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SMART GROWTH AND ECONOMIC SUCCESS:
BENEFITS FOR REAL ESTATE DEVELOPERS, INVESTORS,
BUSINESSES, AND LOCAL GOVERNMENTS
Office of Sustainable Communities
Smart Growth Program
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Acknowledgments
This report was prepared by the EPA's Office of Sustainable Communities with the assistance of
Renaissance Planning Group under contract number EP-W-11-009/010/11.
Principal Staff Contacts: Melissa Kramer and Lee Sobel
Mention of trade names, products, or services does not convey official EPA approval, endorsement, or
recommendation.
Cover photos (left to right, top to bottom): Barracks Row in Washington, D.C., courtesy of Lee Sobel;
TRAX light rail in Sandy, Utah, courtesy of Melissa Kramer; Mission Creek Senior Community in San
Francisco, California, courtesy of Alan Karchmer and Mercy Housing Inc.
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Table of Contents
Executive Summary
I. Economic Advantages of Smart Growth Strategies
II. Economic Advantages of Compact Development
A. Higher Revenue Generation per Acre of Land
B. Infrastructure and Service Delivery Cost Savings
C. Redevelopment and Reuse Opportunities
D. Economic Productivity and Job Creation
III. Economic Advantages of Walkability
A. Price Premium
B. Economic Revitalization
IV. Economic Advantages of a Diverse Range of Choices
A. Meeting Market Demand
B. Responding to Changing Demographics
C. Reducing Housing and Transportation Costs
V. Conclusion
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Executive Summary
Smart growth development is compact and walkable and provides a diverse range of choices in land
uses, building types, transportation, homes, workplace locations, and stores. Such development projects
are attractive to private-sector interests because they can find a ready market and compete financially.
They appeal to local governments because they can be the building blocks of a growing economy and
high-quality, economically sustainable neighborhoods and communities while also helping to create a
cleaner, healthier environment. Some of the advantages for developers, communities, and local
governments associated with smart growth include:
• Compact development: Using land and resources more efficiently and redeveloping old or
neglected areas while retaining existing infrastructure can create economic advantages for real
estate developers and investors, businesses, and local governments. Compact development can
generate more revenue per acre because it uses land more efficiently. It can reduce the costs of
land and infrastructure for individual projects and the costs of providing fire and police
protection, utilities, schools, and other public amenities. By locating companies closer together,
compact development can create a density of employment that increases economic productivity
and attracts additional investment.
• Walkability: Walkable neighborhoods have well-connected streets and a mix of land uses near
each other, making not only walking but also bicycling and transit more convenient and
appealing. Projects in walkable neighborhoods command a price premium, earning real estate
developers and investors a higher return on investment. Improvements to streets and sidewalks
to make them more appealing to pedestrians can benefit local businesses by attracting more
customers. In turn, local governments benefit through additional property and sales tax
revenue.
• Range of choices: People and businesses value places that bring together a variety of activities
to create vibrant environments. The demand for such places exceeds the supply. Many people in
the two largest demographic cohorts, baby boomers and their children, are particularly
interested in lively neighborhoods with their daily needs close by. Communities with access to
transit also help people reduce their transportation costs, enabling them to save money or
spend more on their homes, entertainment, or other things they value. Changing demographics
will likely further increase the demand for smart growth development over the coming decades;
developers, investors, businesses, and local governments who respond to these market
preferences could reap economic advantages.
The following table summarizes the strategies outlined in this report that can play a key role in creating
profitable real estate development, productive economic development, and economically resilient
communities.
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Potential Benefits to Real
Estate Developers and Potential Benefits Potential Benefits to
Strategy Investors to Businesses Local Governments
Develop compactly,
redeveloping land with
existing infrastructure
when possible
Reduced costs for land and
infrastructure
Increased
economic
productivity that
attracts additional
investment
Reduced costs of
providing fire and
police protection,
utilities, schools, and
other public amenities
Create walkable places
Increased sales and
increased sale prices
Increased
economic activity
Higher property and
sales tax revenue
Provide a diverse range
of choices in land uses,
building types,
transportation modes,
housing, workplace
locations, and stores
Increased sales and
increased investment value
Increased ability
to attract
employees and
customers
Increased tax base
from higher property
values and new
residents
This report is the first in a series from EPA's Smart Growth Program designed to inform developers,
businesses, local government, and other groups about the benefits of smart growth development.
Additional reports will build on this work, exploring how real estate developers and investors can
overcome real and perceived barriers to benefit from infill opportunities, how decisions about where to
locate will impact the bottom lines of businesses, and why smart growth strategies are good fiscal policy
for local governments.
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Economic Advantages of Smart Growth Strategies
I. Economic Advantages of Smart Growth Strategies
An increasing number of people are looking for vibrant, diverse places to live and work. They want more
housing and transportation options and the ability to walk or bike to meet their daily needs. Businesses
want to locate in areas where they can attract customers and the best employees. Local governments
are eager to improve their communities to attract and retain residents and businesses while maximizing
limited resources available for infrastructure needs and service delivery. Private developers and real
estate investors are trying to maximize their returns in a fragile economy with changing market
preferences. Smart growth approaches provide opportunities to meet all of these needs by linking
economic development efforts to real estate and public infrastructure investments that create places
attractive to businesses and people. Ten principles of smart growth were developed by the Smart
Growth Network, an organization of diverse partners who work to encourage development that benefits
the economy, community, public health, and the environment (see Exhibit 1). Following these principles,
smart growth approaches can help create
strong local economies, improve the quality
of life, and help protect environmental
resources—for example, by reducing air
pollution from vehicles by encouraging
walking, bicycling, or taking transit; building
more compactly to protect ecologically
sensitive land; or incorporating natural ways
of collecting and filtering stormwater
runoff.1
Many in the business community have long
recognized the importance of the link
between places that are good for the
environment and places with strong
economies that help businesses thrive. For
example, a 2004 study, Smart Growth is
Smart Business, found that:
• Quality of life for employees and
customers is critical for a successful
business.
• Reinvestment in established
communities can reduce costs and
boost profits for businesses over the
short and long terms.
Exhibit 1: Smart Growth Principles
Based on the experiences of communities
around the nation, the Smart Growth Network
developed a set of ten basic principles to guide
smart growth strategies:
• Mix land uses.
• Take advantage of compact building design.
• Create a range of housing opportunities and
choices.
• Create walkable neighborhoods.
• Foster distinctive, attractive communities
with a strong sense of place.
• Preserve open space, farmland, natural
beauty, and critical environmental areas.
• Strengthen and direct development towards
existing communities.
• Provide a variety of transportation choices.
• Make development decisions predictable,
fair, and cost effective.
• Encourage community and stakeholder
collaboration in development decisions.
Source: Smart Growth Network. Smart Growth Principles.
http://www.smartgrowth.org/engine/index.php/principles.
1 For more information on the environmental benefits of smart growth strategies, please see: EPA. "Environmental Benefits of
Smart Growth." http://www.epa.gov/smartgrowth/topics/eb.htm. Accessed September 28, 2012.
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Economic Advantages of Smart Growth Strategies
• Smart growth can be a market opportunity for businesses to gain competitive advantage, tap new
customer demand, and increase profits.
• Many businesses want to work with localities, states, and grassroots organizations to encourage
smart growth planning in their regions.
• Smart growth projects sell in both strong and weak economies.'
More recent work has documented that smart growth strategies can provide economic advantages for
businesses, households, local governments, and the nation as a whole. " Real estate development and
investment decisions based on smart growth approaches can influence job creation and economic
competitiveness and generate economic advantages for the private and public sectors. These benefits
can be loosely grouped under the themes of competitiveness and growing efficiently.
• Growing efficiently is a priority for many
communities, The economic downturn that
began in 2007 exposed economic
vulnerabilities in communities built
according to the conventional
development pattern of the past 60 years.
