The Changing Location of New Housing – Part 4

Once again, I’ve become stuck on a topic.  This time it’s the question of whether people are returning to urban cores.  It’s almost time to move on. But before we go, let’s look at a study on the costs of living in more walkable neighborhoods.  The housing cost study adds to the pile of good news for urbanism.

Thus far, in Parts 1, 2, and 3, I’ve written about whether people and homes are moving from the suburbs back into the cities and why they might be doing so.  I also questioned whether the urban/suburban distinction is valid anymore.  Quick summary: A movement downtown seems to be happening, although the conclusion likely won’t be confirmed until the economy is again running well.  But it may not matter because the divide isn’t urban versus suburban any more, but human-scaled versus car-scaled.

But, as residents move up the walkability scale, how do housing costs change?  Atlantic Cities reports on a study by the Brookings Institute that tries to answer that question.  The researchers, using the Irvine Minnesota Inventory method, looked at a sampling of Washington, D.C. housing options, ranging from extreme car-oriented exurbs to fully walkable/transit-friendly urban neighborhoods.

(Note on the Irvine Minnesota Inventory system: I wasn’t familiar with it, so reviewed the assessment criteria.  The assessment detail is impressive.  My only question was whether proximity to principal destinations, such as schools, wouldn’t be a better measure of walkability than the presence or absence of a school on a road segment.  It seemed the methodology might lean toward whether it’s comfortable to walk along a street rather than whether it’s worth doing so.  However, it’s possible that this question is addressed deeper in the documentation.)

The researchers found that a unit in a fully walkable Washington, D.C. neighborhood costs about $1,200 more that the same unit in an exurb.  A surcharge for walkability was anticipated, but nonetheless represents a significant change over the last two decades, since a time when walkable Washington, D.C. neighborhoods were considered less desirable than the suburbs and exurbs.

The price difference likely results from two factors.  First, developers are probably still catching up with the return to favor of walkable locations.  At least a portion of the price difference represents that demand is running ahead of supply.  The difference may reduce as supply increases.

(The finding that market demand is high in walkability neighborhoods is buttressed by another Atlantic Cities story on how economic recovery is coming first to walkable districts.)

However, the second point is that there are inherent reasons why walkable residential will always cost more than the alternatives, at least if one insists on comparing identical units.  Because of the other uses to which bare land in more walkable settings could be put, such as retail or office, plus the added value from features such as better access to transit, the cost of bare land in a walkable setting will always be more expensive.  Therefore, the same unit constructed on it must be more expensive.

As the Washington, D.C. market adjusts, it is likely that the $1,200 price difference will shrink, perhaps to $700 or $800.  But it won’t go to zero.

There are also a couple of comments that should be made about the methodology.  First, in a point that the researchers acknowledge, transportation costs will likely be less in walkable locations.  Additional costs for parking and transit use may be incurred, but for many residents those increases would be more than balanced by owning fewer cars, using less gas, and incurring fewer other operational costs.  The saving would reduce the $1,200 increment.

Also, the assumption that equivalent units be compared misses a key point about walkable communities.  A primary benefits of a walkable environment is that one can entertain at a nearby restaurant instead of paying rent or a mortgage on a living room that is used for guests twice a year.   If a smaller downtown home fills the same role as a larger one in the exurbs, the cost difference should be less than $1,200.

And so, we come to the end of our demographic survey.  After four parts of digressions and diversions, this is what we seem to know about where people and new homes are moving.  With a moderately high degree of certainty, they’re moving downtown, particularly if we define downtown not as major urban cores, but as places of human-scale where walkability is a key element.

And the movement is occurring in sufficient volume that supply isn’t keeping up, resulting in significant cost differences between car-scaled and human-scaled neighborhoods.   The price difference will likely decline as developers respond to the market, but some difference will remain.

Overall, it’s good news for urbanism.

As always, your questions or comments will be appreciated.  Please comment below or email me.  And thanks for reading. - Dave Alden (davealden53@comcast.net)