Multifamily Trends - May/June 2007 - Point of View

Design and location are the keys to successful urban developments.

Urban Place Remaking

By John McIlwain and Prema Katari Gupta

“The American city should be a collection of communities where every member has a right to belong,” wrote former President Lyndon B. Johnson in a special message to Congress in March 1965. “It should be a place where every man feels safe on his streets and in the house of his friends. It should be a place where each individual’s dignity and self-respect [are] strengthened by the respect and affection of his neighbors. It should be a place where each of us can find the satisfaction and warmth [that] come from being a member of the community of man.”

Cities across America are in one stage or another of an urban renaissance that has largely been fueled by the well-documented expansion of downtown living opportunities. Despite the current softness in the larger housing market, downtown housing markets are generally strong and vibrant, though there are areas like Florida where an inventory overhang will take time to resolve. Regardless, prices for downtown condominiums, rowhouses, and other dwelling units remain sound, while suburban prices are falling; similarly, urban rents are on the rise. Why?

The short answer is that a growing number of people consider central cities the area of a metropolitan region with the best all-around quality of life. Accordingly, the demand for urban residences continues to exceed the supply, whereas in most suburbs, the inventory of unsold units exceeds the current demand.

While this is good news for the multifamily industry, not every urban project is faring well. How a development is designed and where it is located are more critical to the success of an urban project than to a suburban one. For one thing, in the suburbs, “location” implies the neighborhood in which the project resides (the school district it is in), while in an urban setting it often implies the block on which the project is located as well as other structures on the block or around the corner. Successful development in cities means reading certain signs and, as often, remaking a block.

The Urban Comeback

American downtowns have experienced an ebb and flow of neglect, interest, planning, and bulldozing over the decades, and only recently begun to apply the proper toolkit for their full revival. In the years following World War I, the American metropolis began decentralizing, predicated on assumptions of cheap energy, the automobile (and buses and trucks), and a boundless urban envelope. In response, a number of sometimes well-intentioned but ultimately misguided efforts, aimed at reversing urban decline, attempted to reinvent and reshape American cities in the decades that followed.

First came the massive federal urban renewal program in the 1950s, 1960s, and 1970s, which involved large-scale slum clearance and an attempt to retrofit the urban core for the automobile. Well-known examples are the roads, bridges, and tunnels designed and built by Robert Moses in New York City, which devastated neighborhoods and sparked Jane Jacobs to write what is now considered an urban planning classic, The Death and Life of Great American Cities.

In the 1970s and 1980s, cities tried to lure suburbanites from their distant enclaves by creating large downtown venues—convention centers, urban shopping malls modeled after suburban malls, cultural venues, stadiums, hotels, and large-scale entertainment facilities.

The suburbanites who came to these venues, however, went home immediately after they attended a concert or game; similarly, retail was unable to compete with the ease of suburban shopping for those living in the suburbs. Such one-dimensional solutions failed to revitalize the urban core; and often they obliterated the scale, grid, and diversity of the existing area—the very basis of its attractiveness.

However, cities began to learn from these mistakes in the 1990s and are starting to get it right. A new breed of mayors began focusing on the basics of urban life—safety, cleanliness, orderliness, and the efficient delivery of services. They also formulated a kinder, gentler, and more equitable urban revitalization toolkit—which includes zoning incentives, tax abatements, and historic preservation, among other things—that is largely based on re-creating the urban ecology of the nation’s prewar cities.

Other factors came together to support the new trend to downtown living. Empty nesters, singles, immigrants, and gays now dominate American household statistics, all of whom tend to be “urbanites.” Less than one household in four today is made up of the old traditional family—mother, father, and school-age children—whereas during the 1950s, this type of family constituted more than 55 percent of all households. These trends are expected to continue for several more decades, allowing cities and other urban areas to keep on growing in vitality and quality.

Robust urban revitalization has been underway for years in the downtowns of large American cities—New York, Philadelphia, and Chicago. Medium-sized cities such as Washington, D.C.; Chattanooga, Tennessee; Louisville, Kentucky; Tampa, Florida; Austin, Texas; and Orlando, Florida—to name but a few—have also seen their downtowns revitalized to one extent or another. Even small cities like Lexington, Kentucky, and Bradenton, Florida, are beginning to plan this process if it has not already begun. Hardly a city small or large has not been affected to some degree by the urban renaissance.

Of great importance is the fact that most mayors and officials have learned that housing is essential to a healthy downtown, and they are looking for ways to encourage residential development. All this is good news for multifamily housing, the primary form of urban residential construction. That said, what makes an urban project successful?

”Location, Location, Location”

Don’t buy the house, buy the neighborhood.—Old Russian proverb

Projects located in cities are not guaranteed to be successful, though most have been. Urban multifamily projects require close attention to location, amenities, cost, and timing. There are key things to look for in assessing a location, both on a block and in a neighborhood. Astute urban residential developers know where to look and what to look for, and can see opportunities missed by others; they are also able to avoid many of the pitfalls of the overeager or inexperienced developer.

One basic rule of urban development is that urban locations change in quality by the block as much as by the neighborhood. There are often good blocks in marginal neighborhoods and bad blocks in stable neighborhoods.

