As we come out of this economic recession, there will be tremendous opportunity for real estate investment. Housing prices in the Metro Region have increased over 10% in the last year. While still down 30% from the highs of the mid-2000’s, the opportunities for significant redevelopment are many. The difference is that the form of residential redevelopment and change, from a majority of single family detached to a majority of attached and clustered single and multi -family uses.
With the recovery in progress city planners, developers and citizens have an opportunity to remake the landscape for the next generation of housing. As Generation Y (those born in the 1980’s to the late 1990’s) enters into the professional world, the developers and those in positions to shape the housing industry should take note: “This is NOT your parent’s housing market.” Dr. Chris Nelson, formerly a professor of planning and public policy at Ga. Tech and current Director of the Metropolitan Research Center at the University of Utah, recently presented a report, with the above title. The presentation contained a wealth of data to which policymakers should take note and will shift the thinking of the suburban built 1990’s, to the urban culture of today.
In the heyday of our Region, suburban markets such as Cherokee, Cobb, Gwinnett and Henry Counties grew exponentially. Baby boomer traditional families enjoyed subdivision living that included cheap gas for commutes to work; this typically kept them in one location for long periods of time, like previous generations. But
the recession impacted the mentality and habits of this generation, that requires a change from the traditional 3/2 on a half-acre lot to walkable communities, where less time is spent in a car or doing yard work and more time is spent on the “live, work, play” mode of this generation. “This is a brand new housing ball game and we are way out to lunch with our zoning codes and planning; this is our future and our zoning codes are based on a reality that no longer exists” said Dr. Nelson.
Council for Quality Growth Chairman Emeritus and Weissman Nowak Curry & Wilco Partner Doug Dillard strongly echoed Nelson and believes the Metro Region is behind the curve for the new landscape of development. “Local zoning ordinances and land use regulations, along with elected officials and staff are not prepared or equipped to make the kind of land use decisions they will be asked to make in the next ten years” says Dillard. He further stressed that “it is imperative the Euclidian type ordinances that separate and exclude use must change to be inclusionary, promoting connectivity and pedestrian friendly commutes.”
Nelson presented a litany of data on the changing housing market, including the main drivers of change: Demographics, Economics, Financial and Preferences. Within these factors include a U.S. household that by 2030 will include 71% without children, 29% with children and a single-person household population at 29%, and the average household size shrinking to 2.6 per house. Additionally, more children are moving back in with their parents and aging adults are moving back in with their children, keeping the household size steady but lowering the demand for new housing.
Another factor to consider is the lion’s share of the housing market, between 2010 and 2030 will be adults 65+, as Nelson reports, a 77% share of the market demand. Translation: Singles, young couples and older couples/retirees who want low maintenance apartments, condos and smaller single-family housing, will dominate the market over the next 20 years. Factor in the demise of the sub-prime market, a higher down payment requirement by lenders and a smaller income for the new generation, and you see a new trend: Smaller homes; shorter commutes and smaller incomes.
The rental market will play a larger role in this generation, with home ownership seeing a steady decline from a high of 69% in 2005 down to 63%, according to Dr. Nelson. If the trends continue at their current pace, the renter share of the market will increase to 45% between 2010 and 2030 in the Metro Atlanta Region. When you take these numbers and recent surveys by the National Realtors Association that show, in 2011, by a 59% to 39% margin, people would choose smaller houses on smaller lots with a shorter commute time versus larger houses and a longer commute time.
In a number of surveys of the American people, attached and small lot housing were preferred over large lot housing. Walkable destinations and rising gas prices are becoming a factor when purchasing or renting, as surveys show more people consider these options, with almost half of the demographic preferring mixed-use neighborhoods with walkability or want to live in a smart-growth community.
One solution, according to Nelson, is to move future development projects near existing transit stations, such as MARTA. Additionally, expanding MARTA to new locations is an option, but an expensive one. Another solution is creating a bus rapid transit system, streetcar and light rail and build new walkable communities around these transit options, in order to meet the demands in this new reality
of development. With the new Atlanta Streetcar, MARTA changes on the horizon and Cobb County exploring Bus Rapid Transit, the Metro Region is on the right track.
Where does the housing and development market go from here? Over and over again at the Council Advisory Committee meetings, members hear the same thing from elected officials and staff: What will it take to encourage redevelopment and new development in our city, county, etc? As Doug Dillard said earlier, a complete reworking of zoning ordinances, as well as a change in the mindset of policymakers and elected officials in the region is the first and needed step. Secondly, development in the Region should be centered around transportation nodes, which will require an overhaul of our transit system in Atlanta and the surrounding suburban counties.
Travel to Cobb County and look at the development that has occurred with the West Village, central to the city and allows for walkability in the Smyrna-Vinings area, built as a single-family condominium development and inclusive of the “live, work, play” lifestyle sought by the new generation. Or, look at the redevelopment that has occurred in Decatur, where transit, walkability and a sense of community
are prevalent. The Atlanta BeltLine offers tremendous opportunities for the new types of development Metro Atlanta needs to remain competitive; as well as the areas surrounding the current Georgia Dome and possible future Atlanta Falcons stadium. There is so much opportunity to implement a new landscape on the surrounding region and if the key officials and development community can come together, we will see a new influx of growth that harkens us back to the glory days of the 1970’s and beyond.
The market has changed and the players are changing. If the residential development community is planning a comeback anywhere near the profit and pricing levels that were seen in the past then the focus must be on the future.