Lincoln House February 2011 - Newsletter - Lincoln Institute of Land Policy
In This Issue:
The great housing reset
Fiscal storms
Zoning reform can be done
True grid
Adapting with Ed BlakelyPast Issues:
The great housing reset
The housing bust left many things in its wake, but some of the most troubling detritus are the "zombie" and obsolete subdivisions sprawled across peripheral areas - approved and platted, some partially built but most just lots, unimproved roads and the occasional lone lamppost - all over the country but particularly prevalent in the South and Intermountain West.
Many developers rushed for entitlements in the real estate run-up to 2007, said Jim Holway, executive director of Western Lands and Communities, a joint venture of the Sonoran Instituteand the Lincoln Institute, speaking on the panel "Reshaping Development Patterns" at the New Partners for Smart Growth conference in Charlotte. The planned developments are typically in far-flung locations, make it difficult for others to get permitting in better locations, and lock in water allocations. Much of the land wouldn't be developed for 5 or 10 years under the best of circumstances, let alone amid the plummeting demand.
The zombie subdivisions "are never going to move," said Kathy Rinaldi, county commissioner for Teton County, Idaho, where nearly 5,000 homes and lots lie fallow in over 36 approved, unbuilt, and incomplete subdivisions across thousands of acres of environmentally valuable land. Some developers are changing their schemes to create more density and open space, but others, including a development around a golf course where the topsoil has been scraped for fairways, simply hope and wait for the market to come back. In the meantime, property tax collections are down over 80 percent, there are $250 million in foreclosures in the works, and the local paper is thick with legal notices reflecting extensive litigation. The county would like to figure out how to "incentivize replatting," Rinaldi said. Public sentiment generally favors respect for property rights, though some want to see the subdivision developers' entitlements revoked.
Aside from the contentious idea of replatting or rezoning already approved land, one option, given that prices are so low, is for local or state government and possibly non-profit partners to go in and purchase the land, especially if it has high wildlife or natural resource value, said Holway. Senior fellow Armando Carbonell, who moderated the panel, suggested there might be a way to seize the moment and rethink the location of these developments, or possibly redesign them. The incentive for developers for engaging in such a "reset" would be to recognize the changing market for housing that is steadily turning away from the purchase of single-family homes, said Arthur C. "Chris" Nelson, professor at the University of Utah.
The trends seem clear: households with children will drop from 45 percent in 1970 to 27 percent in 2030. Households without children will rise sharply, and the market will be dominated by aging baby boomers. Three million people turn 65 each year. "This will change our housing demand functions," Nelson said.
Meanwhile, home ownership is declining, from 66 percent in 2000 to a predicted 62 percent by 2015, as part of a significant movement from owner-occupied to renters; the propensity to buy slows down as most people age. Add to that the "great senior sell-off" - the aging boomers looking to sell their homes in the years ahead - and sellers are likely to far outnumber buyers, leading to ever-lower prices. Some seniors in Buffalo are abandoning their homes because they simply cannot sell them, no matter what the price.
Many household may actually increase in size in the "doubling up" phenomenon, including grandparents living with families, further reducing demand, Nelson said. A 6,000 square-foot McMansion could be repurposed into a three-family rental. The real demand will be for multi-family housing, versus single-family homes. "We're overbuilt by about 28 million homes on large lots considering demand by 2020," Nelson said.
The bottom line, said Holway: "It's not just a crash. It's going to be different when (the market) comes back" The multi-year research project Holway has been engaged in seeks to redirect and reconfigure the obsolete subdivisions to reflect the coming changes in housing demand. Holway will also be talking about reshaping development patterns at the 20th Anniversary conference of the Rocky Mountain Land Use Institute: The Next West March 3-4 in Denver. More coverage of zombie subdivisions at The Boston Globe.
Fiscal storms
The standoff in Wisconsin over getting rid of collective bargaining for public employee unions, which may well be repeated in a half-dozen other states, has been only the latest in a march of headlines undersxcoring the seriousness of the basic expendtiture-and-revenue problem for state and local governments. Others included A Path Is Sought for States to Escape Their Debt Burdens, and Mayors See No End to Hard Choices for Cities, Including Bankruptcy. A number of legislators and think tank executives from around the New England region gathered at Lincoln House recently to assess the situation, and senior fellow Joan Youngman filed this report.
The legislators from all six New England states heard a panel of experts consider the fiscal challenges facing state and local governments and suggest possible solutions, Youngman says. To no one's surprise, the news was sobering. Donald Boyd of the Rockefeller Institute of Government made clear that the road back from this recession will be a long one. This is due to the severity of the downturn, the slow pace of recovery, and the special impact on activities such as retail sales, which affect state and local revenues. Forty-eight states face lower nominal revenue than two years ago, and at least forty states have budget gaps for 2012. The most serious long-term pressure will come from pensions, retiree health care, Medicaid, and federal budget cuts.