The current path of many communities is
not financially sustainable; overinvestment
Exhibit 2: Smart growth communities are compact,
walkable communities with a variety of transportation
options. Smart growth approaches have been used to
create economic opportunity and improve the quality
of life in communities across the country, such as
Lancaster, Pennsylvania (pictured here).
z National Association of Local Government Environmental Professionals and Smart Growth Leadership Institute. Smart Growth
is Smart Business: Boosting the Bottom Line & Community Prosperity. 2004.
http://www.nalgep.org/publications/PublicationsDetail.cfm?LinkAdvlD=52733.
3 Kooshian, Chuck and Steve Winkelman. Growing Wealthier: Smart Growth, Climate Change and Prosperity. Center for Clean
Air Policy. 2011. http://www.growingwealthier.info/index.aspx.
4 Urban Land Institute. What's Next? Real Estate in the New Economy. 2011. http://www.uli75.org/whats-next/.
• Competitiveness is critical to real estate developers, businesses, and local government. Places have
long competed with each other to attract
and retain talented workers, high-quality
jobs, and economic investment. Now,
major economic changes and demographic
shifts are changing the housing and
commercial markets. To remain
competitive, communities will need places
that respond to changing attitudes and
behaviors driving people and businesses
toward the center of metropolitan areas.4
Smart growth developments can compete
strongly in this changing marketplace by
creating places that can meet the
increasing market demand for walkable,
mixed-use communities.
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Economic Advantages of Smart Growth Strategies
in new infrastructure—rather than reinvestment in existing places—uses public money inefficiently
and creates long-term financial liabilities.5 Smart growth strategies have inherent efficiencies that
can minimize private and public costs while maximizing property values for homeowners and
revenues for local governments. Developers also can realize efficiencies at the project level that can
increase their returns and preserve capital to invest elsewhere.
This document shows how smart growth project can provide economic advantages for real estate
developers, investors, businesses, and local governments. The private sector can profit from smart
growth projects because there is a ready market and these projects compete well financially. Although
residential mixed-use projects make up a small share of the real estate market, their numbers grew
dramatically between the mid-1990s and the mid-2000s as communities relaxed some zoning barriers
and financial markets became more comfortable lending for such projects.6 Smart growth development
adds value to communities, so developers of smart growth projects can build goodwill and strengthen
relationships with local governments. Local governments like smart growth projects because they can be
the building blocks of a growing economy and high-quality, economically sustainable neighborhoods and
communities. Stemming from the smart growth principles, three characteristics are fundamental to
producing these economic advantages for developers, investors, businesses, and local governments:
• Compact development.
• Walkability.
• A diverse range of choices in housing, transportation, and other land uses.
5 StrongTowns.org. Curbside Chat. 2011. http://www.strongtowns.org/companion-booklet/.
6 Tombari, Edward. Smart Growth Smart Choices Series: Mixed-Use Development. National Association of Home Builders. 2005.
http://www.nahb.com/fileUpload_details.aspx?contentlD=39196.
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Economic Advantages of Compact Development
II. Economic Advantages of Compact Development
The compact development pattern that is central to smart growth development uses land and resources
more efficiently and concentrates activity close to infrastructure, amenities, and other community
resources. The efficient use of land focuses public and private investment in areas where it can take
advantage of past infrastructure investments to create economic value by generating higher property
tax revenue per acre of land, reducing costs of infrastructure and service delivery, and providing
redevelopment and reuse opportunities. The focused investment can also spur business activity and job
creation in these locations.
A. Higher Revenue Generation per Acre of Land
Developing at higher densities uses land more efficiently to generate more revenue, both private and
public, per acre of land. For example, research on the relative fiscal productivity of various land uses in
Sarasota County, Florida, has demonstrated that compact, mixed-use developments in central locations
generate more property tax revenue per acre than single-use developments in more suburban
locations.7 Similar results have been found for communities in Colorado,8 Montana,9 and North
Carolina.10 Developers and investors seek to maximize profits when designing projects, but the public
sector often has not recognized the economic advantages of higher-density development.11 Many
communities focus on the absolute dollar figure of taxes that large, low-density developments can
generate rather than considering the amount of taxes different types of development can generate per
acre, the expected return on infrastructure investments, the costs of municipal services, and the impact
developments have on surrounding property values. While market feasibility and community character
concerns will guide the level of density that is appropriate and achievable in a community, businesses
and local governments can benefit from development at higher densities where the market demands it.
1. Infrastructure and Servl livery Cost Savings
Extensive research has found that compact development patterns, higher density, mixed uses, and other
characteristics of smart growth development can reduce the costs of providing public infrastructure and
delivering services.12,13 Many communities with conventional low-density, single-use development
patterns are financially burdened by the cost of maintaining, and ultimately replacing, their existing
7 Katz, Peter. "Sarasota's Smart Growth Dividend." Planning. American Planning Association. December 2010.
8 Stroud, John. "Study: Dense Downtowns = Higher Tax Yield." GlenwoodSprings Post-Independent. July 11, 2011.
http://www. postindependent.com/article/20110712/VALLEYN EWS/110719986&parentprofile=search.
9 Kemmick, Ed. "Downtown Development Can Pay Off, Experts Say." Billings Gazette. August 30, 2011.
http://billingsgazette.com/news/local/article_a086f50b-0bd7-5154-a884-53fl070993a0.html.
10 Langdon, Philip. "Best Bet for Tax Revenue: Mixed-Use Downtown Development." New Urban News. September 13, 2010.
http://newurbannetwork.com/article/best-bet-tax-revenue-mixed-use-downtown-development-13144.
11 Minicozzi, Joseph. "The Smart Math of Mixed-Use Development." Planetizen. January 23, 2012.
http://www.planetizen.com/node/53922.
12 Litman, Todd. Understanding Smart Growth Savings. Victoria Transport Policy Institute. 2011.
http://www.vtpi.org/sg_save.pdf.
13 Muro, Mark and Robert Puentes. Investing in a Better Future: A Review of the Fiscal and Competitive Advantages of Smarter
Growth Development Patterns. The Brookings Institution. 2004.
http://www.brookings.edu/research/reports/2004/03/metropolitanpolicy-muro.
4
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Economic Advantages of Compact Development
infrastructure given the tax revenue this development generates.14 Smart growth strategies can help
create vibrant and diverse communities in which public infrastructure investments yield returns that
cover long-term financial obligations. Several examples illustrate how smart growth strategies can
reduce short- and long-term costs of development for local governments:
• An analysis of alternative growth scenarios for the Salt Lake City region showed that the region's
modeled growth strategy, which included transportation investments, zoning changes, land
preservation policies, and water conservation incentives, could save $4.5 billion over 20 years in
transportation, water, sewer, and utility infrastructure compared to the baseline scenario based on
existing plans and trends (see Exhibit 3).
• The Maryland Department of
Planning estimated the amount of
road infrastructure needed
between 2010 and 2030 under
both the current (as of 2010)
statewide growth pattern and a
smart growth scenario. The
department estimated that the
current growth scenario would
require about 2.5 times more new
road infrastructure than the smart
growth scenario, at a cost of $29
billion.1
• An infrastructure cost model
analyzing base case and smart
growth alternative development
patterns in Sacramento, California,
found that the smart growth
alternative would save $14
billion.18 Savings came from reduced service costs for water, sewer, roads, flood control, drainage,
and other utilities and from fewer land purchases needed to mitigate the loss of farms and wildlife
habitat.
14 StrongTowns.org op. cit.
' Federal Highway Administration. "Case Study: Envision Utah."
http://www.fhwa.dot.gov/planning/toolbox/utah_overview.htm. Accessed May 21, 2012.
16 MacCleery, Rachel and Jonathan Tarr. "Utah Business Embrace Light Rail" Urban Land. December 13, 2011.
http://urbanland.uli.org/Articles/2011/Nov/MaccleeryUtah.
17 Choi, Kenneth and Christopher Fricke. "Fiscal Impact Analysis - Analyzing the Effects of Smart Growth on Projected Road
Development in 2030." Maryland Department of Planning. 2010.
http://www.mdp.state.md,us/PDF/OurWork/Fiscallmpact_RoadProjection.pdf.
