The End of Sprawl

Over the past couple days we’ve been debating in the comments whether the increased demand for urban living among young people is a trend that will be with us for a long time, or whether the exurban growth the Lehigh Valley experienced during the aughts is going to return as the economy recovers.

Here is an earlier post on why I think the exurban trend is largely over, but consider a few other points.

First, USA Today reports on the new Census data showing that demand for housing in far-flung suburbs is way down, and core cities are driving the growth:

Almost three years after the official end of a recession  that kept people from moving and devastated new suburban subdivisions, people continue to avoid counties on the farthest edge of metropolitan areas, according to Census estimates out today.

The financial and foreclosure crisis forced more people to rent. Soaring gas prices made long commutes less appealing. And high unemployment drew more people to big job centers. As the nation crawls out of the downturn, cities and older suburbs are leading the way.

Population growth in fringe counties nearly screeched to a halt in the year that ended July 1, 2011. By comparison, counties at the core of metro areas are growing faster than the nation as a whole.

“There’s a pall being cast on the outer edges,” says John McIlwain, senior fellow for housing at the Urban Land Institute, a non-profit development group that promotes sustainability. “The foreclosures, the vacancies, the uncompleted roads. It’s uncomfortable out there. The glitz is off.”

Richard Florida adds more context here.

Second, a new US PIRG report shows that driving is on a long-term decline among young people. It’s not just the recession – the structural decline goes back to 2001. Here’s Angie Schmitt:

Driving is down: “From 2001 to 2009, the annual number of vehicle miles traveled by young people (16 to 34-year-olds) decreased from 10,300 miles to 7,900 miles per capita—a drop of 23 percent.”

Biking is up: “In 2009, 16- to 34-year-olds as a whole took 24 percent more bike trips than they took in 2001, despite the age group actually shrinking in size by 2 percent.”

Young people even reported consciously driving less to save the environment. “Sixteen percent of 18- to 34-year-olds polled said they strongly agreed with the statement, ‘I want to protect the environment, so I drive less.’ This is compared to approximately nine percent of older generations.”

The trend toward non-automobile transportation options was even more pronounced among higher-income Americans, notable because this group is less likely to be motivated by economic concerns. “From 2001 to 2009, young people (16- to 34-year-olds) who lived in households with annual incomes of over $70,000 increased their use of public transit by 100 percent, biking by 122 percent, and walking by 37 percent.”

A number of factors are thought to be contributing to the trend. Some states now require “graduated” driver’s licensing, making young people pass multiple driving tests and hold learner’s permits longer before they earn full privileges. Higher gas prices, obviously, help put owning a car out of reach for many younger Americans, especially as the age group struggles in a less-favorable job market. Finally, technology, specifically smartphones, and their incompatibility with (safe) driving, help make alternatives that much more inviting.

Third, there’s an ongoing structural End of Retail scenario where the Internet is putting traditional big-box retailers out of business. Matthew Yglesias has been all over this trend for a while now:

Tolstoy wrote that each unhappy family is unhappy in its own way, but while each troubled big-box chain has a unique story, there’s a common enemy: the Internet.

Online retail sales this past November and December were up 15 percent compared with late 2010. In the third quarter of 2001, e-commerce sales were 3 percent of all retail (including food) sales in America. By the third quarter of 2011 (i.e., before the Christmas surge was fully incorporated into the data), that was over 12 percent. The move toward online shopping is relentless, driven by both convenience and the ability of Web-based retailers to largely avoid paying sales taxes. As mobile devices become even more useful for shopping, online retailers will grow faster.

There has been a furious recent debate about whether or not to lament Amazon’s ability to put your local independent bookstore out of business, but the debate itself shows what a bad position major chains are in. Some people feel sentimental about independently owned neighborhood stores, and many of them will find ways to turn those good vibes into a viable business strategy. But nobody feels sentimental about Kmart and Sears. That’s why the mall vacancy rate is still near its recessionary high point, even though retail sales have revived. Individual big-box retailers may still prosper, of course. Wal-Mart, for example, may well succeed in its effort to push into the big city markets that have thus far eluded it. But that kind of growth will come largely at the expense of existing supermarkets and other incumbents. As a whole, the big boxes will find themselves fighting over a brick-and-mortar retail pie that will almost certainly be stagnant or shrinking even if overall economic growth strengthens. Sears may go down sooner than some of its competitors, but at least, like Woolworth before it, it’ll leave an iconic skyscraper behind as its legacy. Most will simply vanish without a trace.

Finally, suburban office vacancies are still quite high as space near the core is filling up. Businesses are increasingly opting for central locations.

All these trends have certainly been accelerated by the Lesser Depression, but none of them appear to have been caused by the economic slowdown. They are all trends that were already underway, and the downturn simply pulled the inevitable changes forward in time.

The task now is for policymakers, especially at the local level, to recognize that things are not just going back to the way they were. Current land use policy and municipal finance practices are built around the expectation that development and investment will continue flowing from the center outward to the periphery. Now the tide is turning, and investment and development want to flow back toward the center. Policymakers need to accommodate this sea change by relaxing zoning restrictions on dense infill development in the core cities and inner-ring suburbs. Otherwise, they are going to miss out on the next boom in multi-family housing.

