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Thursday, Jul. 10, 2008
Is Florida the Sunset State?
By Michael Grunwald/Miami
Water Crisis Mortgage Fraud Political Dysfunction Algae Polluted Beaches Declining
Crops Failing Public Schools Foreclosures
Greetings from Florida, where the winters are great!
Otherwise, there's trouble in paradise. We're facing our worst real estate meltdown
since the Depression. We've got a water crisis, insurance crisis, environmental crisis
and budget crisis to go with our housing crisis. We're first in the nation in mortgage
fraud, second in foreclosures, last in high school graduation rates. Our consumer
confidence just hit an all-time low, and our icons are in trouble--the citrus industry,
battered by freezes and diseases; the Florida panther, displaced by highways and
driveways; the space shuttle, approaching its final countdown. New research
suggests that the Everglades is collapsing, that our barrier beaches could be under
water within decades, that a major hurricane could cost us $150 billion.
We do wish you were here, because attracting outsiders has always been our primary
economic engine, and our engine is sputtering. Population growth is at a 30-year
low. School enrollment is declining. Retirees are drifting to the Southwest and the
Carolinas, while would-be Floridians who bought preconstruction condos in more
optimistic times are scrambling--and often suing--to break contracts. This is our
dotcom bust, except worse, because our local governments are utterly dependent on
construction for tax revenues, so they're slashing school and public-transportation
budgets that were already among the nation's stingiest. "This may be our tipping
point," says former Senator Bob Graham.
Florida was once a swampy rural backwater, the poorest and emptiest state in the
South. But in the 20th century, air-conditioning, bug spray and the miracle of water
control helped transform it into a migration destination for the restless masses of
Brooklyn and Cleveland, Havana and Port-au-Prince. Florida developed its own
ventricle at the heart of the American Dream--not only as an affordable playground
and comfortable retirement home with no income tax but also as a state of escape
and opportunity, a Magic Kingdom for tourists, a Fountain of Youth for seniors, a
Cape Canaveral for Northerners looking to launch their second acts. Even the soggy
Everglades, once considered a God-forsaken hellhole, became a national treasure.
But now the financial and environmental bill for a century of runaway growth and
exploitation is coming due. The housing bust has exposed a human pyramid scheme-an economy that relied on a thousand newcomers a day, too many of them
construction workers, mortgage bankers, real estate agents and others whose
livelihoods depended on importing a thousand more newcomers the next day. And
the elaborate water-management scheme that made southern Florida habitable has
been stretched beyond capacity, yo-yoing between brutal droughts and floods,
converting the Everglades into a tinderbox and a sewer, ravaging the beaches, bays,
lakes and reefs that made the region so alluring in the first place. "The dream is
fading," says University of South Florida historian Gary Mormino. "People think
Florida is too crowded, too spoiled, too expensive, too crazy, too many immigrants-name your malady."
Still, the winters really are great! And this doom-and-glooming might sound familiar.
In 1981, TIME declared crime- and drug-plagued South Florida a "Paradise Lost."
The region then embarked on an epic boom. Southeast Florida--including Miami,
Fort Lauderdale, West Palm Beach--ballooned into the nation's seventh largest
metro, while southwest Florida--Naples, Cape Coral, Fort Myers--became the fastestgrowing metro. Last year 82.4 million visitors found their way to this lost paradise.
And last month Governor Charlie Crist unveiled a $1.75 billion deal to buy the U.S.
Sugar Corp. and its 187,000 acres of farmland, a move that would help restore the
Everglades. It's the state's best eco-news in decades.
So lifers like seventh-generation Floridian Allison DeFoor--lawyer, lobbyist,
historian, Episcopal minister, environmental consultant and Republican operative-are disinclined to panic just yet. "Sure, it's the end of Florida as we know it," DeFoor
quips. "It's always the end of Florida as we know it."
Florida's history is lush with volatility and flimflam. As Groucho Marx's real estate
huckster warned in The Cocoanuts in 1929, "You can even get stucco! Oh, how you
can get stucco." But eventually, the lies always seemed to come true, because there
were always new dreamers from cold climates, and worthless swampland was just a
drainage canal and a zoning variance away from becoming a golf-course subdivision.
Yet even boosters admit that Florida's Miracle-Gro has created many of its current
problems. "We need steady growth, not crazy growth," Crist says. There's a sense that
paradise has been ruined by awful traffic, overcrowded schools, overtapped aquifers
and polluted beaches. The land of Disney dreams for the middle class is now a highcost, low-wage state with Mickey Mouse schools and Goofy insurance rates, living
beyond its environmental and economic means in harm's way. As peculiar as it
sounds, this go-for-broke state of boundless possibilities--the land of Kimbo Slice,
Miami Vice and Mar-a-Lago--might be leading America into a new era of limits.
