Foreclosures point to waning of the suburban era, study says

William H. Lucy has examined America’s foreclosure epidemic in enormous detail and has arrived at this conclusion: Decades-old patterns of suburban growth and urban decline are now being reversed.

“The years leading up to the 2008-2009 crises may be seen in retrospect as the last hurrah of the exurban extreme of the American dream,” says Lucy, a professor of urban and environmental planning at the University of Virginia. Increasingly, people with choices and financial resources want to live in cities.

The residential foreclosures that spiked in the past three years have been highly concentrated. Sixty-two percent of foreclosures in 2008 occurred in just four of the 50 states: California, Florida, Nevada, and Arizona. Forty percent clustered in 16 counties within 10 metropolitan areas, nearly all of them in the Sunbelt, which have more than their share of semi-abandoned tracts — referred to by Lucy as “zombie subdivisions.”

The foreclosure crisis has taken most of its toll on metropolitan areas’ edges — places that in many instances depended heavily on real estate activity for their economic well-being, according to Lucy. His findings appear in Foreclosing the Dream: How America’s Housing Crisis Is Reshaping Our Cities and Suburbs, a 208-page paperback from the American Planning Association’s Planners Press ($52.95).

Lucy attributes much of the foreclosure crisis to these factors:
• Federal policy aimed at increasing the homeownership rate above the 64 to 66 percent range where it had stayed from the 1960s to the 1990s. President Bill Clinton boosted the rate to 67.7 percent. President George W. Bush’s goal of getting 5.5 million more Americans to own homes — pushing the rate to 71.4 percent —resulted in a further easing of financial standards.
• A long-term decline in the incomes of most Americans and an increase in the gap between the rich and the rest of the population. Many who were enticed to buy houses couldn’t afford them.
• Credit that started out cheap but jumped to a higher rate within a few years.
• The recession. “The foreclosure crisis was triggered in those states where house prices to income ratios widened the most,” led by California and Nevada and then Arizona and Florida, Lucy says.

Back to the city
Unaffordable houses and a severe recession weren’t the only influences, Lucy says. “Something else was also afoot. … The whole pattern of metropolitan development was quietly moving in reverse.”
Through a detailed examination of census records, Lucy shows that the condition of quite a few cities stabilized by 1990 and then improved. “During the 1990s, something remarkable began to happen,” Lucy says. “Cities were attracting people with money.” In the 40 central cities of the 35 metropolitan areas ranked as America’s largest in 1980, the decline in average per capita income halted.

Why the change?
“The revival of interest in cities on the part of middle-class whites had a lot to do with a fondness for older homes,” particularly their craftsmanship and character, Lucy maintains. By 2000, neighborhoods with housing built before 1940 were no longer the poorest in their metropolitan areas. They were attracting inhabitants with greater means.

At the same time, neighborhoods made up of housing that had been built between 1950 and 1970 started to lose their privileged status. Areas developed from 1950 to 1970 were “most likely to be dominated by small houses [whose appeal was waning], far from shops and other needs.”
In other words, both the nature of the houses and their construction and their closeness to, or distance from, everyday needs and services precipitated a profound shift. Urban living gained in popularity.

More children, jobs
It’s commonly asserted that middle-income families with school-age children avoid cities because of their poor educational systems. Lucy thinks that’s changing. He cites the move of many families into Lower Manhattan condominium units — housing that was expected to be filled by empty-nesters, retirees, and young single professionals.

Parents in those locations are demanding better schools. “If city public schools improve, the trickle of middle-income families with children back to cities may become a substantial stream,” Lucy predicts.  
Job trends may also support city revival. Between 1998 and 2001, 33 of 36 large cities studied by Lucy saw their employment grow. (The exceptions were Detroit, St. Louis, and Buffalo.) “New economy” jobs — in the professions, education, health, government, finance, insurance, and information— seem to have pushed the per capita incomes of non-Hispanic whites higher in many cities than they are in the suburbs.

Affluent blacks have been moving out of cities, but affluent whites, predominantly households of one or two persons, have been taking their place.

Building permits reflect an urban rebound. “Between the early 1990s and the six years from 2001 to 2007, New York City’s share of regional building permits increased from 15 percent to 44 percent,” Lucy reports. “Chicago went from 7 percent to 23 percent. Portland rose from 9 percent to 22 percent. Atlanta grew from 4 percent to 13 percent.”

Lucy’s analysis of data suggests:
• “As the percentage of households with children declines, and that of singles, empty-nesters, and elderly increases, housing demand will increase in cities and inner suburbs, and demand in outer suburbs and exurbs will level off or decline nationally.”
• “Suburban decline will accelerate in middle-aged housing, but that won’t be uniform; demand for housing in some inner suburbs will rise.”
• “Demand will increase for transit serving more areas more frequently.”
• “Demand for more mixed use and walkable neighborhoods will increase, and prices in these areas will escalate as supply lags behind demand.”

He rejects the idea that rapid, continuing, outward development is inevitable because of the nation’s growing population and a scarcity of room for development in cities. If we choose to make it happen, he says, “a tremendously high proportion of our future growth as a nation could easily occur within already developed areas: in, or on the edges of, big-city downtowns; on busy corners of city streets away from downtown; and in new urban villages close to high-speed transit stations in suburbs.”

How each region responds to the challenges of transit and development will vary, producing contrasting results. Greater Atlanta and greater Washington, DC, illustrate the two extremes, in Lucy’s view.

“Washington, DC, and some suburban cities and counties planned for transit-oriented development, and use of transit rose to the second-highest level in the United States,” he notes. “Atlanta’s transit use lagged, which may be one reason why Atlanta has the most declining suburbs in the country.”