18 Sacramento Area Council of Governments. "Initial Blueprint Infrastructure Cost Analysis." Regional Report. October 2005.
http://www.sacog.org/regrpt/pdf/2005/10-Oct/OCT_RR_2005_V6_5.pdf.
Exhibit 3: Salt Lake City's businesses supported expansion of
the transit and light-rail system because studies showed that it
would reduce public costs of infrastructure and personal
transportation costs in the region, expand access to
employment, reduce congestion, stimulate economic activity
in the commercial core, and create development opportunities
along transit corridors.
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Economic Advantages of Compact Development
• A study in Rhode Island found that the state could save more than $1.4 billion over 20 years if its
next 20,000 housing units were built in a compact configuration instead of a low-density, large-lot,
scattered pattern of development. The study showed savings on roads, schools, and utilities and
calculated the benefits of conserving farms and forest lands.19
• A comparison of the coverage areas and relative costs of fire protection service between two
neighborhoods in Charlotte, North Carolina, found that a fire station in a neighborhood with a well-
connected street pattern typical of smart growth development covered 4.5 times more addresses at
a much lower annual per capita cost than a station in a less connected area ($159 versus $740).20
• A cost-simulation model found that increasing lot size can affect the cost of providing water and
sewer service, as can increasing distance from existing water and wastewater treatment plants.
Annual costs for water and sewer service for households on small lots less than half a mile from an
existing water and wastewater treatment plant are less than 25 percent of the costs for households
on large lots four to five miles from an existing treatment plant.21
Developers also benefit from infrastructure efficiencies in smart growth projects. Higher densities and
compact development patterns that require shorter utility runs and less roadway area can translate to
significant cost savings on the construction of utilities and streets, costs often paid by developers.
A case-study comparison examined the infrastructure costs of traditional neighborhood development
versus conventional suburban development.22 The study considered variables that drive infrastructure
costs, including lot size, product type, residential density, thoroughfare cross section, and thoroughfare
network pattern, to quantify and compare the impact on the total infrastructure cost. The study found
that infrastructure costs for traditional neighborhood development scenarios were consistently less than
conventional suburban development scenarios, ranging from 32 percent to 47 percent less, with the
traditional neighborhood development cost savings based principally on density.23 Lower-density
conventional suburban development also has greater land acquisition costs compared to a compact
traditional neighborhood development accommodating the same number of homes.
Developers can save money on transit-accessible projects because fewer parking spaces are needed.
East River Plaza, a pedestrian-accessible shopping center in the East Harlem section of New York City,
19 H.C. Planning Consultants, Inc. and Planimetries, LLP. The Cost of Suburban Sprawl and Urban Decay in Rhode Island. Grow
Smart Rhode Island. 1999. http://www.nbwctp.org/resources/the_cost_of_suburban_sprawl_and_urban_decay_in_ri.pdf.
20 Congress for the New Urbanism. "Saving Lives and Money: A Charlotte Case Study." CNU Report: Emergency Response &
Street Design. 2009. http://www.cnu.org/resources/publications/cnu-report-emergency-response-street-design-2009-2009.
21 Speir, Cameron and Kurt Stephenson. "Does Sprawl Cost Us All? Isolating the Effects of Housing Patterns on Public Water and
Sewer Costs." Journal of the American Planning Association 68(1): 56-70. 2002.
22 Traditional neighborhood developments have many smart growth characteristics. They typically include a variety of housing
types, often on the same block; a mix of uses and amenities; and open spaces such as parks and plazas. Streets are generally
narrow with on-street parking, and the street network is in a grid or similarly well-connected arrangement. A conventional
suburban development includes different housing types separated from one another based on size and price and arranged in
subdivisions of pods on cul-de-sacs and looped streets. Residential uses and nonresidential uses, when present, are separated
from each other. Streets are wide, do not have on-street parking, and are arranged in large blocks, cul-de-sacs, and loops, with
only a few collector streets to link to main roads.
23 Ford, Jonathan. Smart Growth & Conventional Suburban Development: Which Costs More? Morris Beacon Design. 2009.
http://cppwbe.files.wordpress.com/2011/ll/epa-sg-and-conventional-suburban-development-which-costs-more.pdf.
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Economic Advantages of Compact Development
was constructed with 1,248 parking spaces based on demand forecasts that used data from store
locations in auto-dependent outer boroughs. Actual use of the parking structure was measured at less
than 40%. A portion of the parking garage was converted to a storage area, and other alternative uses
are being explored.24 A 2010 study of 12 transit-oriented development projects in Santa Clara County,
California, found that all provide more on-site parking than residents actually use. About 26 percent of
the available parking spaces were unused. Using a national average cost per space, the study estimates
that the 2,496 unused parking spaces represent about $37.4 million in potential construction cost
savings.25
C. Redevelopment ami Ren nltles
Redeveloping neglected or abandoned properties can provide businesses and local government with
new economic development opportunities in the existing development footprint. For example, reusing
historic buildings can preserve a neighborhood's character, making it a more attractive place for
businesses and people to locate. In addition, redeveloping properties already served by infrastructure
and utilities not only saves communities and developers the costs of new infrastructure but also takes
advantage of past investment. The increase in surrounding property values that occurs when blighted
properties are redeveloped enhances the tax base and public revenues. Property types that present
opportunities for economic growth through redevelopment can take a variety of forms:
• Brownfields are parcels with real or perceived contamination. Contaminated property can create a
barrier to redevelopment because of liability concerns, cleanup costs, and uncertainty about how
long cleanup will take. State brownfields cleanup programs26 can reduce liability concerns and be a
cost-effective way for local government to encourage private development. A review of eight
studies concluded that, on average, $1 of public investment in brownfields projects leads to $8 in
total investment (although results from site to site vary considerably). The review also found that
when considering public spending on site-specific assessment, cleanup, and preparation only
(excluding other public investments in the project), $1 of public investment leads to an average of
$20 in total investment.27 A review of six employment studies concluded that, on average, a total
public investment in a brownfields project of $10,000 to $13,000 creates or retains one job in the
community, although the investment needed drops to roughly half that if considering only site
preparation costs.28 This rate of employment generation is at least 2.5 times larger than what the
24 Gebhart, Kyle. "Wasteful Parking Supply in East Harlem" TPD News. American Planning Association. Spring 2012.
http://www.apa-tpd.org/newsletters/TPD%20Newsletter%20(Sping%202012).pdf.
25 Serafin, Eduardo et al. A Parking Utilization Survey of Transit-Oriented Development Residential Properties In Santa Clara
County. San Jose State University and Santa Clara Valley Transportation Authority. 2010.
http://www.sjsu.edu/urbanplanning/docs/VTA-TODParkingSurveyReport-Voll.pdf.
26 EPA. State Brownfields and Voluntary Response Programs: An Update from the States. 2011.
http://epa.gov/brownfields/state_tribal/update2011/bf_states_report_2011.pdf.
27 Paull, Evans. The Environmental and Economic Impacts of Brownfields Redevelopment. Working Paper, Northwest-Midwest
Institute. 2008. http://www.nemw.org/images/stories/documents/EnvironEconlmpactsBFRedev.pdf
28 Precisely estimating the employment impacts of smart growth projects is challenging, as an ideal study would account for
jobs created during cleanup of brownfields, construction of the new development, and any resulting economic activity, as well
as account for interactions with nearby neighborhoods and commercial districts. The examples in this report are designed to
illustrate that smart growth projects can be an efficient use of resources to promote economic activity and its associated job
creation.
7
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Economic Advantages of Compact Development
U.S. Department of Housing and Urban Development and the U.S. Small Business Administration
expect from program investments.29 A study of brownfields remediation sites found that housing
values near cleaned up sites increased by between 5.1 and 12.8 percent.