Comments

  1. Kelly says:

    I will actually agree with the suburban office complexes its a stupid use of landmass when offices can easliy be put in the inner city core in multi level buildings many of which are already in existance and need tenants. Were three years out of the recession yet unemployment remains over 8 % and wages have decreased a significant amount for those who have found work in other fields. The housing market colapse has led to fewer home loans being approved and more people forced into the rental market when their financials change so will there living arrangements at least they should as renting can never be an investment as you will never be able to recover any of your money as it will never be yours to sale. In a unstable economy the realty industry becomes a buyers market as their are more homes on the market than buyers with a vibrant economy as we saw in the early 2000s it becomes a salers market as home values soar with more able buyers than their are houses available on the market. Your local book store or your big chains like Barnes and Nobles cant compete with Amazon as they have too much overhead to sale at the same prices as amazon yet your Wal Mart still rules the world for the simple reason its cheaper.

    • Jon Geeting says:

      But why should we be optimistic about young people’s capacity or willingness to bear more debt? Price-to-rent ratio makes buying a good option right now, but we’re not seeing younger workers taking advantage of this. And as the economy improves and house prices increase, buying is going to start looking worse. I think a greater share of the Millenial generation are going to be permanent renters than we saw with previous generations.

      I think the housing bubble has dealt a serious blow to the idea that owning a house is an investment. A house depreciates, like a refrigerator or a car. What (maybe!) increases in value over time is the land the house sits on. But what the housing bubble showed us is that this is not guaranteed, and sometimes land doesn’t keep increasing in value over time. Sometimes areas become less desirable and land prices fall. As a renter, you don’t have to worry about being locked in place. You can move to stronger labor markets.

      Wal-mart is increasingly looking to downtown locations to reach price-sensitive customers. Even they are feeling the End of Retail pinch from the Internet. What retail storefronts are increasingly going to be useful for is non-tradeable services – all the stuff people still need to do face-to-face. Probably a lot of home-made craft stores and clothing stores will remain, but they’re going to get a bigger return on the Internet too, through sites like Etsy. What the non-tradeable service sector needs to thrive is proximity – a lot of customers in a compact area, for better matching of buyers and sellers.

  2. Rich says:

    This is a fad, I hate to say it. The economy is way down for younger people, so they have to live in lower cost places, places where they don’t have to drive to work. They’re also not getting married and having kids as early as previous generations. PERHAPS, this will be the new trend- young people staying single until their 30′s, having less families, and working in the core areas, as well as living there. The reality is though, that it is preferable to more people than not to not raise families in cities. For varying statistical and socioeconomic reasons, suburban schools do better, suburbs have less “scary” (to be defined as violent plus) crime, and people like more space. I love moving from urban area to urban area now, and it’s enjoyable to live like this, but I’d hate to do so with a kid.

    I do not take a zero sum view here. Population, on the whole is growing, and I believe that urban growth will continue in the future, I just think it’s silly to think that suburban growth into places like Lancaster County will not continue in the future. The fastest growing counties in Pennsylvania continue to be periphery counties- Lancaster, York, Berks, Lehigh, Monroe, and even Northampton. In Southwest PA, it’s Washington and Butler. Philadelphia’s growth is relatively minor (percentage wise), and Allegheny is actually shrinking, especially in Pittsburgh, even as I think most of us would say that Pittsburgh is a modern success story of urban revival.

    • Jon Geeting says:

      That’s not right. Philadelphia and Pittsburgh have both been posting solid population growth numbers lately. Pittsburgh has its highest jobs count ever, and their real estate market is heating up. Rents are going up in both cities. Tony Hanna said in the Morning Call that rents are starting to rise in the LV and in Allentown.

      People move to where the jobs are, and where the higher wages are. That is what is happening in Philly and Pittsburgh. Job growth and wage growth in both cities is strong, so people are going there to earn higher wages. If Allentown gets a lot more high-paying professional jobs downtown because of the NIZ, it too will grow its population. The arena is not going to do that, the cheap high quality office space is.

  3. john.jay says:

    Hey Rich. I was just wondering where you get your housing statistics, I have a difficult time finding up to date ones on the web. Do you use census data or is there good realty data out there. Thanks!

    • Rich says:

      Sorry this took a bit. I’m using census data. Pittsburgh declined.

      • Jon Geeting says:

        They lost population in the 2000-2010 period, but in the past two years the population in the core has been growing. Again, look at the articles I linked to.

  4. Kelly says:

    But the title of your post was suburban sprawl is over. Everything is a dominoe effect watch and see. If and when Allentowns population increase and the higher paying jobs become available then natives to the region will seek to escape the crowdedness of the city and to raise their families in better school districts with more space and a backyard and this has happened at every single turn in american history in the past 60 years or so with an improved economy. Land increases in value over time to put houses on not for the simple fact its land. theres plenty of dirt in the world land is only valuable if its needed to be developed. land has a flat value per acreage and their is little to nothing to be done to vacant land to change the fair market value to it if left vacant. I believe what you will see is when the inner city populations increase along with an improving economy the subarbs are sure to follow suit.