The Busted Dream
Juan Puig embodied the Florida dream, proving that an ordinary guy with moxie
could make a fortune and enjoy the high life by selling the dream to others. A Cuban
immigrant, he started his career as a janitor and then a baggage handler at the Miami
airport, living in a Hialeah apartment without air-conditioning, peddling sunglasses
to co-workers on the side. In the 1990s, he discovered real estate, rehabbing and
selling a few foreclosed duplexes, then developing town houses and branching into
condo conversions as the market went nuts. He soon built a statewide empire with
300 employees, including a staff priest who blessed his projects. He bought a
waterfront mansion in Coral Gables, a fleet of classic cars, a Ferretti yacht, huge
collections of fine wine, Cuban art and luxury watches. Just last year he spent
$80,000 on an antique billiard table.
Puig's financial records were a mess, and his accountant was a convicted felon with
ties to the Colombian drug kingpin, Pablo Escobar. But that never seemed to bother
Puig's investors or lenders, who kept showering him with money as long as condo
prices kept soaring. It certainly didn't bother Puig, who explained in a recent
deposition that he never paid attention to his books, in part because his expertise
was in matters like where to advertise property and whether to paint the doors
yellow or white, and in part because he never imagined the Florida housing market
could tank: "Of course, I trusted that the business, like always, would be successful."
Of course, he got stucco. Now that South Florida has tied Las Vegas as the nation's
fastest-tanking real estate market, Puig is bankrupt, with $80 million in debts. His
mansion was liquidated for $11.4 million, and his yacht went back to the bank. At
Puig's bankruptcy auction, bidders competed for a necklace studded with 226
diamonds, a Sopranos pinball machine, a 1965 Ferrari, nine designer bikes and other
bubble baubles. The billiard table went for $25,000. "It's amazing how fast it all
came crashing down," says Puig's criminal defense attorney, Joel Hirschhorn.
In the Paradise Lost days, Hirschhorn worked the white-powder bar, representing
Medellín cartel leaders and other cocaine cowboys. Then he wore a pinkie ring with a
two-carat diamond; now he wears Brooks Brothers and defends fraud cases. "It's
where the action is," he explains with a grin. An epidemic of inflated appraisals,
exaggerated incomes, straw buyers--and the lax regulation to enable it all--has made
Florida tops in mortgage fraud, according to the Mortgage Asset Research Institute;
in a recent Palm Beach County case, a grocery cashier's salary was listed as $344,000
a year. And Paul Singerman, bankruptcy counsel for Puig's companies, is even
busier. His firm represents the Florida home builders Tousa Inc. and Levitt and
Sons, which happen to be the nation's two largest bankrupt home builders, along
with droves of failing contractors, landscapers and architects. "I got two calls from
window distributors this week," Singerman told me. "A tile guy called this morning."
Keep the cell phone on, Paul. In some Miami high-rises, the foreclosure rate is as
high as 1 in 4, and owners who still own are getting nailed with huge condo fees to
make up for the lost revenue. Florida banks repossessed 620% more property last
year than in 2006, and they're starting to unload nonperforming real estate loans for
as low as 30¢ on the dollar. Miami topped a recent list of America's worst housing
markets, just ahead of Orlando, with Tampa fourth. From 20% to 40% of the
speculators who waited on lines to buy preconstruction condos during the boom are
expected to walk away from those investments before closing; many are turning to a
new cottage industry of get-your-deposit-back lawyers. "The ambulance chasers are
everywhere," says developer Jorge Pérez, the so-called Trump of the Tropics, whose
Related Group faces more than 100 lawsuits by remorseful buyers. "We've gone from
euphoria to panic in a year."
And we haven't hit bottom. The glutted Miami market already has a five-year
inventory, but Peter Zalewski of Condo Vultures says 22,000 more condos are still
under construction downtown, which will double the supply. "Just wait. We haven't
even started to feel what we're going to feel," he says.
That's also true in Florida's exurban boomtowns, communities like Homestead, Port
St. Lucie and Kissimmee, that subprime borrowers flocked to for cheaper land and
better deals. Now their homes are going back to the bank, and their neighborhoods
are dotted with unmowed lawns and mosquito-infested pools. "Those lower-priced
options are the places that are going to hurt for a long time," says Wayne Archer,
head of the University of Florida's real estate program.
The problem is, even those lower-priced options aren't cheap. Florida's prices remain
higher than the national average--especially when you count sky-high property taxes
and insurance premiums that can be as burdensome as mortgage payments--while
its wages are lower. Fitch Ratings warned that when a big hurricane hits, Florida's
insurance market "could effectively collapse." That won't jump-start a recovery.
