Mixing housing types in TNDs

Building a balanced neighborhood requires walking a fine line between implementing new urbanist principles and anticipating market demand. An analysis of the mix of housing types in selectednew urbanist communities highlights two aspects of this crucial element of creating viable neighborhoods. First, a true mix of apartments, townhouses, and single family homes is emerging in maturing projects such as Kentlands, Fairview Village, and Celebration. Second, in the initial phases of development, most developers still prefer to gain a foothold in the market with single-family homes, the housing type both lenders and home buyers are most comfortable with. Notable exceptions to this trend include Vermillion, where townhouses far outnumber single-family dwellings in the first phase, and Orenco Station, which has a high number of apartments. Numbers on both the existing mix and estimates of the planned mix are found in the accompanying tables. New Urban News also found that a number of developers do very limited market research before building, while others consider it essential to gather as much information as possible on demographics and market trends. Furthermore, developers emphasize the importance of having a flexible building plan (see sidebar), and offer solutions for making different housing types compatible in the streetscape. Fine-grained mix The nearly completed Kentlands in Gaithersburg, Maryland, may offer the best example of a fine-grained mix. On some blocks in this community, multifamily units rub up against townhouses and single-family homes. Town architect Mike Watkins notes that the mix has evolved through a balancing act between good planning and builder responsiveness to market demand. Overall, the distribution of for-rent and for-sale apartments and attached and detached homes is very even (see table). Fairview Village in Portland, Oregon, is close to a 50-50 split between multifamily and single-family housing, and in later phases, construction of apartments and townhouses will outpace the growth in single-family units. The developers and builders have made adjustments along the way — many apartments built as rental housing have been converted to condominiums as the demand became apparent. Developers Holt & Haugh began cautiously, however. In 1995, a stagnant economy coupled with the fact that virtually no attached housing existed in the area, prompted the company to start with the safest bet — detached single-family homes. Even in the current strong economy, traditional neighborhood developments (TNDs) such as Avalon Park (Orlando, Florida), Village of Baxter (Charlotte, North Carolina), and Civano (Tucson, Arizona) are building almost exclusively single-family homes at the outset. Says Lee Rayburn of CDC Partners LLC, Civano’s developer: “In the first phase we wanted to be in the middle of the market as much as possible. We just need some success and then we can get more complex.” In an urban infill environment, building the whole range of housing types simultaneously is more feasible. Park DuValle in Louisville, Kentucky, is a striking example of how a monolithic public housing project can be replaced by a neighborhood of subsidized and market-rate apartments mixed in with a wide range of multifamily units (duplexes, four-plexes, six-plexes) and single homes. The market success of Park DuValle, particularly in regard to single houses, surprised local real estate professionals, although market research by Zimmerman/Volk Associates had identified a fair amount of potential. The Park DuValle study is just one of many that Zimmerman/Volk and other firms have conducted, taking a close look at demographic subgroups and predicting their interest in TND and their potential need for specific types of housing. Most recently, Zimmerman/Volk suggested the optimum mix of multifamily and single family housing, and attached and detached units on specific sites in the Philadelphia metropolitan area (see March/April issue). In hypothetical studies of housing mix, the firm has suggested that a ratio of 39 percent rental housing to 61 percent for-sale housing is ideal for an urban infill redevelopment. In an established suburban area this ratio would change to 24 percent rental and 76 percent for-sale. For a greenfield TND, Zimmerman/Volk recommends a mix of 20 percent rental and 80 percent for-sale. In these analyses, the for-sale category was further broken down into condominiums, rowhouses, and detached housing, including low, middle, and high-range prices (see table). One purpose of market research is to demonstrate to investors and financiers that potential market demand is sufficient and measurable. Market research also helps in refining the master plan – and gives developers and builders a good sense of what products to offer. the case for market research Charles Adams of Celebration Associates says thorough market research is essential for deciding the mix of housing types. A former vice president of community development with Disney, he oversaw the development of Celebration, and is now working with his Disney colleague Don Killoren on the development of the Village of Baxter outside of Charlotte, North Carolina. Clear Springs Development, of which Killoren is the CEO, is the developer of record. The developers’ first step was to do a supply and demand assessment, a detailed look at the macro trends affecting household growth in the Charlotte area. “The next step was to break this down to predict at what price points this growth is going to occur,” Adams says. “How many houses will be needed in the $100,000 range versus the $150,000 range?” Next, the developers looked at how homes at various price points sell in competing projects and identified the area’s “best performer.” “We typically would not put together a plan that would exceed the absorption rate of the best performer in the market,” Adams says. Clear Springs Development did not commission a market study but relied on information from secondary sources and also hired locals with knowledge of the real estate market. The company also used focus groups of both potential buyers and real estate brokers to pinpoint exactly what demographic, even psychograhic, groups it wanted to target. “We can’t assume that what we did in Florida will work here. There are such dramatic differences regionally and from year to year in what a buyer wants,” Adams says. In Civano, the first market studies were commissioned by the City of Tucson to measure the appeal of a development with a new urbanist layout and energy