The following is an excerpt from the recently-released RPA report.
- 56 percent of millennials and 46 percent of baby boomers prefer to live in more walkable, mixed-use neighborhoods; demand is also evidenced by sharp increases in rents in recent years.
- While there is a growing shortage of multi-family housing, the nation’s current supply of single-family homes is estimated to exceed future demand for at least the next 25 years.
Americans’ housing preferences are shifting. Millennials are pulling away from auto-oriented, single-family suburbs in search of denser, more diverse neighborhoods, whether in large cities, older suburbs or transit-oriented villages. Their parents, the large baby boom cohort now in their 50s and 60s, increasingly seek to downsize to the same types of walkable neighborhoods as they age. Yet the supply of mixed-use, walkable neighborhoods with character is too limited and not expanding rapidly enough to respond to these changing preferences. Federal financing rules are a major reason for the mismatch, which results in higher financing costs, higher housing prices and limited investment in poorer communities. The complexity of the regulations lead to dominance by larger developers and larger projects that can afford the resources and time required, limiting both the type of product and pool of available developers available to municipalities.
Despite overwhelming evidence that a growing number of Americans prefer to live in walkable communities with stores, services, parks and other amenities, federal housing rules are impeding the private market from creating enough housing choices to meet this demand. By definition, walkable communities have a mix of housing and non-residential uses in settings ranging from high-rise urban neighborhoods to traditional downtowns to newer suburban main streets. Among the most common and sought-after places are those characterized by older low-rise buildings, typically three-to-four stories, with ground floor retail and apartments on the upper floor. But development projects with this mix of activities are ineligible for most federal loan guarantees and financing, and are often unable to attract private financing as a result. Notably, lower income people suffer most from this entrenched problem.
In a recent survey by Urban Land Institute, 50 percent of people said that walkability is either the top or a high priority in where they would choose to live. A Brookings Institution study concluded that convenient, amenity-rich communities are economically appealing, and that the walkability of an area increases the per-foot price of commercial and residential spaces. This study also found that 63 percent of millennials would prefer to live where they do not need a car often. While this demonstrates demand for walkable areas, it also suggests that many people who want to live in these areas may not be able to afford them, as higher rents lead to more gentrification and dislocation.
Housing in walkable, mixed-income urban neighborhoods isn’t keeping up with this demand. A recent American Planning Association survey found that across all demographic groups, fewer people want to live in suburbs. The survey found that of the respondents, 40 percent live in an auto-dependent neighborhood today, while only 10 percent would see themselves in the same type of neighborhood in the future. This preference also spanned generations, with 56 percent of millennials and 46 percent of baby boomers preferring to live in more walkable, mixed use neighborhoods, according to the APA survey. While there is a growing shortage of multi-family housing, the nation’s current supply of single family, detached homes is estimated by Arthur C. Nelson to exceed future demand for at least the next 25 years.
Because the housing finance system has been created to support single-family development, providing affordable housing in walkable neighborhoods is expensive and difficult. Without adequate subsidies and financial support to increase the supply of multifamily units in mixed-use, walkable neighborhoods, prices will continue to increase. The land in these areas is more desirable, and therefore more expensive. Developers agree that private sector approaches alone will not create affordable housing in urban areas, but rather a government approach is needed. Reforming the regulations would reduce the amount of cash subsidy that is needed by generating more lower-cost units while aligning with market principles, and is in turn politically more practical.
(Top photo by Andrew Price)