Yolanda Kodrzycki, Director of the New England Public Policy Center, reiterated this message in her overview of economic conditions, pointing out that "job destruction" rates are declining in New England, but job creation remains sluggish, and the Federal Reserve identifies the fiscal position of U.S. states and localities as a major risk to near-term economic growth.
Bart Hildreth of Georgia State University discussed state and local government securities, another topic of intense current interest, particularly since Wall Street analyst Meredith Whitney predicted on CBS's "60 Minutes" that there would be "50-100 sizeable municipal defaults" totaling "hundreds of billions of dollars" Hildreth was far more sanguine, noting that municipal defaults are rare and most state and local securities are sound. In his words, Illinois is not "the next Greece" But he stressed the real challenges facing borrowers, including "headline risk" - the effect of alarming predictions on investor confidence.
Michael Griffith of the Education Commission of the States reviewed the impact of the downturn on education spending. Once again, the issue was as immediate as the week's headlines, as the Economist magazine considered whether challenges from China constituted a "Sputnik Moment" for the United States. Against this background, there was palpable shock among the New England legislators to learn, for example, that California districts have shortened their school year by as much as eight days as a cost-cutting measure. The urgent need to identify efficiencies and cost reductions that preserve vital services was a central theme for the day's discussion. Connecticut State Senator Gayle Slossberg outlined an extensive effort in that state to review procedures ranging from payroll processing to nursing home operations. Former Vermont Senator Susan Bartlett described a similar project, and Jennifer Weiner of the Federal Reserve Bank of Boston analyzed the policy choices and demographic characteristics that make New Hampshire a famously low-spending state. Bo Zhao of the Federal Reserve Bank of Boston considered ways in which state aid might be better targeted to needy municipalities, an issue of particular importance when all state and local revenue sources are under pressure.
Byron Lutz of the Federal Reserve Board of Governors sounded a welcome heartening note as he reviewed the continued resilience of the property tax. Despite the largest housing market contraction since the Great Depression, property tax revenues continued to grow through the third quarter of 2010. This is in part due to "assessment lag," and declines are likely in the future as revaluations account for reductions in property prices. But it is also due to the annual flexibility in rate-setting that provides some ability for local governments to stabilize revenues even as state taxes saw double-digit reductions across the nation. There is great variation in property tax collections among the states, reflecting the housing market, the political climate, and the legal structure of the tax.
The gathering - an annual event organized by Daphne Kenyon, visiting fellow and co-author of a recent report on payments in lieu of taxes - was a mix of practical realism, cautious optimism, and respect for the seriousness of the situation, Youngman said, as the lawmakers face the most critical budget choices yet in the months ahead.
Zoning reform can be done
Changing the rules of the development game is not to be taken lightly, perhaps especially in a place like Miami, where towers can rise hard by single-family homes. But the experience of the ambitious Miami 21initiative - a complete overhaul of the zoning code and process, based on smart growth and New Urbanism principles - shows that key stakeholders can actually welcome change. Or at least not put up too much resistance. Both citizens and developers like the clarity and predictability of the new rules, says Ana Gelabert-Sanchez AICP, planning director for the City of Miami from 1998 to 2010 and this year a Loeb Fellow at Harvard's Graduate School of Design. The key was consistent political leadership and public participation, she said at the kickoff of the spring lecture series February 16 at Lincoln House, but also the fact that the new form-based and transect-based code is both firm and flexible at the same time - what senior Armando Carbonell called a kind of "planning Spandex"
It took five years and 500 meetings for the guidelines and regulations to be adopted. Miami has fully embraced the form-based code approach - the emphasis on the relationship and scale of buildings in a district or neighborhood, rather than on uses, and specifically the separation of uses, a legacy of Euclidian zoning. The old approach gave Miami lots of surface parking lots, a patchwork of multi-layered special districts and nearly two-dozen zoning designations that only lawyers could understand. Mixed-use and context-sensitive are the mantras now, with simple rules like parking structures must be lined, and ground-floor retail should embrace the street. "The architects are happier. They are in control, not the land use attorneys," Gelabert-Sanchez said.
Height and density are now governed by a clear formula for floor area ratio (FAR). Density bonuses - previously awarded with nothing in return - are secured through the provision of affordable housing or open space and public realm improvements. Parking requirements have been relaxed - although not completely, thanks to a commissioner who threatened to walk out if the standard 1.5-spaces-per-unit minimum was altered. The transect - a series of six categories from lesser to greater density - was modified to marble into existing residential neighborhoods. In transitional industrial area already seeing changes such as housing or artists lofts, owners have some leeway. "It was a change of mindset," Gelabert-Sanchez said, "but we found that people wanted that change"
True grid
Make no little plans, Daniel Burnham famously suggested. When it comes to fast-growing cities in the developing world, planners really do need to think big.
That was the message from Shlomo "Solly" Angel, lead author of the report, Making Room for a Planet of Cities, at a launch event hosted by Cities Alliance and the World Bank in Washington. Planning fast-growing cities for the next 50 years is necessary though daunting.