• Greyfields are economically obsolete
shopping malls and other sites that
offer large infill redevelopment
opportunities. Greyfield sites are
typically highly visible properties that
reduce the appeal of surrounding
communities, so their
redevelopment often catalyzes
additional projects in the area.
Greyfield redevelopment projects
can achieve market-competitive sales
prices and lease rates for commercial
and residential space and
dramatically transform entire areas.
For example, the Boca Raton Mail in
Florida was transformed into Mizner
Park, a new town center. The
completed project had an assessed
value of $68.3 million in 2002,
compared to the old mall's assessed
value of $26.8 million in 1990.31
• Redfields are financially distressed properties (real estate "in the red"). Many resulted from the real
estate crash of 2007 when developers and lenders went bankrupt, leaving their development
projects foreclosed, vacant, or stalled. The Redfields to Greenfields initiative ' that started in Atlanta
is a strategy to address the glut of distressed properties in many communities. Under this strategy,
public-private partnerships would buy distressed properties and convert the land to parks or open
space. In addition, where appropriate, the partnership could hold portions of the land for future
redevelopment when market conditions are more favorable. Although this strategy is still emerging,
it could help local governments create jobs, attract new residents and businesses, and enhance
property values around the newly created parks and open space. By removing troubled loans from
bank balance sheets, the strategy could also help revive the real estate financing market, benefitting
29 U.S. Department of Housing and Urban Development. Basically CDBG Guide 2007.
https://hudnsphelp.info/media/resources/BasicallyCDBG_Guidebook.pdf.
30 Haninger, Kevin et ai. "Estimating the Impacts of Brownfield Remediation on Housing Property Values." Duke Environmental
Economics Working Paper Series. August 2012. http://nicholasinstitute.duke.edu/environmentaleconomics/estimating-the-
impacts-of-brownfield-remediation-on-housing-property-values/.
41 Congress for the New Urbanism. Malls Into Mainstreets. 2005. http://www.cnu.org/mallsintomainstreets.
32 Redfields to Greenfields, http://rftgf.org Accessed October 21, 2011.
Exhibit 4: The mixed-use Mizner Park town center in Boca
Raton, Florida, demonstrates how suburban communities can
create vital downtowns by redeveloping abandoned shopping
centers. Redeveloping the underused Boca Raton Mall into
Mizner Park removed a blighted property and helped revitalize
the surrounding community.
8
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Economic Advantages of Compact Development
developers seeking funding for projects. The ability of public parks and open space to increase the
value of surrounding property is shown by the Atlanta Beltline project. The announcement of a plan
to redevelop an abandoned rail line into a series of public parks, multi-use trails, and a new transit
system coincided with an increase in home values within a quarter mile of the project. Homes
appreciated as much as 30 percent more than similar properties located farther away.33
Strategies for redeveloping and reusing such properties can benefit from state and federal tax
programs, such as:
• The Historic Tax Credit is a key federal financing tool for historic preservation that can make
projects financially viable. Historic preservation and reuse of buildings helps to revitalize older cities
and towns, encourage compact development, and save communities' distinctive character and
notable architecture. Historic Tax Credit use tends to cluster primarily in cities and rural centers
where most historic buildings are located. An evaluation of the economic impact of the Historic Tax
Credit suggests that fiscal year 2009 and 2010 projects using the tax credit created (or saved) over
145,000 jobs34 nationwide and generated $6.2 billion in income and $400 million in local
government taxes.35 Many states have their own historic tax credits. In the state of Maryland, there
must be spending of at least $5 by historic property owners for every $1 invested by the state. An
analysis of Maryland's historic tax credit suggested that for every dollar of the commercial credit
(excluding credits used for residential structures), the state realized approximately $8 of total
economic output, including wages and sales tax receipts. In addition, every $1 million in credits was
associated with creation of roughly 70 jobs.36
• The New Markets Tax Credit program administered by the U.S. Department of the Treasury can
provide revitalization funding in low-income communities. The $15 billion program provides private-
sector investors (e.g., banks, insurance companies, corporations, and individuals) with federal
income tax credits in return for new investments in eligible businesses, ranging from small business
startups to real estate development. Revitalization activities and redevelopment projects often fit
New Markets Tax Credit qualifications.37 From 2003 through 2010, the New Markets Tax Credit
program invested $20.9 billion in real estate developments and businesses in low-income
communities.38
33 Immergluck, Dan. "Large Redevelopment Initiatives, Housing Values and Gentrification: The Case of the Atlanta Beltline."
Urban Studies 46(8):1723-1745. 2009.
34 Job figures in the report are actually for "job years," defined as one job sustained for one year, which might be filled by
multiple people.
35 Listokin, David and Michael Lahr. Second Annual Report on the Economic Impact of the Federal Historic Tax Credit. National
Trust Community Investment Corporation and Rutgers University. 2011. http://www.preservationnation.org/information-
center/sustainable-communities/community-revitalization/jobs.
36 Cronyn, Joseph and Evans Paull. "Heritage Tax Credits." The Abell Report. The Abell Foundation. March 2009.
http://www.abell.org/pubsitems/arn309.pdf.
37 EPA. "New Markets Tax Credits." 2005. http://www.epa.gov/brownfields/tax/nmtxcr_0605.pdf.
38 U.S. Department of the Treasury. "CDFI Fund Releases Data Related to NMTC Program Projects Financed Through 2010."
http://www.cdfifund.gov/news_events/CDFI-2011-26-CDFI-Fund-Releases-Data-Related-to-NMTC-Program-Projects-Financed-
Through-2010.asp. Accessed May 16, 2012.
9
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Economic Advantages of Compact Development
Reuse and redevelopment strategies facilitate development, increase the tax base, revitalize
neighborhoods, and create jobs. Research shows that public investment in site cleanup, historic
preservation, and other revitalization activities can leverage a significant amount of private money,39
making such strategies attractive for communities with limited resources. These investments typically
focus on removing critical barriers so that development can proceed.
Economic Productivity ami Job Creation
Compact development enhances economic productivity. Modeling research shows that a doubling of
population density increases economic productivity by 2 to 4 percent.40 This increased productivity is
thought to be due to reduced costs of transporting products between businesses, the higher degree of
specialization possible in areas with more people, and a faster flow of ideas.41,42 Research on patent
activity in metro areas found that a city with twice the employment density of another will produce 20
percent more patents per capita.43 Smart growth strategies can foster the conditions that promote
innovation, which is critical for competitiveness in the new economy. Local governments can benefit
from making smart growth strategies a key element of a job creation strategy. Developers and investors
can benefit from investing in compact, walkable communities where growing, innovative companies will
want to locate.
An approach to creating high-skilled and high-paying jobs is to support clusters of interrelated firms,
industries, and supporting organizations at the regional level. Such clustering within mixed-use districts
can foster innovation, strengthen entrepreneurship, enhance productivity, and improve regional
economic performance.44 Smart growth strategies have a role to play in developing and maintaining
successful clusters by orienting local and regional land use policy, infrastructure investments, and
transportation improvements to help effectively connect workers to industry concentrations.
Communities can benefit from linking business development and smart growth strategies because
companies are seeking locations that support a concentration of both employees and related
businesses.
39 Paull op. cit.
40 Abel, Jaison et al. "Productivity and the Density of Human Capital" Journal of Regional Science doi: 10.1111/j.l467-
9787.2011.00742.x. 2011.
41 Ciccone, Antonio and Robert Hall. "Productivity and the Density of Economic Activity." The American Economic Review.
86(l):54-57. 1996.
42 Glaeser, Edward and Joshua Gottlieb "The Wealth of Cities: Agglomeration Economies and Spatial Equilibrium in the United
States," Journal of Economic Literature 47(4): 983-1028 December 2009.
43 Carlino, Gerald et al. Urban Density and the Rate of Invention. Working Paper, Federal Reserve Bank of Philadelphia. 2006.
http://www.philadelphiafed.org/research-and-data/publications/working-papers/2006/wp06-14.pdf.
