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Suburban, Urban, Commuting

NeighborhoodX: In praise of secondary cities

July 5, 2017 | 4:52 pm | | Articles |

Every so often I include a guest post that I wish I had written on my own. This is one of them. It was written by my friend and colleague at NeighborhoodX. I hope you enjoy it.


In praise of secondary cities

Why the next great Brooklyn neighborhood might not be in Brooklyn.


Detail of Edward Hopper, “From Williamsburg Bridge”

Constantine A. Valhouli   |   Jun 20, 2017 10:45 AM

Not so long ago, the central question of urban planning was how to revive the downtowns and surrounding neighborhoods of major cities. In the last decade or so, those efforts have succeeded to the point where the central question has become, “where do the people go who are being priced out of these cities?”

It’s worth a moment to understand what shifted during that time.

Across the United States, the downtowns in need of revival had been damaged by misguided federal policies like redlining (a racist policy of not making loans in ethnically-diverse neighborhoods) and urban renewal (massive demolition of historic neighborhoods). By contrast, the revival of these neighborhoods was often a fragmented, small-scale effort that largely happened from the ground up. Cheaper rents and large vacant spaces provided fertile ground for creative and entrepreneurial efforts.

Many of these neighborhoods experienced the same arc. From sleepy and decrepit bargains to lively and gritty destinations, and finally to consumerist caricatures of their former liveliness. Some of these neighborhoods were victims of their own success; rents and purchase prices rose out of reach because it was now much more desirable. For other neighborhoods, rezoning created incentives to demolish those large, vacant spaces (or those small, occupied houses) for an apartment complex or condo tower aimed at more affluent residents.

Among affluent families, the shifting preference from suburbs to cities is glibly described as a ‘change in consumer preference.’ But it is more than this. The shifts are not just on the demand side, but on the supply side as well. During that time, the cities changed as well, becoming more like suburbs – and thus more welcoming to wealthy suburbanites. In turn, the demographic of these cities is coming to resemble affluent suburbs: doctors, lawyers, management consultants, and those in financial services.

At the same time, the people who made these cities interesting and dynamic – the writers and artists, musicians and actors, entrepreneurs and talented young people – are being priced out. Today, many young people who move to a major American city to pursue creative or entrepreneurial ventures require the financial support from their parents.

And yet, people are paying these higher prices because they believe that they need to be in the city in order to pursue these kinds of ventures and meet like-minded people. But is this always true? Or could smaller cities and suburbs also could provide these opportunities?

Almost every unsexy suburb within commuting distance of major cities has the basic raw elements to make for a fascinating and livable place.

In addition to low rents and purchase prices, there is often a critical mass of housing within walking distance of a historic (but largely vacant) downtown, one that evokes the opening sequence of Bob’s Burgers. But even the vacancies can be an opportunity rather than a drawback. These were the same conditions that faced the early next-wave residents of almost-suburban city neighborhoods like Williamsburg, South Boston, or Silver Lake. In each case, it was the vision and drive of the creative and entrepreneurial residents that transformed these buildings from space into an actual community.

Today, these suburbs and mill towns are overlooked by major real estate investors. But again, this can be an opportunity rather than a drawback. Even as contrarian investor Sam Zell recently sold Equity Residential’s suburban portfolio to focus on urban markets, this creates an opportunity to be a contrarian to the contrarian, by taking advantage of the lower prices because these areas are out of favor.

But not all secondary cities are created equal.

Some have geographic advantages of significant parks, protected land, or beautiful views and rivers (like Beacon and Garrison, NY). Others have architectural advantages, with intact neighborhoods of elegant historic houses for less than the price of a Manhattan studio apartment.

Former mill towns have a particular advantage – if it is used thoughtfully.

The vacant or underused factory buildings offer a potential density that might only be found in larger cities. For example, the buildings in the canal district of Lowell, Mass., would not look out of place in Tribeca in New York City. Furthermore, the redevelopment of these spaces generally doesn’t displace anyone (except for pigeons) and, if done thoughtfully, can add mixed-use liveliness that can benefit the entire neighborhood or town. The vast size of the buildings and the relative affordability of the raw space allows developers to devote square footage to, say, independent movie theaters and stages, to provide a lifestyle within walking distance for which residents previously needed to travel out of town.

