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$$/Sustainability Matched: New Economics of Place

Scott Polikov / Aug 28 2008

For Release Sunday, August 31, 2008

Scott Polikov America’s 60-year development pattern has broken down, like an exhausted 1950 Chevy rusting at roadside. But the building and real estate industry is only slowly awakening to the new reality.

We all knew the pattern, popularized after World War II and mostly triumphant since. A smart builder discovers and buys an inexpensive piece of cornfield or pasture. Up go single-family houses, or, more recently, many townhomes. Proximity to stores, offices, other conveniences (except perhaps schools) is irrelevant: everyone will be driving anyway. The successful sales prove it.

No longer. Almost overnight, the ground rules for development have been eviscerated. Sure, real estate calculations of cash flow and value are still being made. And yes, local planning and zoning commissions are continuing to hold meetings until midnight to decide whether to approve zoning for the proverbial townhouse project down the street from a single-family enclave.

But, have you recently heard of a developer securing a construction loan for virtually any kind of standard real estate residential development? His or her banker likely told them that “we aren’t originating construction loans at this time.”

Why? The fundamentals of the “bedroom community” economy have collapsed. Banks have not figured out at what point they will hit the bottom of their financing crisis. The need for radically improved, sustainability-focused strategies has never been more compelling than in this time of looming home foreclosures, $4 a gallon gas, an economy in decline, and broad agreement that the earth’s fragility is not longer just the cry of the fringe.

The new development “secret” is simple but critical: not just to reject our old way of building housing units any place, but to focus early and hard on creating and strengthening whole communities.

Not so long ago, local economic development strategies revolved almost exclusively around recruiting businesses. “Quality of life” was just a buzzword used as the calling card of the local neighborhood activists.

But not today! Economic development worth its salt has become firmly connected to place, and to the environment. The quality of life of our neighborhoods, our cities and our regions has now become a bottom-line factor for many business decisions.

Business calculations have always been, will always be driven by competition. Today’s competition is more and more about recruiting skilled people. Cities and regions are increasingly intent on attracting the best and the brightest because they know companies want to operate where they can recruit and hold high quality human talent.

This new focus dovetails with the necessity of rethinking the capacity of developers and public servants to create attractive, sustainable communities. Bankers will be obliged to make their capital decisions the same way. The New Urbanism real estate practices introduced in the 1990s bring together these opportunities.

But the “new” in the New Urbanism is really just expanded appreciation for the more sustainable approaches to planning and development recognized by leaders of earlier generations. Developer J.C. Nichols, a founding member of the Urban Land Institute, embodied those ideals. He developed numerous communities including the 1920s Country Club District in Kansas City, anchored by the famous Country Club Plaza, a model of a walkable, mixed use urban center in a suburban location.

Through the seminal Community Builders Handbook produced under his leadership, Nichols promoted the idea that predictability in land markets and protection of value over time requires neighborhood planning, reliance on design, and integrating such standouts of the civic realm as grand boulevards, parks and public buildings.

I’m engaged myself in putting this approach into practice. Our firm, the Gateway Planning Group, planned a 2,000-acre transit oriented development (TOD) in Leander, Texas. A key goal: to enhance the value and potential of the growth corridor that’s expanding northward from Austin along a new rail transit line. The master plan will be carried out through an urban design-based zoning and subdivision ordinance.

My economist colleague, Jon Hockenyos of TXP, Inc., determined that the tax base of the area would be roughly $900 million at build-out if it were built as a typical suburb. But the new plan and code, Hockenyos calculated, would double the build-out value to almost $2 billion. Now his projection seems modest: as the market has recognized the value of our TOD approach, the value of the raw land has increased almost 600 percent.

And why? It’s because Leander, instead of being just another exploding bedroom community, will have its own cosmopolitan center supported by convenient regional rail connections to Austin. We’re convinced the Leander TOD, by providing a mix of housing options, pocket parks and neighborhood businesses, will attract talented young professionals as well as empty-nesters with disposable income. We fully expect to sustain the region’s economy, reduce its ever-expanding carbon footprint, and achieve sustainability on a site otherwise destined for classic sprawl.

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