44 Muro, Mark and Bruce Katz. The New 'Cluster Moment': How Regional Innovation Clusters Can Foster the Next Economy. The
Brookings Institution. 2010. http://www.brookings.edu/research/papers/2010/09/21-clusters-muro-katz.
10
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Economic Advantages of Walkability
III. Economic Advantages of Walkability
For a neighborhood to be walkable, it must be safe, interesting, and easy to walk in, and there must be
places people want to walk to. Therefore, walkability requires a mix of land uses close together as well
as streets and sidewalks that are more comfortable and appealing for pedestrians. These safer, more
interesting, and better-connected streets also make it easier to use public transit and bicycle. Many
people prefer to live, work, and shop in walkable places because of these more convenient
transportation options. Projects in walkable neighborhoods benefit real estate developers and investors
by commanding a price premium. They benefit local businesses by increasing economic activity in the
area. Finally, they benefit local governments by producing higher property and sales tax revenue.
A. Price Premium
Compact, walkable development projects, especially those with good transit access, have an established
record of generating higher rents and sales prices for developers and investors because buyers are
willing to pay a premium for them.45 This premium translates into higher tax revenues for local
governments.
Part of the well-established premium for transit-oriented development is generated not just by the
access transit provides, but also by the amenities and design of transit-accessible neighborhoods.46 For
example, walkable neighborhoods have higher home prices—one study found that homes with above-
average levels of walkability command a premium of about $4,000 to $34,000 above homes with
average levels of walkability.47 The walkability premium exists for commercial real estate as well. An
analysis of more than 4,200 properties found that walkability was associated with higher property
values and higher net operating incomes for offices, retail spaces, and industrial properties.48
An extensive body of research explores how transit accessibility is related to property values.49 A review
of the literature found that most studies show a correlation between transit and property values,
although the size of the premium varies among studies and across markets:50
45 Leinberger, Christopher. The Option of Urbanism: Investing in a New American Dream. Island Press. 2007.
46 Bartholomew, Keith and Reid Ewing. "Hedonic Price Effects of Pedestrian- and Transit-Designed Development." Journal of
Planning Literature. 26(l):18-34. 2011.
47 Cortwright, Joseph. Walking the Walk: How Walkability Raises Home Values in U.S. Cities. CEOs for Cities. 2009.
http://www.ceosforcities.Org//research/walking-the-walk/.
48 Pivo, Gary and Jeffrey Fisher. "The Walkability Premium in Commercial Real Estate Investments." Real Estate Economics.
39(2):185-219. 2011.
49 Smith, Jeffery and Thomas Gihring. "Financing Transit Systems through Value Capture: An Annotated Bibliography." Victoria
Transport Policy Institute. 2010. http://www.vtpi.org/smith.pdf.
50 Fogarty, Nadine et al. Capturing the Value of Transit. Center for Transit-Oriented Development. 2008.
http://www.reconnectingamerica.org/resource-center/books-and-reports/2008/capturing-the-value-of-transit-3/.
11
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Economic Advantages of Walkability
Property Type
Premium
Single-family home
2 to 32 percent
Condominium
2 to 18 percent
Apartment
4 to 45 percent
Office
9 to 120 percent
Retail
1 to 167 percent
Several studies have found that compact developments featuring open space, trails, and greenways
have sold more quickly than similar projects elsewhere and often have a high rate of presold units.51 An
analysis of more than 16,400 sales in Portland, Oregon, for example, found price premiums for homes
located within 1,500 feet of the following amenities:52
Amenity
Premium
Natural areas
$10,648
Specialty parks
(e.g., playgrounds, skate parks, and golf courses)
$5,657
Urban parks
$1,214
While proximity to natural areas could encourage people to locate far from other amenities, these
results demonstrate that availability of open space in urban areas can also attract residents, generating
higher revenues for developers and investors from the sale of units and higher property tax revenue for
local governments. The ongoing shift in consumer preferences (discussed in Section IV.A) will likely
intensify demand and further increase this premium.
A portion of the value that transit or other public improvements confer to surrounding properties can
help pay for additional resident amenities.53 For example, tax revenue generated from smart growth
projects can fund local improvements such as construction of transit stations, improved sidewalks and
streets, open space preservation, or cleanup of contaminated sites. Such projects can have a multiplier
effect that benefits both private- and public-sector interests, since smart growth projects can encourage
additional development that in turn improves the value of existing development. In Chicago, tax
revenue increases generated by redevelopment of the Kinzie Industrial Corridor have been used to fund
protected bike lanes, new sidewalks, street lighting, transit station improvements, and pedestrian safety
enhancements.54
51 Ibid.
52 Shoup, Lily and Reid Ewing. The Economic Benefits of Open Space, Recreation Facilities and Walkable Community Design.
Active Living Research. 2010. http://activelivingresearch.org/node/12477.
53 Fogarty op. cit.
54 Saavedra, Jason. "Value Capture: Financing Sustainable Transportation." Grid Chicago. December 22, 2011.
http://gridchicago.com/2011/value-capture-financing-sustainable-transportation/.
12
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Economic Advantages of Walkability
B. Economic Revitalization
Public projects that make walking safer and more appealing, such as improving sidewalks, reducing
traffic speed, adding streetlights or street trees, and beautifying the streetscape, have had a quantifiable
benefit on sales, occupancy, and business activity in many communities:"''
• Lodi, California, undertook a $4.5 million retrofit of five downtown blocks that widened sidewalks;
extended curbs at intersections; and added street trees, lighting, benches, and other streetscape
improvements. The city reports that the pedestrian improvements helped to attract 60 new
businesses, reducing the vacancy rate from 18 to 6 percent, and increasing downtown sales tax
revenues by 30 percent. 6
• After traffic lanes on Valencia Street in San Francisco's Mission District were narrowed to
accommodate bike lanes and calm traffic, two-thirds of merchants reported improved business and
sales. An equal number of merchants indicated they would support additional measures such as tree
planting, sidewalk widening, and transit improvements.' '
• By the late 1990s, Washington,
D.C.'s Barracks Row was
experiencing a steady decline of
commercial activity and had
crumbling sidewalks, lack of
streetlights, and speeding traffic. A
public-private partnership formed in
200358 revitalized the community
with improvements such as new
patterned sidewalks, street trees,
streetlights, and traffic signals. This
commercial corridor attracted 44
new businesses and 200 new jobs
into the neighborhood, more than
tripling economic activity measured
by sales, employees, and number of
pedestrians.D=l
• The streets in downtown West Palm
Beach, Florida, were once designed mainly to ensure that cars could quickly travel through without
stopping. In 1993, downtown properties were 80 percent vacant, the city was $10 million in debt,
55 National Complete Streets Coalition. "Complete Streets Spark Economic Revitalization." Undated.
http://www.completestreets.org/webdocs/factsheets/cs-revitalize.pdf.
56 Ryan, Bill. "Economic Benefits of a Walkable Community." Let's Talk Business. July 2003.
http://www.uwex.edu/ces/cced/downtowns/ltb/lets/0703ltb.pdf.
57 Drennan, Emily. "Economic Effects of Traffic Calming on Urban Small Businesses." Masters Thesis, San Francisco State
University. 2003. http://www.emilydrennen.org/TrafficCalming_full.pdf.
'B Barracks Row Main Street. "About Barracks Row." http://www.barracksrow.org/what/about. Accessed February 7, 2012.
9 National Complete Streets Coalition op. cit.
Exhibit 5: Streetscape improvements on Washington, D.C.'s
historic Barracks Row helped revitalize the commercial area,
significantly increasing economic activity by making the area
more appealing for pedestrians and bicyclists.
13
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Economic Advantages of Walkability
and street crime was common. In an effort to revitalize the barren downtown, the city invested in
infrastructure to improve the environment for pedestrians. Improvements included enhanced
pedestrian crossings, traffic-calming measures, and streetscaping. After these changes, downtown
West Palm Beach reached an 80 percent commercial occupancy rate, and property values in the
area increased more than six-fold.60
60 Rush, Natalie et al. "Street Design for Revitalization Case Study No. 16." Undated. West Palm Beach, Florida.
http://www.walkinginfo.org/pedsafe/casestudy.cfm?CS_NUM=16. Accessed February 7, 2012.
