Valuing Walkable Urbanism – The economics of great places:Back to News

As developers and consultants dedicated to the creation of walkable, mixed use, mixed income places, we are often confronted by the argument that such development types cost more and are not what is wanted by the marketplace.On the contrary, studies show that creating a great place also creates value. We would argue that as a post recession strategy, resources dedicated to the creation of great places will represent the best long term investment.

Our experience working for a major international home building and development company, was the primary force which encouraged us to the study and understanding of historic development patterns. In our market area (the San Francisco Bay Area) the established great places commanded a profound premium in real estate values when compared to new suburban developments.

So why would someone prefer to live in a 100 year old house with all its issues in one town and pay much more money per square foot than for a comparable brand new home in a new home suburban sub division nearby. Adjusting for commute location and schools, the answer is because people like living in a small town community which is walkable, has a mixture of housing and building types and has its own unique character.

As a home builders that conclusion drew us to develop new communities which stitched into the fabric of existing great towns and ultimately led to the creation of Urban Community Partners in order to affect the design and development of great new places.

When faced with the decision as to how a new project should be designed, from an economic perspective, long term value creation including investment in the public realm, should be very significant and should factor into all design philosophy and decision making. In general terms, most people who visit a TND community find it very attractive as a place to live and visit, they intuitively begin to understand what is different. The financial implications of TND projects are, however, much less well understood.

Several studies have been undertaken in the past to try and quantify the financial performance of a traditional neighborhood designed project (TND) verses a conventionally designed suburban development project (CSD).The most significant of these studies was called “Valuing the New Urbanism” by Eppli and Tu and was published by the Urban Land Institute originally in 2000. This study compared the value history of several new urbanist TND projects across the nation to the performance of comparable conventional developments in the same market areas. Results of the study established that on average, over the five projects studied, there was an 11% price premium for the TND projects over the CSD’s and in one, Harbortown in Memphis Tennessee, the premium was as much as 25%!

Even more dramatic results were documented in a follow on study conducted by the planning firm of Duany Plater-Zyberk in 2008. Updating the results of the ULI study and adding new projects for review, they were able to show that in St Charles, MO, within one product segment, comparable homes in New Town St Charles (a TND project) sold for a premium of up to 44.5% more than a similar sized home in an adjacent conventional (CSD) development called Charlestown.

Not all projects in all locations have similarly dramatic results, however it is fair to say that TND’s do command a price premium over their suburban competitors. Changing the mindset of a generation of homebuilders drilled the concepts of mass production to change to TND designs will not be easy and the argument will rage for some time to come particularly in post recessionary times.

For those interested in a better way however, there is an understanding that value has several components and that a cheap house many not be the best long term value for a home buyer when they factor in quality of life and resale price into the equation. For those committed to creation of great places for future generations then, there is the comfort in the knowledge that it is possible to do well by doing good.

To obtain a copy of the ULI report,the DPZ study and additional material click here