Published on December 20th, 2012 | by Scott Cooney2
The effect of walkability and bikeability on real estate value
The housing boom and subsequent bust that caused the financial meltdown of 2008 in the U.S. had many origins. I’d argue that a main cause that has not received much attention was America’s commitment to accommodating the car. Urban planning changed radically when, after World War II, cars became the norm in America. No longer were communities planned for people, they were planned for cars.
The results for homeowners have been notable. In 2008, well before the real estate crisis, our sister site Ecolocalizer ran a story about James Howard Kuntzler’s book, which was urging us to imagine a “future without cars”. In it, the author argues that car-based cities that were developed much more recently in America’s history were likely going to face a collapse property value due to decreasing demand and ample supply. What he predicted has held out. Housing prices in Houston, Las Vegas, and Orlando, the three cities specifically called out as examples of unlivable places, have been hit harder than most.
New urbanism, as some call it, holds the promise of a better today for people seeking a better life. Connections with neighbors, the ability to walk or bike to work, proximity to restaurants, clubs, events, and shopping, and a sense of community that simply can’t be found in suburbia all constitute elements of New Urbanism. (check out GreenBuildingElements.com’s description of New Urbanism for more).
For real estate investors, the bubble in 2008 holds another lesson: New Urbanism holds the promise of a better tomorrow. Think about the demographics. Young, educated Americans are increasingly choosing NOT to own a car. Car ownership in the U.S. is declining, while public transit ridership is increasing.
To learn about the concept in a very fun, user-friendly way, Walkscore.com is a great resource. Check it out to see how walkable your neighborhood is. Using a scale of 1 to 100, Walkscore ranks places from car-dependent to “walker’s paradise”. Walkscore has now been around long enough, according to Jeff Speck, author of Walkable City: How Downtown can save America, One Step at a Time, that economists have been able to measure the financial impact of walkscores on housing prices in the multiple listing service (MLS). The effect is clear as day. Every one point in walkability raises real estate value between $500 and $3,000, depending on where you are.
Speck goes further, arguing that demographic trends are only going to continue to create value for real estate investors in walkable neighborhoods:
“…the generation raised on Friends is not the only major cohort looking for new places to live. There’s a larger one: the millennials’ parents, the front-end boomers. They are citizens that every city wants–significant personal savings, no schoolkids.“
Christopher Leinberger, economist at the Brookings Institute and author of The Option of Urbanism: Investing in a New American Dream, believes that empty nesters want walkability and to leave behind the large empty nest in exchange for a community where they can easily meet their neighbors, meet for coffee, and go for a walk to the store. Think about the empty nesters you know–what life do you think they want? If they’re your loved ones, what life do you want for them? Now think about the economics of all that younger and older money investing in walkable real estate.
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