14
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Economic Advantages of a Diverse Range of Choices
IV. Economic Advantages of a Diverse Range of Choices
Smart growth approaches provide a diverse range of choices—in land uses, building types,
transportation modes, housing, workplace locations, and stores. Many consumers and businesses value
places where a variety of activities come together to create economically and socially vibrant
neighborhoods. Developers, investors, businesses, and local governments that respond by offering
variety and choice through smart growth developments can reap economic advantages. The demand is
there now, and demographic trends over the coming decades will increase the number of people
interested in smart growth neighborhoods. People appreciate the benefits that compact, diverse, and
walkable development generate—from lowering combined housing and transportation costs to
improving quality of life.
A. Meeting Market Demand
Smart growth development can provide the homes, shopping areas, and workplaces that people want
now and will want in the future, while minimizing environmental and social costs. A 2010 analysis of real
estate trends notes that "the two largest demographic groups in the country, the baby boomers and
their children—together comprising half the population—want homes and commercial space in
neighborhoods that do not exist in anywhere near sufficient quantity."61 Several lines of evidence
support this assertion and suggest that the market has yet to catch up with changing preferences:
• At least one-third of homebuyers prefer homes in neighborhoods with smart growth
characteristics,62 and future demand for homes in compact neighborhoods could exceed 140
percent of the current supply.63
• Surveys in 200464 and 201165 found that a majority of Americans want short commutes, sidewalks,
and places to walk to. Another 2011 study also found that most households want shorter commutes
as well as access to a variety of services and more transportation options. The availability of such
housing is inadequate to meet current and future demand.66
• A 2011 survey found that 56 percent of people aged 55 years or older considered being near more
restaurants and shops to be among the most important neighborhood amenities if they were in the
market for a new home. Fifty-seven percent of people aged 18-34 considered a shorter commute to
be most important.67
61 Leinberger, Christopher and Patrick Doherty. "The Next Real Estate Boom." Washington Monthly. November 2010.
http://www.brookings.edu/articles/2010/ll_real_estate_leinberger.aspx.
62 Logan, Gregg et al. The Market for Smart Growth. EPA. 2007. http://www.epa.gov/smartgrowth/sg_business.htmttp2.
63 Robert Charles Lesser & Company. Measuring the Market for Green Residential Development. 2008.
http://www.rclco.com/pdf/Measuring_the_Market.pdf.
64 Belden Russonello & Stewart. 2004 National Community Preference Survey. Smart Growth America and National Association
of Realtors. 2004. http://www.smartgrowthamerica.org/narsgareport.html.
65 Belden Russonello & Stewart. The 2011 Community Preference Survey. National Association of Realtors. 2011.
http://www.realtor.org/reports/2011-community-preference-survey.
66 Litman, Todd. Where We Want To Be: Home Location Preferences and Their Implications for Smart Growth. Victoria Transport
Policy Institute. 2011. http://www.vtpi.org/sgcp.pdf.
67 Press Release. "Trulia Optimistic About Long-Term Housing Demand as 80 Percent of Homeowners Plan to Buy Again." Trulia.
September 20, 2011. http://info.trulia.com/index.php?s=43&item=131.
15
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Economic Advantages of a Diverse Range of Choices
• As of 2011, more than 10,000 real estate websites use the Walk Score tool68 to help home buyers
and renters rate home and apartment listings by the walkability and transit accessibility of the
surrounding neighborhood.69 Walk Score measures the walkability of an address by awarding points
based on the distance to a variety of services and amenities.
This shift in preferences is reflected in business decisions, not just consumer choices. Many companies
are reconsidering decisions to locate in stand-alone suburban office sites and instead are looking for
more vibrant locations with access to restaurants, grocery stores and other shops, homes, and
transit.70,71,72 For example, in Atlanta, BellSouth Corporation decided to consolidate 10,000 employees
from 25 different offices into three sites near transit stations. The company encouraged its employees
to use transit to get to work. Employee surveys indicated 95 percent satisfaction with the changes.73
noodleStream.com, which provides safety training, relocated from the northern part of the city to
downtown Oklahoma City in 2011.74 The move made the office more convenient for many employees
and provided access to more transportation options. The company is now also within walking distance
of many amenities such as restaurants, barber shops, banks, and doctors' offices. A study on the
financial performance of commercial properties between 1998 and 2007 shows that a portfolio
consisting solely of properties that are near transit, energy efficient, or in areas targeted for
redevelopment performed as well as, if not better than, a portfolio of conventional properties.75
1, Responding to Clianglng Demograplii.es
Demographic trends are helping to drive an increasing preference for more compact, diverse, and
walkable development. Considering these trends in light of existing housing stock and consumer
preferences, demand for new homes through 2025 might be almost exclusively for multi-family;
attached; and small-lot, single-family, detached homes.76 These demographic trends show:
• The United States will add 32 million households from 2000 to 2025, but only 4 million of these new
households will have children. Eleven million of these new households will consist of one person,
accounting for 34 percent of the growth.
68 Available at http://www.walkscore.com.
69Walk Score. "10,000+ Sites Now Using Walk Score Professional." July 19, 2011. http://blog.walkscore.eom/2011/07/10000-
sites-now-using-walk-score-professional/.
70 Stern, Julie. "Flexibility Key to Office of the Future." Urban Land. Urban Land Institute. August 2011.
http://urbanland.uli.org/Articles/2011/August/SternOffice.
71Spivak, Jeffrey. "Urban Office Momentum." Urban Land. Urban Land Institute. September 2011.
http://urbanland.uli.org/Articles/2011/September/SpivakUrbanOffice.
72 Baeb, Eddie. "Corporate Campuses in Twilight." Crain's Chicago Business. May 30, 2011.
http://www.chicagobusiness.com/article/20110528/ISSUE01/305289984/crains-special-report-corporate-campuses-in-twilight.
73 Fritz, Julie. "A Plan for a Better Atlanta: BellSouth and Carter & Associates improve the Atlanta commute while building new
offices." Southeast Real Estate Business. 2003. http://www.southeastrebusiness.com/articles/MAR03/cover2.html.
74 noodleStream.com. "noodleStream.corn's relocation puts Safety right in the Middle of Downtown Oklahoma City." 2011.
http://www.prweb.com/releases/2011/ll/prweb8929328.htm.
75 Pivo, Gary and Jeffrey Fisher. "Investment Returns from Responsible Property Investments: Energy Efficient, Transit-oriented
and Urban Regeneration Office Properties in the US from 1998-2007." Working Paper, Responsible Property Investing Center,
Boston College and University of Arizona; and Benecki Center for Real Estate Studies, Indiana University. 2008.
http://www.kelley.iu.edu/bcres/files/research/PivoFisherl0-10-08.pdf.
76 Nelson, Arthur. "Leadership in a New Era." Journal of the American Planning Association. 72(4):393-409. 2006.
16
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Economic Advantages of a Diverse Range of Choices
• By 2025, only about one-fourth of all households in the United States will have children, and nearly
30 percent will contain only one person.
• More people are turning 65 each year than ever before. One million people will reach 65 in 2012,
and two million will do so in 2025.
These trends will likely shape a substantial amount of new development. Up to $30 trillion will be spent
on development from 2000 to 2025—meaning over half of the development on the ground in 2025 will
not have existed in 2000.77 Young adults who are just entering the housing market and older Americans
whose needs are changing will make smart growth strategies increasingly important for attracting
residents and businesses. Located at roughly opposite ends of the age spectrum, these two groups share
some preferences in where they want to live, work, shop, and play.