While these entertainment spaces are critical to the livability of a secondary city, they do not need to be gratuitously large or fancy. In fact, they will likely be better, and more affordable, if they are not.

For example, community groups who try to raise money for a nonprofit movie theater get caught in an endless cycle of grant writing to raise much more money than they actually need to launch. People forget that at its heart, a movie theater is a black box room with a projector. Maybe with beanbag chairs. Rather than trying to compete with commercial chain theaters on technology or fancy seating, their competitive advantage can be intangible – better film programming, or video talks with the director or writer, or events or events (like Rocky Horror Picture Show) that cannot be found elsewhere.

Even buildings that are not historically significant can be re-purposed rather than demolished. Smaller towns that grew by absorbing more contemporary suburbs have examples for how to reuse functional buildings like auto body shops and chain restaurants.

In outlying neighborhoods of Austin and Sedona, some former Pizza Hut franchises have been transformed into independent restaurants. In Greenwich, Connecticut, a former Howard Johnsons was renovated into the sleek, midcentury J-House Hotel. In a rural part of North Andover, Mass., the local music venue was the Red Barn, which was exactly what is sounds like. And in suburban parts of Anchorage, Alaska, pop-up shops take the form of happily-painted garden sheds on trailer hitches, set up in parking lots or roadside which serve as mobile coffee shops or as specialty jerky shacks.

Truly, more Brooklyn than Brooklyn.

In 2006, at the final show of CBGB’s – a moment that for many marked the end of a countercultural era for the East Village – when most people were waxing nostalgic about the revelry, the community, and the closing of an institution, Patti Smith offered an unsentimental coda: “CBGB is a state of mind. Young kids all over the world are going to have their own f—ing clubs. They won’t care about CBGB because they’re going to have the new places, and the new places are always the most important.”

This sort of punk rock/DIY ethos that drove the city’s revival from the 1970s to the 1990s, and this pragmatic, grassroots approach is precisely why the next hot Brooklyn neighborhood might not be in Brooklyn.

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Westchester to Manhattan Commute Time by Housing Cost

April 7, 2017 | 10:34 am | | Infographics |

Because I’m a little behind, the awesome infographic below by Michael Kolomatsky appeared in the New York Times real estate section a few weeks ago: How Much Is Your House Worth Per Minute?.

My original version covering Fairfield County was so popular they wanted me to do recurring versions. This one was much harder since there wasn’t an obvious “sweet spot” but the concept was the same. And best of all, it’s pretty darn cool.

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NYT Calculator: Suburban Sales Boom Measured By Houses on Monopoly Board

November 19, 2016 | 7:46 am | | Charts |

The New York Times created another super cool graphic in their new Calculator column, based on my idea. In the fall of 2015 I observed a massive surge of sales in Westchester County (north of NYC for those not familiar with our area). However median sales price was nearly flat during this period. This was phenomenon repeated in all of the counties that surround NYC – except for NJ since I don’t cover that market yet but anecdotally I believe the same phenomenon is occurring there. I believe this moment was the point where the affordability challenge became so severe that renters and move up buyers had to move out of the city.

Specifically, Brooklyn showed a surge in median sales price from 2009 with a modest growth in sales. Westchester reflected the opposite patterns of Brooklyn. Westchester county sales boomed over the same period while the growth in median sales price was much more tepid.

westchestervbrooklyn11-2016

Below is the NYT graphic for the suburban sales boom article.

11-18-16nytcalculator

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The Relationship Between Commute Time and Housing Prices

October 28, 2016 | 3:48 pm | | Infographics |

Back in the mid 1990s after my wife and I moved to Fairfield County, Connecticut from Manhattan, I noticed the decline in housing prices further from the first express stop in Stamford, CT.

