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The Rise and Fall of the Suburbs

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One of the more interesting articles I’ve read recently from a mainstream publication comes from The Atlantic.  Christopher Leinberger, a scholar and a real-estate developer (not sure I’ve ever seen those two terms together like that, but he is a professor of urban planning at UMich and a real-estate developer), writes about the possibility that the suburbs will become the next slums, as affluent people move out of the burbs into urban centers, while the displaced poor move out to the formerly swank enclaves of McMansions and treelined streets. (HT: Instapundit)  Most of the article is a look into the distant future (2025 to be precise) but you owe it to yourself to read the whole thing.

Prof. Leinberger’s hypothesis is built upon analysis of a number of trends, research conducted by the Metropolitan Institute at Virginia Tech:

Arthur C. Nelson, director of the Metropolitan Institute at Virginia Tech, has looked carefully at trends in American demographics, construction, house prices, and consumer preferences. In 2006, using recent consumer research, housing supply data, and population growth rates, he modeled future demand for various types of housing. The results were bracing: Nelson forecasts a likely surplus of 22 million large-lot homes (houses built on a sixth of an acre or more) by 2025—that’s roughly 40 percent of the large-lot homes in existence today.

For 60 years, Americans have pushed steadily into the suburbs, transforming the landscape and (until recently) leaving cities behind. But today the pendulum is swinging back toward urban living, and there are many reasons to believe this swing will continue. As it does, many low-density suburbs and McMansion subdivisions, including some that are lovely and affluent today, may become what inner cities became in the 1960s and ’70s—slums characterized by poverty, crime, and decay.

The trend is undeniable around my part of the country.  I can think of two close friends, both very successful attorneys, who have chosen to (over)pay for relatively small coops in Manhattan instead of the enormous stately homes they could have bought for the same price.  The multifamiliy development going on both in Manhattan and in the east bank of the Hudson River in Jersey City, Hoboken, and elsewhere is positively frantic.

I do think that Prof. Leinberger’s article, while very compelling, doesn’t necessarily examine all angles, however.  (That isn’t really a criticism, since he isn’t writing a scholarly dissertation but a magazine article.)  For example, I think he may be cherrypicking certain examples in support of his hypothesis:

Pent-up demand for urban living is evident in housing prices. Twenty years ago, urban housing was a bargain in most central cities. Today, it carries an enormous price premium. Per square foot, urban residential neighborhood space goes for 40 percent to 200 percent more than traditional suburban space in areas as diverse as New York City; Portland, Oregon; Seattle; and Washington, D.C.

Well, yes, I’m sure he’s correct as it pertains to New York City, Portland, Seattle and Washington DC.  But what about Detroit?  Minneapolis?  Newark, NJ?  Bridgeport, CT?  If you pick cities that most GenX and Millenials — just now coming into the peak of their earning power — think are cool hip places to live, then I suppose that tends to support the thesis.  But there are still many urban centers that no affluent consumer in his or her right mind would want to step into.  It seems like the phenomenon may be more local than Prof. Leinberger portrays, at least in the magazine article.

Plus, in looking at New York City, is he taking into account the immense variation between the island of Manhattan and the boroughs of Brooklyn, Queens, Bronx, and Staten Island?  The average condo in Manhattan goes for $1.43M on average; in Brooklyn, that figure is $428K.  (Source: REBNY – PDF) 

Furthermore, he posits that the cultural shift behind this trend is… well, walking.  Throughout the article, he points out that the benefit people want from living in urban centers is walking distance to stores and restaurant, a walkable downtown, and so forth.  For example:

In one study, for instance, Levine and his colleagues asked more than 1,600 mostly suburban residents of the Atlanta and Boston metro areas to hypothetically trade off typical suburban amenities (such as large living spaces) against typical urban ones (like living within walking distance of retail districts). All in all, they found that only about a third of the people surveyed solidly preferred traditional suburban lifestyles, featuring large houses and lots of driving. Another third, roughly, had mixed feelings. The final third wanted to live in mixed-use, walkable urban areas—but most had no way to do so at an affordable price.

