"Smart Money in Real Estate is on Smart Growth"

Baby Boomers, developers and cities are catching on to Smart Growth.  Boomers are looking to escape the suburbs and developers have recognized the great opportunity this presents. Cash strapped cities are revitalizing their downtowns and preventing urban sprawl which is helping their bottom lines The following are excerpts from an article in Reuters by Helen Chernikoff and Al Yoon.

Maryland (Reuters) - This suburb of Washington, D.C. inspired R.E.M.'s 1984 song about the soul-sucking blandness of a suburban adolescence that has been a staple of rock and roll. "(Don't Go Back to) Rockville" described a town of empty houses, "where nobody says hello."

But some experts in the real estate business believe that in the future, more and more of us will be going back to places like the revamped Rockville -- quite happily, in fact.
"They had a point at the time," Sally Sternbach, the head of Rockville's economic development arm, says of R.E.M.'s quiet anthem. "We got it wrong. We built a mall that never found its anchors. It languished for 40 years. It was like the biblical 40 years in the desert."
Then, 15 years ago, Rockville convened hearings and forums to discuss its lackluster downtown, deciding in the end to replace it with a town square lined with shops, restaurants and apartments, all steps away from a subway station -- in other words, more of an urban experience.
The citizenry wanted vibrant street life both for the fun of it, and to attract business. So far, it's worked. Teenagers use Facebook to signal spur-of-the-moment breakdance sessions on the town square's bandstand because, as Dominique Estrera, 17, explained, it's really the only place they can "hang out and break."
Adults like to socialize there, too. "I love the Town Square because I can't walk more than a couple feet without seeing someone I know from doing business," said Robin Wiener, president of Get Real Consulting, a firm that helps healthcare providers put their records online.
Rockville's renaissance over the past four years shows how the shift toward urban-style living has reached the suburbs. And urban planners insist the trend has legs.
Dubbed "smart growth," the movement favors the development of a mix of housing and businesses in and near existing cities. At the same time, it discourages the Topsy-like growth of peripheral suburbs, known disparagingly as "sprawl."
The unexpected revival of a number of cities, from Rockville to Sacramento, stands in contrast to plunging home prices in the suburbs. "America is catching on to this trend," said Peter Calthorpe, who co-founded the Congress for the New Urbanism in 1993 to create alternatives to the conventional suburb.
He says the previous model was based on the assumption that the United States could prop up the single family home in a distant location by keeping the cost of oil and mortgages low. But that era is over. "The true cost of transportation and housing is going to start to surface," he warns.

LIVING FOR THE CITY

If the trend persists, as many expect, it would be a sharp rejection of the preferences and policies that have shaped U.S. housing since World War II.
The suburb as we know it today -- open, low-slung, car-dependent -- was born with the post-war baby boom. All of a sudden, there was a desperate need for housing. By 1950, single-family housing starts had soared from around 286,000 a year in 1945 to 1.6 million, according to Census Bureau data. And as the car became more widely available, and roads spread, so did the suburbs.
During the most recent housing boom, homebuilders started 6.3 million detached single-family homes between 2003 and 2006. By 2007, single-family homes accounted for 63 percent of U.S. housing units.
The baby boomers whose arrival kicked off the postwar housing frenzy fed this latest expansion, too. This time, they sought space for their own families, said James Chung, president of Reach Advisors near Albany, New York, whose clients include developers. "Suburban developers did a fantastic job riding that wave," he said.
But today, aging boomers are growing out of the suburbs and their children have not yet grown into them -- and may never do so to the extent their parents did. This demographic shift, more than anything else, is driving consumer demand for compact, walkable neighborhoods, Chung said.
Born between 1946 and 1964, baby boomers represent about a third of the U.S. adult population, and will do so through the next decade, said demographer Dowell Myers of the University of Southern California.
Boomers are eager to liberate themselves from the maintenance of house, lawn and car now that their children have skipped the nest, said Mollie Carmichael of John Burns Real Estate Consulting, an Irvine, California-based firm that advises homebuilders. They want necessities within walking distance because they know they will not be able to drive forever.

FOLLOW THE MONEY


Elected officials and bureaucrats like Gochnour and Rockville's Sternbach are also being mindful of the public purse, said Joseph Minicozzi, a real estate developer and city planner in Asheville, North Carolina who has done research there and in Sarasota County, Florida.
His work shows that local governments reap much more in taxes from urban centers than from malls or "big box" retail like a Wal-Mart, but pay more to build suburban infrastructure such as sewers and streets.
In the city and county of Sarasota, for example, 3.4 acres of urban residential development consumes one-tenth the land of a multi-family development in the suburbs. But it requires little more than half of the infrastructure investment and generates 830 percent more for the county annually in total taxes: that's $2 million from the city structure and $238,529 from the suburban one.
What's more, suburban housing takes 42 years to pay off its infrastructure costs. Downtown? Just three. "I'm preaching to Joe and Jane Six-Pack who want to be subsidized. These (city) centers produce a tremendous amount of revenue and then hemorrhage it out to the suburbs," Minicozzi said. "We don't have a rational discussion on the true costs of the way we manage land."
That is starting to change, as cash-strapped governments struggling with the recession's hit to tax revenue are starting to press developers to share the pain of paying for highways and other infrastructure, said Richard Rich, a director for Thomas Enterprises, whose 240-acre redevelopment of Sacramento's abandoned railyards is the largest urban redevelopment project in the country.
As a result, profitability will come to depend on higher-density construction, said Rich, his voice echoing through the cavernous stalls of the former transcontinental railroad being salvaged for a retail plaza. "Just as they evolved to start, they will de-evolve the product," he said, of suburban developers.