City blocks and neighborhoods today are especially dynamic, with many areas gentrifying while others stagnate or continue to decline, waiting for the forces of gentrification to move in. Predicting these changes and their timing is more art (and some luck) than science as the pace of change can vary with the economy.

As the number of jobs in a region grows, especially if they are white-collar “creative” jobs, certain urban neighborhoods will likely continue to improve and demand will outstrip supply. This dynamic, however, can change quickly if the economy slows, fewer new jobs are created, or businesses leave the city. Thus, while both location and timing are critical in developing urban housing, timing is perhaps the trickiest and most unpredictable problem, given the long lead times developers need to obtain all required approvals and complete construction of large urban projects.

Unlike greenfield development, urban development involves considerable complexity. First, although there is no shortage of vacant properties in cities, assembling smaller parcels into an economically viable larger site can be both expensive and time consuming. In addition, building costs will likely be higher.

Fire codes are often stricter for legitimate reasons, and dense development requires more complex and expensive types of construction. Unfortunately, despite the need for tougher codes, years of rigid bureaucracies have caused many municipal codes to be overly cumbersome and outdated. According to Harvard Business School professor Michael Porter, “construction in inner cities is far more regulated than it is in the suburbs—a legacy of big-city politics and entrenched bureaucracies.”

Context-sensitive development is essential. A project in an established neighborhood must respect its context. However, as sites often are limited in urban environments, it may be necessary to re-create a block—if not an entire neighborhood—in order to turn an available site into a desirable location. Knowing how to do this skillfully can make the difference between a quick sell or rent-up and a slow one. The following basic principles deserve special attention in doing this:

Safety. Jane Jacobs taught us that the safest neighborhoods rely on a mix of uses to maximize the hours of pedestrian traffic, encouraging “eyes on the street.” Fine-grained mixed-use development also creates more livable and interesting places.
Cleanliness. The now-prevalent “broken window” theory argues that a clean, orderly, and well-maintained environment can deter crime and encourage residents to assume more responsibility for the welfare of their neighborhood.
Public spaces. Also known as “third places,” these spaces include not only parks, but also coffee shops, bars, restaurants, gyms, and beauty salons. They are at the heart of healthy communities as they build “social capital,” facilitating community interaction and vitality. Prospective homeowners or tenants look for such spaces within an easy walk, generally considered no more than five minutes away. This translates to a quarter-mile radius from a project; the amenities within this radius are as much a part of a buyer’s or renter’s home as their kitchen.
Walkablity/scale. Gone are the days of superblocks and Corbusian high-rise apartments. Not surprisingly, many of the country’s most desirable neighborhoods were built before the age of the automobile.
Proximity. Scattered sites well outside of the established core present challenges. One of the best ways to provide a sense of closeness to and connectivity with the urban core is through efficient bus and rail transit. Being within five minutes of busstops or a rail stop can overcome the disadvantages of a peripheral location.
Sustainability. Increasingly, residents crave urban environments that have high standards of livability, comfort, sustainability, durability, and efficiency. Parks, trails, and other green infrastructure can contribute greatly to a community’s vitality and sense of place. Likewise, sensitivity to the efficient use of energy for heating, cooling, cooking, and lighting helps market projects.
Variety and diversity. High-quality urban places facilitate the interaction of people with a diversity of lifestyles. Renters and owners should mingle. Retail corridors should include local proprietors and national retailers. A Starbucks may be located there as well as a local coffee shop. Restaurants choices should include local bars, ethnic restaurants, and formal restaurants. The needs of a diverse population should be met by a broad range of services.
History and authenticity. A city’s history should show. Historic buildings should be preserved whenever possible. They provide a sense of place and an identity that is unique, not a copy of a hundred other places around the country.
Connectivity. Residents should have a variety of transportation options, including bike trails, public transportation, and car sharing.
Parking. On-street parking should be allowed, but residents should have choices. Parking lots are neighborhood killers, as are above-ground parking garages, unless they include street-level retail. Most city codes include unnecessarily stringent parking requirements. Efforts also should be made to keep down the amount of parking and locate it below ground or behind buildings.

Re-Creating the Old Neighborhood

I have an affection for a great city. I feel safe in the neighborhood of man, and enjoy the sweet security of the streets.—Henry Wadsworth Longfellow

Perhaps the best way to prepare oneself to develop urban housing is to read, or re-read, Jacobs’s The Death and Life of Great American Cities. She demonstrates, among other astute insights, that a sharp eye and good common sense can be more valuable in building urban neighborhoods than the science (or art) of urban planning, important as that may be.

Fortunately, mayors, business leaders, and their allies in downtown revitalization have absorbed much of this common sense and are all now acutely aware that residential development is essential in the quest for vibrant 24/7 downtowns; in many cases, they have emerged as allies to developers of urban multifamily housing. While previous efforts at revitalizing cities emphasized automobile access and large-scale destination creation, the most successful recent attempts to improve downtowns have taken a more robust and varied approach, and have focused on the pedestrian. Downtowns are becoming more cohesive and self-sustaining—and home to a growing and diverse population of new urbanites. And that is very good news for developers of urban multifamily housing.

	John McIlwain is a ULI senior resident fellow and holds the ULI/J. Ronald Terwilliger Chair for Housing.
	Prema Katari Gupta is a scholar in residence at ULI.