efficient housing. The developers did further research in an effort to identify their target market, and according to Lee Rayburn, market research is an on-going concern. CDC Partners surveys both buyers and visitors every quarter and measures the sales performance of its homes against similar types in the Tucson area. Civano is required to build 20 percent affordable housing, but the rest of the mix is purely market driven, Rayburn says. Interviews with new urbanist developers, however, indicate that many do without systematic market research. Some start building and then gauge what housing types appeal to buyers. In Kentlands, Mike Watkins has seen little evidence of comprehensive research. “I’m surprised how subjective the developing business is,” he says. “One would expect planning to be subjective and developing more of a number-crunching, objective business, but that has not been the case here.” Some builders may have done market studies, Watkins says, but mostly they build what they know is selling in the surrounding areas. The usefulness of such research might be called into question considering that new urbanist communities are still an unknown to most people. “I don’t think you can have the market tell you what people want, because they have no idea what the offering would be,” says Robert Kramer, developer of Haile Village Center the only TND in the Gainesville, Florida, area. PacTrust, the developer of transit-oriented Orenco Station in Hillsboro, Oregon, planned for at least half of the project’s for-sale product to be attached. The company conducted market studies in the Hillsboro area and found that only two attached housing units had been sold in the previous year. The information was of little value and certainly gave no indication that the first 120 townhomes in Orenco Station would sell out as rapidly as they did. “We’ve learned that you can’t follow the market blindly, because then you are just following the crowd,” says Dick Loffelmacher, director of retail leasing at PacTrust. “But if you do an exceptional job of creating a community, then you have created a new market.” Compatibility TND developers must grapple with the question of whether to keep different housing types segregated or whether to build them in close proximity to each other. The conventional wisdom that says homeowners are wary of renters living next door still holds some sway. In Avalon Park and Haile Village Center, for example, rental units will be concentrated in the commercial town center. Haugh says multifamily housing provokes concerns primarily because most suburban garden apartment complexes are such poor models. In Fairview Village, the apartments are very dense, 37 units per acre, and feature underground parking. Because their quality of design and materials are comparable to those of single homes, these apartment buildings won’t bring down the value of surrounding homes, Haugh says. Kentlands and Park DuValle provide more proof that close integration of housing types have not hurt sales or housing values. But for this kind of intermixing to work, buildings must share common characteristics, Watkins says. It is especially important for the buildings to have similar relationships to the public realm – to have similar setbacks, for example. Use of common building materials will also help make differing types of dwellings compatible. In Park DuValle, a conscious effort has been made to use the same design and quality of materials in both rental and for-sale housing, says Charles Cash of the Louisville Development Authority. “We have achieved real diversity; you can’t distinguish one from the other from the outside.” The same approach will guide development in the Village of Baxter. In later phases, townhouses and single-family homes will be built side by side – a step beyond the approach in Celebration, where types only met back to back, separated by alleys. Such a mix better approximates the fabric in traditional towns in the area, Adams says. One street in Fairview Village features apartments and for-sale duplexes facing each other, and in areas where townhouses abut a district of single-family homes, the end units on the townhouses are designed to blend in with the single family homes, Haugh says. In future phases of Haile Village, Kramer plans to build both townhouses and single family houses on a town square because the square accommodates the mixing better than a street. Adjusting the plan As builders and developers adjust to market response, they may also have to make changes in the original master plan. In Kentlands, Watkins explains, the principles of the plan have not changed, even though some areas have changed physically. Some blocks originally planned for townhouses were converted to single-family blocks because builders thought that was what buyers wanted. Then that process was reversed on other blocks as demand for townhouses picked up. “It has worked out fine,” Watkins says, “because it adds authenticity.” Getting quality multifamily housing into a TND while maintaining the integrity of the neighborhood is still a challenge. Says PacTrust’s Project Manager Mike Mehaffy: “The parts of Orenco Station that are strongest are the parts where we paid attention to the creation of a strong neighborhood. The parts that are weakest are parts where we sold to a national multifamily developer, who delivered density without a strong response to neighborhood character.” Mehaffy also notes that PacTrust had difficulty building a truly varied line of single-family home plans. To keep prices down in Portland’s pricey real estate market, the company needed the economy of scale of repeated plans. However, with its broad range of housing types, Orenco Station has managed to offer homes ranging in price from $79,000 to $429,000, a range few conventional projects can match. There is considerable pressure on the New Urbanism to prove that viable neighborhoods can be built anew, and one very visible indicator of progress is the successful mixing of housing types. This sampling of the experiences of TND developers underscores the fact that time is a crucial factor. A neighborhood with a diverse income population won’t spring up overnight. One of TND’s chief advantages over the monocultural subdivision is its flexibility – it can be built in phases and respond to market fluctuations. Good market research will help developers adjust their plans, but sometimes a healthy dose of skepticism may also be in order. “It’s fine to buck the market,” says Watkins. “If we didn’t, we wouldn’t be building TNDs.”