Water, Water, Everywhere
Nobody used to worry about the Big One hitting Florida, because it was a
waterlogged wilderness. "It is a land of swamps, of quagmires, of frogs and alligators
and mosquitoes!" a Congressman scoffed. "A man, sir, would not immigrate into
Florida--no, not from hell itself!" In 1880, Florida ranked 34th of 42 states and
territories in population, and the census found only 257 residents in most of South
Florida.
Florida's leaders believed that if they could just drain the swamp, they could turn a
peninsular wasteland into a recreational, agricultural and residential paradise. They
failed catastrophically. In 1928, a hurricane blasted Lake Okeechobee, killing some
2,000 pioneers that their promises had drawn to the Everglades.
But U.S. Army engineers eventually made the dream come true by imprisoning Lake
O behind a giant dike, subduing the Everglades with 2,000 miles of levees and
canals, seizing control of nearly every raindrop that fell in southern Florida. Their
all-out war on natural water flow made the bottom half of the state safe for an
unrestrained building frenzy that began after World War II and basically continued
until Juan Puig bought his billiard table. Florida now has 18 million residents, most
of them south of Orlando. Such progress had a price. Half the Everglades is gone.
The rest is polluted, disconnected and infested by invasive species ranging from fastgrowing ferns to pythons.
And South Florida is having an ecological and hydrological meltdown, the legacy of a
century of plumbing and dredging and growing without much thinking. The
Everglades ecosystem now hosts 69 threatened or endangered species, and its
rookeries and fisheries have crashed. Massive algal blooms are turning Florida Bay
into pea soup. The region's reefs have lost up to 95% of their elkhorn coral; persistent
red tides have made it tough for sunbathers to breathe at the beach.
Now the rainiest swath of the country is running dry, facing a specter of structural
droughts. And the dike around Lake O. is leaking so badly that water managers
routinely dump billions of precious gallons out of the lake to avoid a 1928-style
calamity, ravaging estuaries and draining the region's water supply. This spring the
lake fell so low that 40,000 acres of its exposed bottom burned out of control, along
with 40,000 acres of the perennially parched Everglades National Park.
We have water, water, everywhere, but much of South Florida's per capita use is 50%
above the national average, and we've lost half the wetlands that used to recharge our
aquifers. So water shortages threaten to limit growth in a way that wetlands
regulations or bad headlines never could. "Florida is astonishingly wasteful," says
Cynthia Barnett, author of Mirage: Florida and the Vanishing Water of the Eastern
U.S. Now the Orlando area is pushing to suck water out of rivers to its north, local
utilities are jacking up water rates as much as 35%, and South Florida's water board
may cap withdrawals from Everglades aquifers. "The idea of water shortages down
here never occurred to anyone," says environmentalist Shannon Estenoz, a Crist
appointee to the board. "But we've got to change the culture because the status quo is
unsustainable."
It's not just gator-huggers who say that. Back in 1995, a 42-member commission
stocked with bankers, farmers and developers released a unanimous report declaring
South Florida unsustainable, warning that the ecosystem's destruction was hurting
people as well as panthers by lowering water tables, increasing flood risks, fueling
gridlock and replacing paradise with "mind-numbing homogeneity, and a distinct
lack of place." In the words of the novelist and columnist Carl Hiaasen, the bard of
Florida's decline, "You don't have to be a wacko enviro to want your kids to be able to
swim in a lake or maybe see an animal that isn't in a cage or a seaquarium. And even
people who don't give a rat's ass about the panther will care when saltwater comes
out of their faucets."
That's why Democrats, Republicans, the sugar industry and environmentalists came
together in 2000 to support a $12 billion plan to revive the Everglades, the largest
ecosystem-restoration project in history. But the project has stumbled and stalled,
which is why Crist's sugar deal is so exciting. It will essentially take Everglades
restoration back to the drawing board, reviving hope for a free-flowing River of Grass
and a stable water supply.
But quality of life remains the biggest risk to the Florida dream. So many
Northeastern transplants are leaving Florida for other states with less congestion and
better education systems that they have their own nickname: Halfbacks. In 2000,
Florida attracted 19% of the nation's migrating seniors; by 2006, it was only 13%.
Florida still has some of America's richest ZIP codes, but it ranks among the worst
states in school spending and health coverage.
The GOP-controlled legislature has responded to the state's woes with protracted
arguments about evolution and other Terri Schiavo--style social issues as well as
legislation proposing crackdowns on bikers who pop wheelies, students who wear
droopy pants and truckers who hang fake cojones on their rigs. It also slashed $5
billion from the state budget. "I just got in an argument about whether we're 50th or
45th in the nation in graduation rates," says Florida house minority leader Dan
Gelber. "What a great debate to have."
