The Next American Urbanism

Our country has the capacity to rise up from the empty parking lots and failing infrastructure to thrive again as a nation filled with natural beauty, productive lands and inspirational cities. As we face this time of enormous economic transition, the need for a continent-wide vision — a path for America to become a healthier and wealthier society — is apparent. The United States was founded on a wide open landscape. Today, we find ourselves pioneers once again, but instead of westward expansion, our great riches will be found by capturing the enormous lost value trapped in our existing places.

Painted in WaterlogueThe time is now for a new vision for the development of America to emerge. Our country’s economy is affected ubiquitously by real estate and its related industries such as construction, architecture, home appliance sales, realty services, local advertising, banking and infrastructure development.  Historically, housing and its related sectors account for about one-fifth of the gross domestic product coming out of a recession.  Today, however, almost all of those sectors remain depressed.  Why?  Might it be that real estate and its intrinsic value have been disconnected in a structural sense?  The silver lining of the recession, however, could be the calling of the fundamental question as to how we view real estate and, consequently, treat it within the finance, regulatory, transportation and tax arenas.

Painted in WaterlogueWe need to create a new continental development model for the United States. Just as with western expansion, industrialization of our cities or the post-WW II suburbanization, this new model must harness the pioneering American spirit of our ancestors and build on our commitment to opportunity, prosperity and freedom for all. Our next development model must focus on creating value throughout our existing cities, towns and regions. The Great Recession has made the failings of our current system too obvious to ignore any longer.

Accordingly, timing is perfect to develop a new comprehensive policy for our economy once again based on place.

The Challenge

Over the past two generations, real estate has been reduced to a simple commodity to be bundled and traded through analog securities and other mechanisms.  This modern-day condition has stripped real estate of its underlying unique value in terms of design, location, regenerative capacity and community development potential.  Banks began to resell their real estate risk through secondary securities markets and sought higher profits through investment banking.  At the same time, pressure to make home ownership more widely available led to the excessive liberalization of mortgage underwriting and loan eligibility.   These factors—along with others such as the historic FHA loan limitations on mixed use—culminated in a commodity “bubble,” both in terms of built “product” and the underlying debt making that overbuilding possible.

Even though the bubble has burst, the system that created the commoditization of real estate remains.  If that system is to be reformed in a meaningful and sustainable way, it must be based on a re-connection of real estate to its underlying value and unique potential as a place.

The Solution

Painted in WaterlogueThe Next American Urbanism offers a means to make that re-connection.  In short, a new operating system for real estate and its role in the American economy can only be sustained by going back to the underlying drivers of value.  A vision that is equally as bold as those American’s have created before, of immigrants seeking freedom, establishing new communities and moving west offers the gravitas for the solution. The towns, cities and countryside of America have been in recent years underutilized and overlooked but are fundamentally the answer.    America must again view itself as a country of pioneers in which the cities and towns, as places, will once more be where its people find prosperity.  America fundamentally needs places for people to thrive.

The Next American Urbanism is a new continental development model for the United States.  Just as with western expansion or the prosperous initial birth of the suburbs through the G.I. Bill, after it, the Next American Urbanism can harness the pioneering American spirit in a modern context.

Numerous MP3 music players proliferated before the introduction of Apple’s iPod in 2001, and yet Apple was able to capture the market for digital music.  The design of the iPod was perfect, creating an uncompromising system for delivering, purchasing and administering digital music.  It changed the economic system for the music industry overnight.  The innovation of the iPod recognized the intrinsic value of music, rather than attempting to control its medium or market.

Similarly, walkable urbanism can deliver the intrinsic value of real estate for humans, places that create opportunities to meet, live and thrive together.  In this context, just as Apple went into the lab to create the iPod, it is time that we return to the economic lab to create a system for delivering resilient towns, cities and countryside for America.

What would America look like if there was a clear business model of delivering urbanism?  New Urbanists have recovered the traditions and patterns for building walkable, regenerative places.  However, the remaining struggle is how to adapt this knowledge to the current regulatory and economic system in order to actually build projects.  Compromises occur and success is often fleeting as the system works in favor of short term profits at the expense of long term value.

Sprawl is not the problem, merely the outcome

Painted in WaterlogueSprawl development patterns are not the problem.  Rather, sprawl is the hypertrophic outcome of the system currently in place, which in significant part is merely responding to demand in the marketplace for separated and isolated land uses.  But not everyone wants to live in that environment; even in the suburbs, many people want to live in walkable urban neighborhoods.  Nevertheless, delivering urbanism—a development pattern knitting walkable streets, diverse housing, convenient access to transit and a variety of scales—requires a finance, regulatory and tax system that rewards complexity and value creation over time.   The current system does not.  But it can, as it once did when America’s prosperity was based on the building of its great cities and authentic small towns.

Facilitating a Policy Framework for the Next American Urbanism

A need exists to assemble behind an initiative that will analyze and design the delivery system for building American cities, towns and countrysides that add value, foster prosperity and provide affordable lifestyles for its citizens.  This initiative would seek to coalesce the necessary elements to harness the key economic drivers around a profitable model for both the private and, most importantly, public sectors.  It will be based on urbanism that can be underwritten and financed as easily as an office park, a conventional subdivision or a garden apartment complex.  That is, we must develop channels other than those that are currently not designed to deliver these places.     To do so, the initiative would be designed to frame the analysis, postulate a policy construct and identify the creative experts in investment banking, finance, regulation, tax policy, and other pertinent areas who can go into the “lab” to create the new urban delivery platform for places of lasting value.

Painted in WaterlogueMany of the research elements of the initiative would focus on the unintended consequences and necessary reforms of federal and state driven policies such as transportation funding protocols that drive regional road building through the singularly-focused “travel demand model”; underwriting policies driven by “one-size fits all” eligibility requirements for HUD, Fannie Mae or Freddie Mac loan guarantees; regulatory policy that makes it difficult to coordinate utility design towards efficient investments versus isolated systems; and Wall Street policy that makes it more profitable to invest in risky derivatives rather than value-based real estate.  But, ultimately, the development of the new operating system for delivering sustainable real estate investments will be grounded in the market’s ability to embrace localism.  In this context, this effort will focus on:

  • Supporting future growth occurring within a context of constrained resources and as part of an imperative towards building an economy rewarding regenerative projects;
  • Blending  urbanism with cutting-edge thinking and practice in local/sustainable economic development generally, focusing on specific industries and types of businesses that can be leveraged by neighborhood-patterns of development;
  • Harnessing and growing local funding capacity; and
  • Generating  a framework of ideas and a business model describing how new enterprises and newly purposed infrastructure can together generate long-term economic growth, along with creating the social capital necessary to sustain such efforts

Partners needed who can embrace this imperative

photo 6For all the reasons one might reference as how we arrived at a point in time when the future appears so uncertain, now is the moment for a new vision of America that builds on the heritage of our past heroes and founding fathers.  A vision this bold must guide the search for solutions to give future generations a chance at living a life of prosperity.  Generations of Americans boarded their covered wagons to push west.  Then generations of Americans packed up their station wagons to claim their own castles with white picket fences and two car garages.  America needs a national development model that inspires the creation of resilient places and celebrates the quality of life of urban places. Grounded in research, with critical input from industry experts and carefully calibrated to implementation capacity, this new model would require development of a comprehensive policy framework by a full range of experts and enlightened participants within the emerging new economy.

In this context, the identification of strategic partners to undertake this momentous effort will be needed.

Co-authored with Scott Polikov and Russ Preston.  Contributing ideas generated by members of CNU NextGen.

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