Young Adults; Competing for Talent
Young adults, particularly those with college degrees, will be highly sought after as the baby boom
generation retires from the labor force and new technologies in the workplace drive demand for new
skills and knowledge. Young people tend to be adaptable, mobile, and relatively inexpensive to
employ.78 Their entrepreneurial activities help drive the economic prosperity of cities and regions. Areas
with higher concentrations of college graduates tend to have higher local employment growth.79
77 Ibid.
78 Cortwright, Joseph. The Young and Restless in a Knowledge Economy. CEOs for Cities. 2005.
http://www.ceosforcities.org/pagefiles/CEOs_YNR_FINAL.pdf.
79 Shapiro, Jesse. "Smart Cities: Quality of Life, Productivity, and the Growth Effects of Human Capital." The Review of
Economics and Statistics. 88(2): 324-335. 2006.
17
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Economic Advantages of a Diverse Range of Choices
Young adults have shown a preference
for living and working in centrally
located neighborhoods. Consumer
research suggests that two out of five
young adults plan to rent for at least
three years, and three out of four plan
to live in an urban core. As shown in
Exhibit 6, these trends suggest that
market demand for new housing in
downtown areas could be strong as
this generation begins buying
houses.80 Between 2000 and 2009, the
number of college-educated 25- to 34-
year-olds increased 26 percent in
neighborhoods within three miles of
central business districts of the
nation's large metropolitan regions,
while the increase in other parts of
these regions was only half that rate. Thirty-six of the 51 metropolitan areas examined showed a trend
of more young adults choosing to live close to or in the city core.81 This analysis suggests that
investments in smart growth development can provide an economic development strategy for
communities. Centrally located, walkable neighborhoods with parks and other public amenities, lively
commercial districts, and public transit can make a region more attractive to young, talented workers.82
The Older Population: Changing Needs
Just as young adults are seeking homes and workplaces in diverse, vibrant areas, older Americans are
also seeking places that better fit their changing needs. This shift presents a major market opportunity
for developers. As baby boomers enter their retirement years, they will increase demand for senior
housing and neighborhoods where older adults can more easily reach amenities, take care of daily
needs, and access health care.83
The growing number of older Americans also provides an economic development opportunity for
communities. Older Americans own more than 70 percent of the financial assets in the United States
80 Kannan, Shyam. "The Growing Market for Smart Growth: Consumer Demand and Demographic Drivers." Robert Charles
Lesser & Co. 2010. http://www.rclco.com/pdf/Market_for_Smart_Growth.pdf.
81 Cortwright, Joseph. Young and Restless 2011. CEOs for Cities. 2011. http://www.ceosforcities.org//research/the-young-and-
restless-in-a-knowledge-economy/.
82 Cortwright 2005 op. cit.
83 Mcllwain, John. "Suburbs, Cities, and Aging in Place." Urban Land. Urban Land Institute. August 2011.
http://urbanland.uli.org/Articles/2011/August/McllwainAging.
4,200,000
4,100,000
4,000,000
3,900,000
3,800,000
3,700,000
3,600,000
3,500.000
3,400.000
/
Largest group began graduating in 2009 -
Greatest demand for rental housing in this
period ~
If Ihis group rents for at least three years,
there will be more first-time homebuyers
in the market in 2013-2018 than ever
before
C^1, r?)'1 c$ c\^ $ cP tf>* ({^
—Number of 22 Year Olds Same 22 Year Olds Turn 25
Exhibit 6: The Impact of Young Adults on the Housing Market.
Beginning in 2009, the largest group of 22-year-olds began graduating
and seeking rental housing. As they seek to buy their first homes,
there will be a flush of first-time homebuyers on the market.
NOTE: Number of 22-year-olds is based on birth rates and does not factor in
death rates and migration. Data source: Centers for Disease Control and
Prevention. Chart courtesy of Robert Charles Lesser & Co.
18
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Economic Advantages of a Diverse Range of Choices
and control nearly $9 trillion in net worth, making them a major part of the local economy in the areas
they choose to live.84
Most older adults prefer to remain in
their homes for as long as possible. A
2005 survey found that 89 percent of
adults aged 50 and over hoped to remain
in their homes as they age. The
proportion was even higher among
respondents aged 65 and over. However,
another survey found that only 51
percent of older adults felt that their
home would be able to meet their
physical needs "very well" as they age,
while 12 percent responded "not well" or
"not well at all,"86 For some, the physical
and/or financial requirements of
maintaining their homes are a burden.
Many older adults cannot or choose not
to drive, so getting to stores and services
can be difficult in neighborhoods that are
far from commercial uses, are not
walkable, and lack convenient public
transit. Since the baby boomers
purchased homes during the peak period
of suburban growth, this generation is
likely to be particularly vulnerable to the isolation of spread-out, single-use neighborhoods as they
Exhibit 7: The Mission Creek Senior Community in San
Francisco transformed a brownfield into an attractive, mixed-
use, low-income senior community. The project includes a
public library, 5,000 square feet of ground-floor retail, and
adult day care. It is 25 feet away from a streetcar stop, less
than a block away from a bus stop, and two blocks from a
CalTrain station. These transportation choices make Mission
Creek a convenient home for its residents, especially those
who cannot or choose not to drive.
Using smart growth strategies to provide development that is compact, diverse, and walkable can offer
older Americans the ability to "age in place" (in the same home) or "age in community" if they choose.
Many older adults would likely be interested in this option—85 percent agreed in a 2010 survey that if
they can no longer live in their home, they would at least like to remain in their community for as long
as possible.88 The Mission Creek Senior Community in the Mission Bay North area of San Francisco
84 Bali, M. Scott. Aging in Place-A Toolkit for Local Governments. Atlanta Regional Commission and Community Housing Resource
Center. 2004. http://www.atlantaregionai.com/File%20Library/Local%20Gov%20Services/gs_cct_agingtool_1009.pdf.
85 AARP Public Policy Institute. The State of 50+ America 2006. 2006. http://www.aarp.org/money/budgeting-saving/info-
2006/fifty_plus_2006.html,
Kochera, Andrew et al. Beyond 50.05: A Report to the Nation on Livable Communities: Creating Environments for Successful
Aging. AARP Public Policy Institute. 2005. http://www.aarp.org/home-garden/livable-communities/info-
2005/beyond_50_05_a_report_to_the_nation_on_livable_communities creating_environments_for_successful_aging.html.
s' Nelson op. cit.
88 Ward rip op. cit.
19
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Economic Advantages of a Diverse Range of Choices
allows seniors, including low-income, disabled, and ill residents, to live in their community and retain
mobility given the project's proximity to a variety of transit options (see Exhibit 7).
While many older adults are likely to stay close to home, some will relocate in their retirement years to
places that better meet their needs and preferences, just as many young adults are doing. The rural
community of Fort Gaines, Georgia, is using smart growth strategies to attract retirees in an attempt to
bolster a population that has decreased since the 1990s. The town emphasizes a diversity of housing
types, walkable neighborhoods with shopping and services nearby, and access to transit. Fort Gaines has
drawn retirees from Florida, Pennsylvania, Virginia, and elsewhere in Georgia. A majority are younger
retirees, aged 62 to 65, who often have sizeable savings.
20
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Economic Advantages of a Diverse Range of Choices
C. Reducing Housing and Transportation Costs
Smart growth strategies pay close attention to the critical link between housing and transportation and
recognize that the location of a community will affect the affordability of both. Although lower land
prices generally translate to cheaper housing in outer suburban locations, the higher transportation
costs incurred in these areas mean that such homes are often not truly affordable for many households
(see Exhibit 8). An index of housing and transportation affordability covering more than 300 U.S.
metropolitan areas90 shows that fewer neighborhoods are considered affordable when transportation
costs are included in the calculation and that affordable neighborhoods tend to be compact, walkable,
and accessible by public transit. In Portland, Oregon, smart growth policies allow residents to drive less,
take shorter trips, and use public transit more often compared to residents of other large metropolitan
areas. An estimate of the amount of money Portland residents save on driving compared to the typical
resident of other large U.S. metropolitan regions is $1.1 billion dollars per year, or about 1.5 percent of
all personal income earned in the region in 2005/1
Lakeview Hillside North Camelback Mesa Surprise Richmond Fairfax Woodacre Adams Cheverly Calvert
East* (Suburban) Aurora East* (Suburban) (Exurban) District* (Suburban) (Exurban) Morgan* (Suburban) Beach/
fUrban) (Exurban) (Urban) (Urban) (Urban) Long
Beach
(Exurban)
Annual Transportation Costs Annual Housing Costs I Area Median Income Community Average Median Income (* Median Income)
Exhibit 8: Average Annual Costs for Housing Plus Transportation. Transportation costs vary significantly by
community even where housing costs and income are similar. Communities in the city and inner suburbs
consistently have lower combined housing and transportation costs than outer suburban and exurban
communities. Census block group data on median income is averaged to produce a community average
median income. Median income is reported for urban locations because they correspond to single block
groups. Chart courtesy of Center for Neighborhood Technology.