"The Outlook Is Always Bright Here!"
I was already feeling grumpy about all this when I watched a lecture by the
University of Miami's renowned coastal geologist Harold Wanless. The
Intergovernmental Panel on Climate Change had predicted a sea-level rise of up to 2
ft. by 2100, but Wanless meticulously explained why 3 ft. to 4 ft. is much more likely-assuming the world can slash carbon emissions enough to slow global warming. I
live in Miami Beach, so I didn't care for his PowerPoint slide showing much of Miami
Beach under water. "That's if we get our act together," he said. Then he showed a
slide of all Miami Beach submerged. "That's if we don't."
I felt better after talking to the bubbly Crist, who's like human Prozac. "How can you
not be optimistic about Florida?" he asked. "Is there a more beautiful place on the
planet?" He then recounted a story that probably won't help him in the GOP
Veepstakes: "John McCain told me, 'It's tough in those Rust Belt states. You really
feel a bit of depression in people's outlook. But when you get to Florida, people feel
great.' And it's true! The outlook is always bright here!" When I reminded him of
Florida's growth-challenged economy and growth-ravaged environment, he took no
offense. "We're going to make a new Florida!" he declared.
He means a sustainable Florida. He's been doing his part environmentally, pushing a
sweeping energy bill through the fractious legislature, fulfilling his pledge to be the
"Everglades governor." His greatest challenge, though, is economic sustainability,
attracting high-wage industries that don't depend on perpetual growth. His
predecessor, Jeb Bush, lured a few biotech firms, with the help of lavish subsidies,
and Crist has targeted green-tech sectors like solar power as well as global trade. But
not even corporate titans who enjoy Florida vacations seem eager to relocate to a
high-priced state with a service-economy workforce and troubled schools. "The
decisions about relocating high-paying businesses are made by people who value
education, and Florida isn't ready for the modern economy," says Graham, the
former Senator. New corporate subsides will be a tough fiscal sell. "The politicians
have told us: Not if it costs money," says Space Coast economic-development director
Lynda Weatherman. The shuttle will be canceled in 2010, and her region may lose
6,000 jobs. "Six thousand one, if I can't figure out how to attract new ones," she says.
Still, did I mention the winters are nice? As baby boomers retire, as Hispanic
markets expand, as leftist dictators harass wealthy South Americans, some people
will always want to come to Florida. In anticipation of the next boom, developer
Pérez has set up a $1 billion fund to buy distressed properties, and Zalewski of Condo
Vultures has been besieged by foreign investors. "Eventually, Florida is going to grow
again," he says.
The question is whether it will grow up. If Florida can reinvent itself, it can be the tip
of the American spear, showing the nation how to save water and energy, manage
growth, restore ecosystems and retool economies in an era of less. But that will
require a new kind of reinvention. "We know how to crash and how to recover," says
Miami historian Arva Moore Parks. "We don't seem to know how to learn."
When Orlando and Tampa Collide—Planning
Central Florida’s Megapolitan Future
by ROBERT LANG, Virginia Tech think tank on suburbanization (Metropolitan &
Suburban Institute)
The Orlando and Tampa metropolitan areas will merge into one super region by 2020.
The combined space will be one of 20 U.S. “megapolitan areas,” which contain over 5
million residents. Many of us sense that a large metropolitan convergence is under way
because we see regions that were once distinct places forming enormous urban
complexes. In the 1960s, it was a shock that Dallas and Fort Worth—which are about 35
miles apart—unified into one big metroplex. By the 1980s, the same pattern became
evident between the DC and Baltimore metros. In this decade, places such as Boston and
Providence, and Cleveland and Akron officially joined as census-designated “combined
statistical areas.”
Now metros with even more distance between their centers are on the verge of
combining, including Phoenix-Tucson, San Antonio-Austin, San Francisco-Sacramento
and, yes, Orlando-Tampa. The megapolitan concept was developed by the Metropolitan
Institute at Virginia Tech to project which big regions will merge in the coming decades.
The idea is that the planning for convergence should start now in terms of land use
policy, transportation infrastructure, and economic development. It is better for regions
to anticipate this scale of change and plan ahead than to wait until statisticians at the
census tell them they have combined.
The planning process has already begun in the Phoenix-Tucson (or the Sun Corridor) and
San Francisco-Sacramento (or Northern California) megapolitan areas. The first
“Sanframento” interregional summit occurred this month at the University of CaliforniaDavis. Arizona State University will release a report on the Sun Corridor in May.
Orlando and Tampa should begin the same process of engagement.