"If you go to a mayor and try to have realistic urban land projections, he may say, ?I don't want to grow. I don't have the budget,'" Angel said. But cities must face up to the coming surge of urban population growth by planning now for inevitable expansion, he said, with generous metropolitan limits, an arterial street grid that can support transit, and selective protection of open space.
If the past is any guide, the expansion will be significant. For the last five years, Angel and his research team looked at GIS-based maps, satellite images, and historical maps to create four new data sets: 120 cities over 100,000 people or more, from 1990 to 2000; density trends in 20 U.S. cities from 1910 to 2000, based on census tracts; a global sample of how 30 cities expanded from 1800 to 2000; and a snapshot of urban land cover in over 3,600 cities in 2000, based on satellite images. All the data, images, and methodology of the research can be viewed at the Atlas of Urban Expansion.
The team looked at five key attributes - urban land cover, density as measured by population in relation to built-up areas, centrality (distance from city center), fragmentation (the amount of open space within cities), and compactness. The bottom line: average densities declined as population and wealth grew, not just in the U.S. as part of the familiar pattern of sprawl but worldwide. On average most cities increased their area 16-fold - they simply found they needed to make more room. Bangkok grew 16 times over since 1944. Expansion can outpace population growth - the U.S. consumes the most urban land, but China, Brazil, and India follow right behind.
Looking to the future, Angel does not suggest that future cities in the developing world should sprawl out unnecessarily. The U.S. suburbanized on the basis of the liberating mobility of the car, while more recent market and demographic trends suggest preference for more density. "Others shouldn't reduce densities as much as we did. Our densities are too low, too low to support transport. We are alone (in that respect), however. We should not export our answer of containment - smart growth that is good to protect the Everglades is not relevant for India" It makes sense to focus on infill and densification in Tacoma, Angel said, but not so much in Mumbai.
More realistic preparation for urban expansion is mostly a matter of math. Over half the planet's 6 billion-plus population currently lives in cities, including many millions in informal settlement. The world's urban population is expected to double in 43 years; the urban population in developing countries is expected to double between 2000 and 2030. Accordingly, urban land cover will double in 19 years, and the built-up area of the major cities in the developing world will triple.
"We need to make minimal preparations," Angel said.
Failure to plan for expansion is evident in gridlock-plagued Bangkok and the 8th circular beltway in Beijing, in San Salvador, where zoning regulations are ignored, and in Sao Paulo, where there has been little effective protection of open space within municipal boundaries.
Examples of better forward-looking preparations, Angel said, include the New York Commissioners Plan Realistic plan of 1811, which basically planned out the grid northward from Lower Manhattan covering the entire island (all of which came to be; Barcelona's Ensanche plan of 1859; Singapore's open space planning of parks and recreation areas; and the transit-supporting grid of Toronto, home to the 3rd largest public transport system in North America.
Abha Joshi-Ghani, manager of the Urban Development and Local Government unit at the World Bank and a member of a panel of experts responding to Angel's presentation, said the key was to think creatively. "Urbanization is the defining phenomenon of this century," she said. "For this rapid and inevitable urban expansion to lead to equitable, inclusive and green growth - we need to respond in innovative ways, embracing new paradigms"
Respondent Eduardo Rojas, noting that the restriction of land can end up hurting the poor, said there must be a new and improved institutional framework to plan for infrastructure in particular that will be needed well beyond current jurisdictional boundaries.
William Cobbett, manager of Cities Alliance, a global coalition of cities and their development partners housed at the World Bank, said the new paradigm suggested by Angel's research should address the current reflex in many cities, which is to keep out the poor. Planning for future urban growth and introducing long-term scenarios beyond the term of local elected officials can set the stage for an alternative to the Mike Davis vision of a Planet of Slums, Cobbett said. "There's an opportunity to have a game-changing debate about urbanization," he said.
Gregory K. Ingram, president of the Lincoln Institute, said in his welcoming remarks that he believes the research will "revolutionize the analysis of spatial structures of cities," currently lacking a strong normalized framework.
More coverage of the event, the report, and the online atlas can be viewed at this report prepared by the World Bank. Neal Peirce of the Washington Post Writers Group and Citiwire also penned this column, World Cities: Where to Put the Oncoming Billions that includes a number of interesting comments.
Adapting with Ed Blakely
Ed Blakely is at Lincoln House as a visiting fellow, here through the end of February editing the forthcoming book tentatively titled Climate Change Challenges to Urban Metropolitan Planning in Australia and the US.Blakely, most recently known as the recovery director for post-Katrina New Orleans, is a professor of urban policy at the University of Sydney and has authored many books and articles on sustainability, urban renewal, and local economic development, including one published by the Lincoln Institute in 1997, with Mary Gail Snyder, Fortress America: Gated Communities in the United States. He earned his B.A., from the University of California at Riverside, an M.A. from the University of California at Berkeley, and a Ph.D. from the University of California at Los Angeles. He recently spoke on adaptation and recovery in Queensland, as Australia faces down climate change-related fires and flooding.
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? ANTHONY FLINT, Lincoln Institute of Land Policy