Real estate has caused two of the last three recessions, including the Great Recession from which we are emerging. That’s because real estate, and the infrastructure that supports it, represents more than 35 percent of America’s economic assets. Engaging one of our biggest assets, and the private capital that goes with it, has continually proven to create sustainable economic growth. However, the Great Recession has highlighted a fundamental change in what consumers want from their real estate.
Instead of expanding suburban sprawl, the new boom in cities like Atlanta will address a different demand than its predecessors. It will come with the creation of new walkable, transit-oriented urban communities, and it has the potential to reshape the American landscape and rejuvenate its economy as profoundly as the wave of suburbanization after World War II.
There are some obvious reasons for the growing demand for walkable neighborhoods: ever-worsening traffic congestion, gas prices and the fact many cities have become more attractive places to live thanks to falling crime and the migration of industry away from city centers. But the biggest factor is demographic.
More than half of America’s population consists of two demographic groups: Baby Boomers and their “Gen Y” kids. As Gen Y leaves the nest for high-tech urban jobs, Boomers no longer need large suburban homes. The demographic convergence is pushing construction inward, accelerating the rehabilitation of cities and forcing existing car-dependent suburbs to develop more compact, walkable, transit-friendly neighborhoods.
This rebuilding will spur millions of new construction jobs and, if energy efficiency is encouraged, create new markets for sustainable materials produced by American manufacturers.
Outside of sustainable economic growth, there are other benefits to the redevelopment of America. Sedentary lifestyles in a car-dependant age have led to the expansion of chronic illnesses like obesity, diabetes and heart disease. The strain on the health care system can be mitigated with healthier Americans who get out of their cars as they go about the day.
Imagine taking millions of cars (and their emissions) off the road. Let’s also think about the effect of replacing aged housing with clean, green, energy-efficient housing. The U.S. Green Building Council estimates new, sustainable developments could reduce water consumption by 40 percent, energy use by 50 percent and waste by 70 percent.
Meanwhile, walkable communities do not exist in sufficient quantity. Lack of supply has created one of the biggest hurdles to living in a walkable community — affordability. Because real estate absorbs so much of our wealth, it is essential that we focus on pushing on the door unlocked by our demographics. The two largest population groups, half of our population, want communities the market is not delivering.
Ultimately, the market cannot act in a vacuum if we truly want to redevelop America. Federal transportation policy must continue to be reformed, and metropolitan regions must continue to work together to chart a common vision, if we want to fully capitalize on the next real estate boom.
Jonathan Blackwell is a senior mortgage banker and renovation loan specialist for PrimeLending.