It is instructive for Orlando and Tampa to consider how the similar-sized Sun Corridor is
planning its megapolitan future. Most importantly, it is critical that residents in Orlando
and Tampa see a stake in working together. The two places have long been rivals, yet the
Phoenix-Tucson rivalry is also legend. Phoenix looks on Tucson as its poor country
cousin and Tucson sees Phoenix as a mini-LA that has created a “Disney Desert.”
However, cooperation between Phoenix and Tucson is already well underway. Evidence
includes the new joint University of Arizona-Arizona State University Medical School in
downtown Phoenix. The school is a much needed spark to Phoenix’s ambition to become
a player in the bio tech industry. Arizona is now pushing transportation investments that
link up the entire Sun Corridor, including high speed rail between Phoenix and Tucson.
The overarching policy is to assess both regions economic competitive advantages to
determine what synergies of the type already found in bio tech exist in other business
sectors.
A combined Orlando and Tampa area could likewise be more than the sum of its parts.
Orlando has one of the most globally connected airports in the nation because of its large
tourist industry. Tampa’s port ranks in the top 20 U.S. sea links in terms of foreign trade.
The combination of Orlando’s airport and Tampa’s sea port makes Central Florida a large
globally integrated metropolis. While apart, Orlando and Tampa barely register as world
cities, falling well behind well-established Atlanta, or even up-and-coming Charlotte.
But a well-coordinated strategy that markets the combined region as offering world class
connections could lure more branch offices of leading global firms and attract more
exporters.
But before Orlando and Tampa improve how they link to the world they must better link
to one another. Adding high speed passenger rail is a logical first step. This is a given in
the rest of the world. In fact, our competitors in Europe and Asia have national policies
of connecting major cities by high speed rail in an effort to integrate their economies and
reinforce business synergies. In the case of Central Florida, improved transportation
capacity would also help in disaster planning. Consider the difficulty that New Orleans
had in evacuating to Baton Rouge and how much better that process might have been
with high speed rail.
Finally, the Orlando and Tampa must confront a host or environmental and resources
challenges that impact both places and demand unified solutions. By the Metropolitan
Institute’s megapolitan area measure Central Florida now contains nearly 8 million
residents. The region could top 10 million by 2020, thus rivaling the Chicago
metropolitan area in population.
Because of land limitations in South Florida due to the Everglades protection, the Central
Florida is now the most southern place in the continental U.S. that has a significant
amount of remaining open space—much it lying in the path of development between
Orlando and Tampa. It would be a disaster to extend current suburban building practices
to this space. Instead, Orlando and Tampa must work off a new model of growth that
clusters development while preserving land. Orlando and Tampa are now building at one
another, but their best hope lies in building together.
The Next Slum?
BY CHRISTOPHER B. LEINBERGER
Appeared in The Atlantic Monthly
Strange days are upon the residents of many a suburban cul-de-sac. Once-tidy yards have
become overgrown, as the houses they front have gone vacant. Signs of physical and
social disorder are spreading.
At Windy Ridge, a recently built starter-home development seven miles northwest of
Charlotte, North Carolina, 81 of the community's 132 small, vinyl-sided houses were in
foreclosure as of late last year. Vandals have kicked in doors and stripped the copper wire
from vacant houses; drug users and homeless people have furtively moved in. In
December, after a stray bullet blasted through her son's bedroom and into her own, Laurie
Talbot, who'd moved to Windy Ridge from New York in 2005, told The Charlotte
Observer, "I thought I'd bought a home in Pleasantville. I never imagined in my wildest
dreams that stuff like this would happen."
In the Franklin Reserve neighborhood of Elk Grove, California, south of Sacramento, the
houses are nicer than those at Windy Ridge-many once sold for well over $500,000-but
the phenomenon is the same. At the height of the boom, 10,000 new homes were built
there in just four years. Now many are empty; renters of dubious character occupy others.
Graffiti, broken windows, and other markers of decay have multiplied. Susan McDonald,
president of the local residents' association and an executive at a local bank, told the
Associated Press, "There's been gang activity. Things have really been changing, the last
few years."
In the first half of last year, residential burglaries rose by 35 percent and robberies by 58
percent in suburban Lee County, Florida, where one in four houses stands empty.
Charlotte's crime rates have stayed flat overall in recent years-but from 2003 to 2006, in
the 10 suburbs of the city that have experienced the highest foreclosure rates, crime rose
33 percent. Civic organizations in some suburbs have begun to mow the lawns around
empty houses to keep up the appearance of stability. Police departments are mapping
foreclosures in an effort to identify emerging criminal hot spots.