I worked on an updated version of the concept for this weekend’s New York Times Real Estate section: What’s Your Commute Time Worth? They did an amazing job on the graphic.

nytimesmetro-northcommute3q16

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[Speaking] The Fairfield/Westchester Chapter of REFA 10-25-16

October 11, 2016 | 10:49 am |

I’m moderating a great panel in Stamford, CT for the Fairfield/Westchester Chapter of the Real Estate Finance Association (REFA) on October 25, 2016 titled:

For Sale and for Rent, Trouble at the Top?

refabrocure10-25-16

Residential Real Estate has been one of the bright spots in the local economy in recent years. The single family market continues to post record sales volumes and the growth of the multi-family market in Fairfield County has been dramatic. However, there is mount- ing concern about perceived over-building at the top end of the luxury single family and multi-family markets. Where is the demand coming from? Will it continue? What prod- uct do people want? Where are we headed? We look forward to a lively and informative program.

The response so far has been heavy – click here for more information or to sign up.

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Podcast: My Port Authority of NY & NJ Interview on Regional Housing Market

September 24, 2015 | 12:16 pm | Podcasts |

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A few days ago I was interviewed by Christopher Eshleman at the Port Authority of New York & New Jersey. He works for Alexander Heil who is the chief economist and publishes a lot of great regional economic insights. Although this is a new effort, this was their first podcast conducted outside of the institution so I am deeply appreciative of the opportunity to share my views.

Christopher is a sharp guy and kept the conversation interesting (I even inserted a Jerry Seinfeld joke). It’s about a half an hour.

Check it out.

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[Infographic] NAR gets into the Urbanization Conversation

September 1, 2015 | 10:12 am | | Infographics |

The National Association of Realtors, who is generally viewed as emphasizing suburban single family housing markets, may be plotting a new course. NAR will be sharing more releases on the topic of urbanization in the coming months. They look to be taking the same path as Realtor.com, the online entity who licenses their name from the NAR mothership. Realtor.com has cleaned up their act and has been much more focused on city life after their recent purchase by News Corp (through Realtor.com’s parent company Move), trying to become relevant again by emulating Zillow and Trulia. And of course, the consumer wins.

It’s a good thing too since urbanization is one of the most important housing trends (affordability aside) facing the housing market going forward.

Here’s an interesting infographic released by NAR today:

NARurbanismInfographic

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[Three Cents Worth #288 Hamptons] Comparing Price Trends in the Hamptons and Manhattan

June 3, 2015 | 6:25 pm | | Charts |

It’s time to share my Three Cents Worth (3CW) on Curbed Hamptons, at the intersection of sand dunes and real estate in the East End of Long Island, NY.

Check out my 3CW column on @CurbedHamptons:

Now that we’ve crossed over into June, I thought I’d illustrate the price trend relationship between the Hamptons and Manhattan. The former seeing a majority of single family sales and many second home purchases. The latter with a housing market of 98% apartments and single family family sales are a rounding error. Despite the differences in their housing stock, their behavior in terms of price trends has been similar over the past decade…

3cwH6-1-15

[click to expand charts]


My latest Three Cents Worth column: Three Cents Worth: Comparing Price Trends in the Hamptons and Manhattan [Curbed]

Three Cents Worth Archive Curbed NY

Three Cents Worth Archive Curbed DC

Three Cents Worth Archive Curbed Miami

Three Cents Worth Archive Curbed Hamptons

Three Cents Worth Archive Curbed LA

Three Cents Worth Archive Curbed Ski

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Bloomberg View Column: Costly City Housing Is an Economic Drag

June 3, 2015 | 6:12 pm | | Charts |

BVlogo

Read my latest Bloomberg View column Costly City Housing Is an Economic Drag.

bv6-2-14a

bv6-2-14b

Here’s an excerpt…

It’s tough living in a big city — the people, the traffic, the noise. Oh, and did we mention the cost of housing? Contrary to conventional wisdom, high and rising housing costs in the U.S.’s biggest cities are not ideal for an economic recovery. Just the opposite: When housing costs take a big bite out of incomes, it diverts money that could be spent on local goods and services or invested in new businesses that stimulate growth…

[read more]


My Bloomberg View Column Directory

My Bloomberg View RSS feed.