    • Jon Geeting says:

      What I am saying is that the economic trends that supported the growth of new subdivisions are quickly coming to an end. People increasingly want to live close to their jobs. As time becomes more valuable, and gas prices increase, and the good jobs are increasingly in the core, people are going to want more housing in the core and in the closest-in suburbs. If city land use policies accommodate as much growth in the housing stock as people want to buy, then it’s going to take development pressure off undeveloped land on the periphery. Another issue is that current seniors are going to be leaving about 24 million suburban homes behind between now and 2030. We aren’t even sure if Millenials are going to want to buy all those homes, let alone brand new ones all the way out in the exurbs.

  5. Kelly says:

    Im also curious with the improvement of pittsburg did you research to see if home sales in the subarbun regions of Pittsburg have increased as well ?

  6. Capri says:

    Jon, I’ve been thinking recently about one of the issues raised by this post, which is what home ownership will look like in the future.

    I pay way more as a renter than I would as a homeowner in the Lehigh Valley market – even after I factor in property taxes and maintenance costs, and yet, my husband and I have no plans to buy in the foreseeable future.

    Where previous generations had a predictable life path (get a job, buy a house, work 40 years, retire), our generation doesn’t have this. Workers change jobs more frequently now than ever before. I feel immense pressure to be able to relocate on short notice for job opportunities, even if I’m not changing employers. Additionally, given the uncertainty of the job market (I’ve been unemployed twice in the last 5 years), I am reluctant to commit to additional monthly expenses – as a renter, if I would be forced to find cheaper housing due to unemployment, I could find it, as a homeowner, my options would be seriously limited. The psychology of long-term career uncertainty definitely has an impact on my own outlook about buying a home, and I think I’m in a well-populated boat on this issue.

  7. Kelly says:

    Capri,

    At one point thou your going to want to be in a position where your not doing that right? Would it be fair to contiue to uproot your children if and when you have them from one failing school system to another or will you want to provide a stable enviroment for them. Also i want to retire someday and work oppurtunities will no longer be a concern with home ownership even if you are forced into saleing and moving into a facility the home is yours and you can recoup at least a small amount of your intial investment back if and when needed. if you spend 12,000 a year for rent and continue to rent for say ten years that is $120,000 you will never see again maybe more as the price of rent usally goes up from year to year. If like you say you never decide to own a home and you rent for the duration of a 30 year mortage at that price you will have spent $360,000 on rent that cannot be recouped or invested for retirement or college etc when you could have bought a nice house outright $110,000 ago and then no longer having a payment freeing up a 1000 dollars a month to save and invest . so with this math without home ownership you will have basically flushed a minimum of $110,000 down the toilet thru out your life with no hopes of recovering. I think Rich is right its a fad that will change with a more stable economic scene. low unemployment leads to higher home ownership.

    • Jon Geeting says:

      There’s a long term trend toward greater mobility in the labor market. I would actually expect an improved economy to result in more migration, not less. People are hunkered down now, keeping the jobs they have, and you see that in migration levels and quits. Both are down. As it becomes easier to get jobs as the economy improves, I can’t imagine that it’s going to become more useful for younger workers to be tied to a specific plot of land for 30 years. Rental housing is more appropriate to a more dynamic labor market.

      • Kelly says:

        Its not but as time progresses the younger workers now will no longer be younger workers they will enter into the generational gap ahead of your generation as Rich says to marry and raise families. Seeing the world or the country is idea when you are young and single but as your family expands Americans tend to seek out the picket fences and work to keep their kids in the school districts that will benefit them the most. lets take Clair who lives in the valley statistics say if you live somewhere for a decade as an adult that is most likly where you will remain if throughout her life she remains here and continues to rent from her economic fears she will basically have pissed away between 1/4 and 1/2 a million dollars in rental property that she cannot get a return of her investment on.

        • Jon Geeting says:

          Even if that was going to continue to be the pattern – and I’ve seen no reason to believe that it will be – I think you are leaving demographic trends out of your story. The Millenials are the biggest generation ever. When we have kids, that’s going to be the biggest generation ever. Even if the percentages of urban and suburban housing stayed the same, this would still entail a huge increase in urban construction. I don’t believe that the percentages are going to stay the same. I think that in the future, multifamily’s share of the housing mix will be permanently higher than it has been in the last 60 years. Whether it’s just population growth or we’re really looking at a permanent change in preferences, the implication is the same: we’re going to need to build a lot more urban housing.

  8. Kelly says:

    Sorry Capri dont know why i called you clair lol .

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  1. [...] out of fashion as more businesses opt for central cities to attract young talent. Nevermind that exurban housing is also falling out of fashion, and the demand for more of this kind of housing is unlikely to reemerge any time soon, for sundry [...]

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