The decline of places like Windy Ridge and Franklin Reserve is usually attributed to the
subprime-mortgage crisis, with its wave of foreclosures. And the crisis has indeed
catalyzed or intensified social problems in many communities. But the story of vacant
suburban homes and declining suburban neighborhoods did not begin with the crisis, and
will not end with it. A structural change is under way in the housing market-a major
shift in the way many Americans want to live and work. It has shaped the current
downturn, steering some of the worst problems away from the cities and toward the
suburban fringes. And its effects will be felt more strongly, and more broadly, as the
years pass. Its ultimate impact on the suburbs, and the cities, will be profound.
Arthur C. Nelson, director of the Metropolitan Institute at Virginia
Tech<http://www.mi.vt.edu/index.asp>, has looked carefully at trends in American
demographics, construction, house prices, and consumer preferences. In 2006, using
recent consumer research, housing supply data, and population growth rates, he modeled
future demand for various types of housing. The results were bracing: Nelson forecasts a
likely surplus of 22 million large-lot homes (houses built on a sixth of an acre or more)
by 2025-that's roughly 40 percent of the large-lot homes in existence today.
For 60 years, Americans have pushed steadily into the suburbs, transforming the
landscape and (until recently) leaving cities behind. But today the pendulum is swinging
back toward urban living, and there are many reasons to believe this swing will continue.
As it does, many low-density suburbs and McMansion subdivisions, including some that
are lovely and affluent today, may become what inner cities became in the 1960s and
'70s-slums characterized by poverty, crime, and decay.
The suburban dream began, arguably, at the New York World's Fair of 1939 and '40.
"Highways and Horizons," better known as "Futurama," was overwhelmingly the fair's
most popular exhibit; perhaps 10 percent of the American population saw it. At the heart
of the exhibit was a scale model, covering an area about the size of a football field, that
showed what American cities and towns might look like in 1960. Visitors watched
matchbox-sized cars zip down wide highways. Gone were the crowded tenements of the
time; 1960s Americans would live in stand-alone houses with spacious yards and
attached garages. The exhibit would not impress us today, but at the time, it inspired
wonder. E. B. White wrote in Harper's, "A ride on the Futurama ... induces approximately
the same emotional response as a trip through the Cathedral of St. John the Divine ... I
didn't want to wake up."
The suburban transformation that began in 1946, as GIs returned home, took almost half
a century to complete, as first people, then retail, then jobs moved out of cities and into
new subdivisions, malls, and office parks. As families decamped for the suburbs, they left
behind out-of-fashion real estate, a poorer residential base, and rising crime. Oncethriving central-city retail districts were killed off by the combination of regional
suburban malls and the 1960s riots. By the end of the 1970s, people seeking safety and
good schools generally had little alternative but to move to the suburbs. In 1981, Escape
From New York, starring Kurt Russell, depicted a near future in which Manhattan had
been abandoned, fenced off, and turned into an unsupervised penitentiary.
Cities, of course, have made a long climb back since then. Just nine years after Russell
escaped from the wreck of New York, Seinfeld-followed by Friends, then Sex and the
City-began advertising the city's renewed urban allure to Gen-Xers and Millennials.
Many Americans, meanwhile, became disillusioned with the sprawl and stupor that
sometimes characterize suburban life. These days, when Hollywood wants to portray
soullessness, despair, or moral decay, it often looks to the suburbs-as The Sopranos and
Desperate Housewives attest-for inspiration.
In the past decade, as cities have gentrified, the suburbs have continued to grow at a
breakneck pace. Atlanta's sprawl has extended nearly to Chattanooga; Fort Worth and
Dallas have merged; and Los Angeles has swung a leg over the 10,000-foot San Gabriel
Mountains into the Mojave Desert. Some experts expect conventional suburbs to continue
to sprawl ever outward. Yet today, American metropolitan residential patterns and
cultural preferences are mirror opposites of those in the 1940s. Most Americans now live
in single-family suburban houses that are segregated from work, shopping, and
entertainment; but it is urban life, almost exclusively, that is culturally associated with
excitement, freedom, and diverse daily life. And as in the 1940s, the real-estate market
has begun to react.
Pent-up demand for urban living is evident in housing prices. Twenty years ago, urban
housing was a bargain in most central cities. Today, it carries an enormous price
premium. Per square foot, urban residential neighborhood space goes for 40 percent to
200 percent more than traditional suburban space in areas as diverse as New York City;
Portland, Oregon; Seattle; and Washington, D.C.
It's crucial to note that these premiums have arisen not only in central cities, but also in
suburban towns that have walkable urban centers offering a mix of residential and
commercial development. For instance, luxury single-family homes in suburban
Westchester County, just north of New York City, sell for $375 a square foot. A luxury
condo in downtown White Plains, the county's biggest suburban city, can cost you $750 a
square foot. This same pattern can be seen in the suburbs of Detroit, or outside Seattle.
People are being drawn to the convenience and culture of walkable urban neighborhoods
across the country-even when those neighborhoods are small.