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A Century Later: Manhattan Is Less Crowded

September 27, 2014 | 12:26 pm |

manhattandensity

The density of the Five Points in 1910 was absolutely incredible.  The 2010 population density is much more balanced across the island.

NYU’s Marion Institute of Urban Management is offering a free seminar at the New York Public Library called “The Rise and Fall of Manhattan Density” to explain how this happened.

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Detroit: Where Hedge Funds and Goats Want to Work Together to Improve Livability

June 24, 2014 | 7:15 am |

goatwiki

The city of Detroit has a problem with goats, among other significant challenges. It has been battered with political corruption (two former mayors are in jail) and it is trying to sheppard (pun intended) through a huge bankruptcy but goats are where the city draws the line.

The city also a tremendous amount of potential and is desperately trying to reinvent itself. My wife’s family is from the Detroit suburbs and I went to college in the Michigan for 4 years – one thing I noticed – the suburbs and the City of Detroit are mutually exclusive unlike most big US cities I have visited. One of the best explanations of Detroit’s fall was a recent read of mine: Detroit: An American Autopsy by Charlie LeDuff. The original urban planners got it all wrong.

But let’s talk about goats. Last year a Detroit city councilman had a vision, that vision was eventually carried out by a billionaire hedge-funder who brought unlicensed goats to control the overgrown vacant lots of Detroit. Goats as lawnmowers are used in other cities.

I don’t think many people in the US realize just how much abandoned property there is within the city boundaries – the size of Paris.

An op-ed piece in the Detroit News made an argument for it, but the city was not interested.

The hedge funder explains:

Detroit is very much a place that lives by what I call ‘home rule.’ The people are bound by a lot of laws from years ago that restrict them from doing things that can help their community. The people of Brightmoor have decided to step up to ensure the survival of their families and the community. One of the ways they are doing this is with guerrilla farming. Guerrilla farming brings attention to pieces of publicly controlled land within the city that have been abandoned, left vacant or have been left to grow wildly out of control by absent owners. It cleans these areas, brings them into a productive capacity and converts them from a nuisance to an asset within the community.

The housing market won’t recover without the abandoned elements being removed ie unkept lawns, condemned housing and commercial structures. One of the surprising aspects of Detroit’s rise from the ashes has been the non-conventional nature of progress. Goats would definitely fit in.

Arguably my favorite type of goat entered this world from 1964-1967.

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Is Gentrification a Four Letter Word?

March 5, 2014 | 11:00 am | |

dieyuppiescum

Back in mid 1980’s the front door of a new condo conversion at One Tompkins Square Park was spray painted with words “Die Yuppie Scum” and it became the battle cry for protests against gentrification of the East Village. With the eastward push of new residential development in the 1980s from the West and Central Village, residents and local businesses worried about being priced out and losing the intangibles that made the neighborhood unique – and that they would disappear along with it.

I remember appraising apartments to the east of Tompkins Square Park, seeing squatters inhabit derelict buildings, observing a burned out school bus on blocks in front of a newly converted walk-up and the self-described “Anarchists” in the park. All that is gone.

Recent discussions about gentrification have been more visible of late – and so have the discussions of the benefits of gentrification.

Merriam-Webster defines gentrification as:

the process of renewal and rebuilding accompanying the influx of middle-class or affluent people into deteriorating areas that often displaces poorer residents

Philadelphia is one of the first cities to tackle the issue in an attempt to keep the long time residents there and in doing so, helping to minimize the loss of the character of the neighborhood. It is fascinating and encouraging to see city governments be proactive on the issue since it costs money in the short term.

The initiatives, planned or underway in Boston, Philadelphia, Washington, Pittsburgh and other cities, are centered on reducing or freezing property taxes for such homeowners in an effort to promote neighborhood stability, preserve character and provide a dividend of sorts to those who have stayed through years of high crime, population loss and declining property values, officials say.

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