Certainly there’s something to his insight.  Young people like to walk around.  Being within walking distance to the corner bistro is certainly attractive — you don’t worry about drinking and driving, and a stroll on a cool summer evening is a wonderful thing.

At the same time, I wonder a bit if Prof. Leinberger didn’t dig deep enough.  For example, he does mention in the article that there is significant demographic change going on in the United States that led to this shift:

Demographic changes in the United States also are working against conventional suburban growth, and are likely to further weaken preferences for car-based suburban living. When the Baby Boomers were young, families with children made up more than half of all households; by 2000, they were only a third of households; and by 2025, they will be closer to a quarter. Young people are starting families later than earlier generations did, and having fewer children. The Boomers themselves are becoming empty-nesters, and many have voiced a preference for urban living. By 2025, the U.S. will contain about as many single-person households as families with children.

My own experience parallels this somewhat.  As a young single, I lived in Manhattan, where walking distance to clubs, restaurants, parks, and bars was extremely important to my lifestyle.  As a young childless couple, we lived in Hoboken where we had a similar lifestyle.  With one child, we still maintained quite a bit of that lifestyle — taking trains to Manhattan and walking around Soho with our stroller, etc.

With two kids, all that stopped.  It simply is no fun to take two kids “out for a stroll”.  Restaurants within walking distance?  That’s nice, but who can really afford a night out with two small kids at home?  Such outings are enough of a rarity that should we actually get the opportunity (e.g., grandma comes for a visit!), we’ll happily drive somewhere to try a restaurant we’ve heard about but haven’t had a chance to try.  For daily living, the minivan (or if you’re hip and cool, the SUV) is almost a necessity with two or more kids.

Now, I don’t know that we’re a typical GenX couple with kids.  So research on driving culture vs. walking culture probably should take urban centers like Salt Lake City and Provo into account.  Utah has the highest birthrate in the country, thanks to the high Mormon population.  If there’s an actual cultural shift towards walking, towards smaller, more intimate “town centers” in America as a whole, examining Salt Lake City might prove interesting.

If, on the other hand, the causation is more like: Americans are having fewer (read as one or none) kids –> therefore they can walk around, stroll, and continue to do those DINK things –> therefore, these GenX families want to live in urban centers… that may lead to different thoughts as well.

If most of the households in urban areas are having one or no kids (and the birthrate for NYC is plunging), that has consequences for things like neighborhood formation, tax base, and employment.  Add in the cost of raising children, and it may be that the “typical” American family of four (the current rate for the U.S. as a whole is still 2.1 births per woman) might find such urban centers not all that appealing.  Being surrounded by single yuppies and DISK (Double Income Single Kid) families with all of their disposable income, facing restaurants that are kid-unfriendly, and all of the things that young singles find exciting and families find disturbing (nightclubs anyone?) might not be the ideal living situation for many families.

Put another way, my lawyer friends with their $3M Manhattan lofts may decide to have another kid.  Suddenly, they may find their formerly hip Tribeca loft to be… a bit small… and the amenities that they loved so much suddenly a bit unfriendly to a couple with two strollers.

Extending things out to 2025, I don’t know that predicting the death of the surburbs might not be premature.  Singles get married; DINKs have a child; DISKs have more kids.  All of a sudden, that house in the burbs with the minivan and a backyard doesn’t look so bad after all.  We may just be in a short-term phenomenon related to where the GenXers and Millenials are in their lifecycle, rather than a permanent, decades-long shift back towards cities.

Nonetheless, I think the article makes for very interesting reading.  It certainly provokes thought on what the real estate industry looks like twenty years out, based on demographic trends.