Builders and developers tend to notice big price imbalances, and they are working to
accommodate demand for urban living. New lofts and condo complexes have popped up
all over many big cities. Suburban towns built in the 19th and early 20th centuries,
featuring downtown street grids at their core, have seen a good deal of "in-filling" in
recent years as well, with new condos and town houses, and renovated small-lot homes
just outside their downtowns. And while urban construction may slow for a time because
of the present housing bust, it will surely continue. Sprawling, large-lot suburbs become
less attractive as they become more densely built, but urban areas-especially those well
served by public transit-become more appealing as they are filled in and built up.
Crowded sidewalks tend to be safe and lively, and bigger crowds can support more shops,
restaurants, art galleries.
But developers are also starting to find ways to bring the city to newer suburbs-and
provide an alternative to conventional, car-based suburban life. "Lifestyle centers"walkable developments that create an urban feel, even when built in previously
undeveloped places-are becoming popular with some builders. They feature narrow
streets and small storefronts that come up to the sidewalk, mixed in with housing and
office space. Parking is mostly hidden underground or in the interior of faux city blocks.
The granddaddy of all lifestyle centers is the Reston Town Center, located between
Virginia's Dulles International Airport and Washington, D.C. Since it opened in 1990, it
has become the "downtown" for western Fairfax and eastern Loudoun counties; a place
for the kids to see Santa and for teenagers to ice skate. People living in the town can stroll
from the movie theater to restaurants and then back home. A 2006 study by the
Brookings Institution showed that Reston's apartments, condominiums, and office and
retail space were all commanding about a 50 percent rent or price premium over the
typically suburban houses, office parks, and strip malls nearby.
Housing at Belmar, the new "downtown" in Lakewood, Colorado, a middle-income inner
suburb of Denver, commands a 60 percent premium per square foot over the singlefamily homes in the neighborhoods around it. The development covers about 20 small
blocks in all. What's most noteworthy is its history: it was built on the site of a razed
mall.
Building lifestyle centers is far more complex than building McMansion developments
(or malls). These new, faux-urban centers have many moving parts, and they need to
achieve critical mass quickly to attract buyers and retailers. As a result, during the 1990s,
lifestyle centers spread slowly. But real-estate developers are gaining more experience
with this sort of building, and it is proliferating. Very few, if any, regional malls are being
built these days-lifestyle centers are going up instead.
In most metropolitan areas, only 5 to 10 percent of the housing stock is located in
walkable urban places (including places like downtown White Plains and Belmar). Yet
recent consumer research by Jonathan Levine of the University of Michigan and
Lawrence Frank of the University of British Columbia suggests that roughly one in three
homeowners would prefer to live in these types of places. In one study, for instance,
Levine and his colleagues asked more than 1,600 mostly suburban residents of the
Atlanta and Boston metro areas to hypothetically trade off typical suburban amenities
(such as large living spaces) against typical urban ones (like living within walking
distance of retail districts). All in all, they found that only about a third of the people
surveyed solidly preferred traditional suburban lifestyles, featuring large houses and lots
of driving. Another third, roughly, had mixed feelings. The final third wanted to live in
mixed-use, walkable urban areas-but most had no way to do so at an affordable price.
Over time, as urban and faux-urban building continues, that will change.
Demographic changes in the United States also are working against conventional
suburban growth, and are likely to further weaken preferences for car-based suburban
living. When the Baby Boomers were young, families with children made up more than
half of all households; by 2000, they were only a third of households; and by 2025, they
will be closer to a quarter. Young people are starting families later than earlier
generations did, and having fewer children. The Boomers themselves are becoming
empty-nesters, and many have voiced a preference for urban living. By 2025, the U.S.
will contain about as many single-person households as families with children.
Because the population is growing, families with children will still grow in absolute
number-according to U.S. Census data, there will be about 4 million more households
with children in 2025 than there were in 2000. But more than 10 million new singlefamily homes have already been built since 2000, most of them in the suburbs.
If gasoline and heating costs continue to rise, conventional suburban living may not be
much of a bargain in the future. And as more Americans, particularly affluent Americans,
move into urban communities, families may find that some of the suburbs' other big
advantages-better schools and safer communities-have eroded. Schooling and safety are
likely to improve in urban areas, as those areas continue to gentrify; they may worsen in
many suburbs if the tax base-often highly dependent on house values and new
development-deteriorates. Many of the fringe counties in the Washington, D.C.,
metropolitan area, for instance, are projecting big budget deficits in 2008. Only
Washington itself is expecting a large surplus. Fifteen years ago, this budget situation
was reversed.