Building more homes and more housing types in compact, walkable communities with a variety of
transportation options would allow more households to reduce their transportation costs. By giving
residents the ability spend more on rent or mortgage payments without straining household finances,
smart growth strategies might expand the potential customer base for developers.
Even if transportation costs are reasonable, the cost of the home itself is a major constraint for many
households. Escalating home prices during the early 2000s left many metropolitan areas with a severe
s? Center for Neighborhood Technology. Penny Wise, Pound Fuelish. 2010. http://htaindex.cnt.org/pwpf.php.
90 Center for Neighborhood Technology. "H + T Affordability Index." http://htaindex.cnt.org. Accessed October 21, 2011.
"L Cortwright, Joseph. Portland's Green Dividend. CEOs for Cities. 2007. http://www.ceosforcities.org/city-
dividends/green/special-reports/portland.
21
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Economic Advantages of a Diverse Range of Choices
need for lower-priced housing even after home prices fell.92 A series of reports documents this unmet
demand in the Boston,93 San Francisco,94 and Washington, D.C.,95 regions. The need tends to be greatest
near major employment centers, where developable land is scarce. Smart growth strategies allow
developers in land-constrained areas to offer different product types and build more compactly to
better meet demand.
Smart growth strategies can reduce the per unit cost of building homes, enabling developers to charge
lower prices and still earn an acceptable rate of return. Local governments can directly and indirectly
influence housing costs through policies and incentives related to land use planning, taxes, development
fees, community revitalization, and neighborhood partnerships.96 But a smart growth strategy's most
effective and direct cost reductions might come from its elements that reduce the land requirements
and overall construction costs per dwelling unit: higher allowable densities, smaller allowable parcel
sizes, and decreased parking requirements.97,98
Many companies recognize that they benefit when their employees can afford homes near the
workplace. Employer-assisted housing programs across the country promote affordable housing
solutions for workers.99 These programs can offer a variety of benefits, such as homebuyer assistance,
rental assistance, education, and counseling. Benefits to the companies can include higher productivity,
100 101
loyalty, reduced turnover, and lower training and recruitment costs. ' Such programs can
complement local government strategies aimed at adding more housing choices accessible to job
centers.
Local governments also benefit, because neighborhoods with homes near transit can be more financially
stable as residents often have lower transportation costs—costs that are not factored into mortgage
underwriting. Several analysts have noted that suburban areas on the outer edges of metropolitan
92 Ward rip, Keith. Housing Landscape 2011: An Annual Look at the Housing Affordability Challenges of America's Working
Households. Center for Housing Policy. 2011. http://www.nhcopenhouse.org/2011/02/latest-report-from-center-for-
housing.html.
93 Urban Land Institute. Priced Out: Persistence of the Workforce Housing Gap in the Boston Metro Area. 2010.
http://www.uli.0rg/ResearchAndPublicati0ns/TerwilligerCenterf0rW0rkf0rceH0using/~/media/D0cuments/ResearchAndPublic
ations/Terwilliger/Reports/WH_Bostonl0.ashx.
94 Urban Land Institute. Priced Out: Persistence of the Workforce Housing Gap in the San Francisco Bay Area. 2009.
http://www.uli.org/report/priced-out-persistence-of-the-workforce-housing-gap-in-the-san-francisco-bay-area/.
95 Urban Land Institute. Priced Out: Persistence of the Workforce Housing Gap in the Washington, D.C., Metro Area. 2009.
http://www.uli.org/report/priced-out-persistence-of-the-workforce-housing-gap-in-the-washington-d-c-metro-area/.
96 National Neighborhood Coalition and Smart Growth Network. Affordable Housing and Smart Growth: Making the Connection.
2001. http://www.epa.gov/smartgrowth/pdf/epa_ah_sg.pdf.
97 Litman, Todd. Where We Want To Be: Home Location Preferences and Their Implications for Smart Growth. Victoria Transport
Policy Institute. 2011. http://www.vtpi.org/sgcp.pdf.
98 Litman, Todd. Parking Requirement Impacts on Housing Affordability. Victoria Transport Policy Institute. 2011.
http://www.vtpi.org/park-hou.pdf.
99 Homes for Working Families and Metropolitan Planning Council. Understanding Employer-Assisted Housing: A Guidebook for
Employers. 2007. http://www.metroplanning.org/uploads/cms/documents/hwfeahfinal.pdf.
100 Warren, James. "It Pays to Help Workers Buy a Home." Bloomberg Businessweek. June 10, 2010.
http://www.businessweek.com/magazine/content/10_25/b4183028448278.htm.
101 Ross, Lynn. Quantifying the Value Proposition of Employer-Assisted Housing: A Case Study of Aurora Health Care. Center for
Housing Policy. 2008. http://www.nhc.org/media/documents/Quantifying_EAH.pdf.
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Economic Advantages of a Diverse Range of Choices
areas, where residents have little choice but to drive to all their destinations, were the most likely to
102 103
experience home price declines in the aftermath of the real estate market crash of 2007. ' Higher
commuting costs, combined with sharp declines in home values (and therefore, owner equity) can make
households more susceptible to falling behind on their mortgage and ultimately facing foreclosure. A
2010 study of over 40,000 mortgages in three metropolitan areas found that the probability of default
was higher in areas that had more vehicles per household after controlling for income,104 suggesting a
potential benefit for communities that enable lower car-ownership rates by facilitating transit, walking,
and biking. Lower foreclosure rates would help protect home values, keep neighborhoods stable, and
stabilize the tax base, improving economic resilience. Developers could also benefit from lower
foreclosure rates because people cannot buy new homes if they cannot sell their existing homes, and
deeply discounted foreclosed homes (or distress sales) depress the new home market.
102 Cortwright, Joe. Driven to the Brink: How the Gas Price Spike Popped the Housing Bubble and Devalued the Suburbs. CEOs for
Cities. 2008. http://www.ceosforcities.Org//research/driven-to-the-brink/.
103 Leinberger, Christopher. "The Death of the Fringe Suburb." The New York Times. November 25, 2011.
http://www.nytimes.com/2011/ll/26/opinion/the-death-of-the-fringe-suburb.html.
104 Rauterkus, Stephanie et al. "Location Efficiency and Mortgage Default." Journal of Sustainable Real Estate. 2(1)117-141.
2010. http://www.costar.com/uploadedFiles/JOSRE/JournalPdfs/06.117_142.pdf.
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¥. Conclusion
Compact, diverse, and walkable development can increase property values and property tax revenues,
encourage job creation, reduce housing and transportation costs, and create amenities and places that
improve residents' quality of life. Real estate developers and investors, businesses, and local
governments can use smart growth development as a strategy to maximize their economic advantages
while improving the quality of life and creating attractive, healthy communities that help protect the
environment.
Additional reports will build on this work, exploring how real estate developers and investors can
overcome real and perceived barriers to benefit from infill opportunities, how decisions about where to
locate will impact the bottom lines of businesses, and why smart growth strategies are good fiscal policy
for local governments.
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SEPA
United States
Environmental Protection
Agency
ro post-consumer waste using vegetable-based inks.
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