-rsh

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Rob Hahn
Managing Partner of 7DS Associates, and the grand poobah of this here blog. Once called "a revolutionary in a really nice suit", people often wonder what I do for a living because I have the temerity to not talk about my clients and my work for clients. Suffice to say that I do strategy work for some of the largest organizations and companies in real estate, as well as some of the smallest startups and agent teams, but usually only on projects that interest me with big implications for reforming this wonderful, crazy, lovable yet frustrating real estate industry of ours.

7 COMMENTS

  1. The trend of moving into the urban core is not true for Jacksonville, Florida. Urban prices in our area do not carry an enormous premium price as it does in other urban cores.

    I agree that fully developed urban core cities like New York City, Portland, Seattle and Washington DC will probably experience people moving back to the urban core in the future. However, cities like Jacksonville Florida where the suburban areas have already created their own “town-village” with their own business parks and amenities will not have people moving to the urban core. Everything is already in the suburbs.

    And from a Floridian’s point of view, I would never move away from the ocean.

  2. The trend of moving into the urban core is not true for Jacksonville, Florida. Urban prices in our area do not carry an enormous premium price as it does in other urban cores.

    I agree that fully developed urban core cities like New York City, Portland, Seattle and Washington DC will probably experience people moving back to the urban core in the future. However, cities like Jacksonville Florida where the suburban areas have already created their own “town-village” with their own business parks and amenities will not have people moving to the urban core. Everything is already in the suburbs.

    And from a Floridian’s point of view, I would never move away from the ocean.

  3. Intriguing points to consider in your post and The Atlantic article.

    In Atlanta we find urban and suburban lifestyles to be related to having children. As you described, going for a leisurely stroll with 2 children (and all their gear) takes leisurely right out of the equation!

    What I have noted is that the move from urban to suburban is more directly related to having school-age children. In general, the best schools in the Atlanta area are in the suburbs.

    When the kids leave home, many of our clients are once again drawn to the amenities of urban living.

  4. Intriguing points to consider in your post and The Atlantic article.

    In Atlanta we find urban and suburban lifestyles to be related to having children. As you described, going for a leisurely stroll with 2 children (and all their gear) takes leisurely right out of the equation!

    What I have noted is that the move from urban to suburban is more directly related to having school-age children. In general, the best schools in the Atlanta area are in the suburbs.

    When the kids leave home, many of our clients are once again drawn to the amenities of urban living.

  5. #3 – Kathy

    You know, I think you raise a very good point. Perhaps the whole issue is that families with 2+ children simply have very different priorities. That doesn’t strike me as any sort of a major insight.

    The real question, then, is: What is going on with demographics of the affluent in the United States? Particularly the GenXers who are in their 30’s now. If research shows that the GenX is averaging Western Europe-like figures (1.5 birth or lower per woman), then I think it’s safe to say that these walking-oriented developments are going to be very popular for a couple of decades, at least in the more affluent areas.

    Because a couple in their 30’s now, with one child, can maintain a urban lifestyle, then the child leaves home, and the childless couple can continue with that lifestyle.

    If, on the other hand, the GenXers are having 2+ children on average, then these urban lifestyle developments will need to cater to the younger set on the one hand, and the older set on the other hand. That ought to be an interesting challenge.

    -rsh

  6. #3 – Kathy

    You know, I think you raise a very good point. Perhaps the whole issue is that families with 2+ children simply have very different priorities. That doesn’t strike me as any sort of a major insight.

    The real question, then, is: What is going on with demographics of the affluent in the United States? Particularly the GenXers who are in their 30’s now. If research shows that the GenX is averaging Western Europe-like figures (1.5 birth or lower per woman), then I think it’s safe to say that these walking-oriented developments are going to be very popular for a couple of decades, at least in the more affluent areas.

    Because a couple in their 30’s now, with one child, can maintain a urban lifestyle, then the child leaves home, and the childless couple can continue with that lifestyle.

    If, on the other hand, the GenXers are having 2+ children on average, then these urban lifestyle developments will need to cater to the younger set on the one hand, and the older set on the other hand. That ought to be an interesting challenge.

    -rsh

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