The U.S. grows its total stock of housing and commercial space by, at most, 3 percent
each year, so the imbalance between the supply of urban living options and the demand
for them is not going to disappear overnight. But over the next 20 years, developers will
likely produce many, many millions of new and newly renovated town houses, condos,
and small-lot houses in and around both new and traditional downtowns.
As conventional suburban lifestyles fall out of fashion and walkable urban alternatives
proliferate, what will happen to obsolete large-lot houses? One might imagine culs-de-sac
being converted to faux Main Streets, or McMansion developments being bulldozed and
reforested or turned into parks. But these sorts of transformations are likely to be rare.
Suburbia's many small parcels of land, held by different owners with different
motivations, make the purchase of whole neighborhoods almost unheard-of.
Condemnation of single-family housing for "higher and better use" is politically difficult,
and in most states it has become almost legally impossible in recent years. In any case,
the infrastructure supporting large-lot suburban residential areas-roads, sewer and water
lines-cannot support the dense development that urbanization would require, and is not
easy to upgrade. Once large-lot, suburban residential landscapes are built, they are hard to
unbuild.
The experience of cities during the 1950s through the '80s suggests that the fate of many
single-family homes on the metropolitan fringes will be resale, at rock-bottom prices, to
lower-income families-and in all likelihood, eventual conversion to apartments.
This future is not likely to wear well on suburban housing. Many of the inner-city
neighborhoods that began their decline in the 1960s consisted of sturdily built, turn-ofthe-century row houses, tough enough to withstand being broken up into apartments, and
requiring relatively little upkeep. By comparison, modern suburban houses, even highend McMansions, are cheaply built. Hollow doors and wallboard are less durable than
solid-oak doors and lath-and-plaster walls. The plywood floors that lurk under wood
veneers or carpeting tend to break up and warp as the glue that holds the wood together
dries out; asphalt-shingle roofs typically need replacing after 10 years. Many recently
built houses take what structural integrity they have from drywall-their thin wooden
frames are too flimsy to hold the houses up.
As the residents of inner-city neighborhoods did before them, suburban homeowners will
surely try to prevent the division of neighborhood houses into rental units, which would
herald the arrival of the poor. And many will likely succeed, for a time. But eventually,
the owners of these fringe houses will have to sell to someone, and they're not likely to
find many buyers; offers from would-be landlords will start to look better, and
neighborhood restrictions will relax. Stopping a fundamental market shift by legislation
or regulation is generally impossible.
Of course, not all suburbs will suffer this fate. Those that are affluent and relatively close
to central cities-especially those along rail lines-are likely to remain in high demand.
Some, especially those that offer a thriving, walkable urban core, may find that even the
large-lot, residential-only neighborhoods around that core increase in value. Singlefamily homes next to the downtowns of Redmond, Washington; Evanston, Illinois; and
Birmingham, Michigan, for example, are likely to hold their values just fine.
On the other hand, many inner suburbs that are on the wrong side of town, and poorly
served by public transport, are already suffering what looks like inexorable decline. Lowincome people, displaced from gentrifying inner cities, have moved in, and longtime
residents, seeking more space and nicer neighborhoods, have moved out.
But much of the future decline is likely to occur on the fringes, in towns far away from
the central city, not served by rail transit, and lacking any real core. In other words, some
of the worst problems are likely to be seen in some of the country's more recently
developed areas-and not only those inhabited by subprime-mortgage borrowers. Many of
these areas will become magnets for poverty, crime, and social dysfunction.
Despite this glum forecast for many swaths of suburbia, we should not lose sight of the
bigger picture-the shift that's under way toward walkable urban living is a healthy
development. In the most literal sense, it may lead to better personal health and a slimmer
population. The environment, of course, will also benefit: if New York City were its own
state, it would be the most energy-efficient state in the union; most Manhattanites not
only walk or take public transit to get around, they unintentionally share heat with their
upstairs neighbors.
Perhaps most important, the shift to walkable urban environments will give more people
what they seem to want. I doubt the swing toward urban living will ever proceed as far as
the swing toward the suburbs did in the 20th century; many people will still prefer the
bigger houses and car-based lifestyles of conventional suburbs. But there will almost
certainly be more of a balance between walkable and drivable communities-allowing
people in most areas a wider variety of choices.
By the estimate of Virginia Tech's Arthur Nelson, as much as half of all real-estate
development on the ground in 2025 will not have existed in 2000. It's exciting to imagine
what the country will look like then. Building and residential migration seem to progress
slowly from year to year, yet then one day, in retrospect, the landscape seems to have
been transformed in the blink of an eye. Unfortunately, the next transformation, like the
ones before it, will leave some places diminished. About 25 years ago, Escape From New
York perfectly captured the zeitgeist of its moment. Two or three decades from now, the
next Kurt Russell may find his breakout role in Escape From the Suburban Fringe.