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RESET Review Part Deux: Location, Location, Location …

RESET Webinar Q & A

By: Alison Berry

Date: May, 01 2013

Have you read our RESET report? There’s a lot of information in there. We looked at the influence of changing economic, demographic, and consumer preference trends on the housing market in the Rocky Mountain West. In particular, we wanted to see if national trends pointing towards a growing consumer appetite for walkable developments are occurring in our Rocky Mountain communities. The findings suggest that housing market preferences are diversifying in our region, with higher priorities placed on convenience, walkability, and neighborhood character. Don’t have time to read the full report? Check out this summary, or our one-hour webinar with the researchers. Still have questions? You’re not the only one. Here are some questions that came up during our webinar: In some communities--like Eagle and Carbondale, Colorado--it seems that compact, walkable developments are capturing a lot of the local real estate market, but you did not find premiums for smart growth in those communities. Don’t these results contradict each other? How do you explain this discrepancy? Clark Anderson: That’s right, we did find in some communities where there is a huge market capture -- compact, walkable developments are taking up 40 to 50 percent of the market--and at the same time, those are the locations where premiums for this development type are the lowest. In fact, there is no premium in Carbondale. There are a couple different things going on. One, there is the resort market influence in these locations that is just driving the baseline value up, and that makes it harder for compact, walkable products to compete. But it also comes down, at least in part, to a supply and demand issue. Because Eagle and Carbondale do have a relatively high supply of compact, walkable development, you might see the premium come down a little bit, because the demand is more effectively satisfied. What can local governments do in response to the findings in the RESET report? Clark Anderson: We have a whole section in the report that addresses that. I would sum it up as trying to set the table for desired development. Key recommendations include:

  • Incorporating policies that not only allow, but encourage expanded housing options.
  • Elevating opportunities for infill
  • Making sound infrastructure investments in the places where you do want to catalyze development.
  • Plan for pedestrian preferences
  • Don’t cripple good projects. Make it easy for good development to pencil out—link infrastructure investments to good developments to make those developments more feasible.

Most of this research occurred in small towns and rural areas, what do you expect to see in larger cities? Andy Knudtsen: We looked at six communities in the Rocky Mountain West, and some of those communities—like Buena Vista, Colorado and Driggs and Victor, Idaho—are very small. Others, like Bozeman, Montana were mid-sized communities, and Boise, Idaho is actually a larger city. We are interested in what is the scalability of our findings to markets like Salt Lake City, Utah; Denver, Colorado, or larger communities. Our market research on other projects suggests that the results in the RESET report are resonating with all different kinds of communities. The high demand for a greater sense of connectivity, walkability, and integration into communities is consistent throughout the region, and compact walkable development is meeting that demand. We’re seeing incredible market capture in large urban markets from compact walkable developments as well. Did you address rental markets in this study, or what would you expect from rental markets in your region? Andy Knudtsen: Due to the structure of our survey, our data come mostly from ownership households, with a handful of renters sprinkled throughout. I think that the question of renters is important, and that would be an excellent follow-up to this study. We need to consider the questions of how do renters get incorporated, and how do developments--especially green field developments--do a better job of incorporating rental options? Renters are likely to have similar preferences for connectivity and walkability, but I don’t think, to date, that the new developments that we see do as good a job as they should incorporating the rentals. Clark Anderson: We did learn in our interviews for the RESET project that there seems to be a concern that in many of these communities, the rental product that is there doesn’t tend to be very high quality. Other research tells us that there are plenty of renters that are higher income renters, and so there is a lot of pressure on rental stock. Because we have a range of income levels all competing for limited rental stock, it drives up rental prices. The take-home message is that there is a good opportunity to provide some higher quality rental stock, as well as other rentals as well. Rentals are a growing part of the market right now. How do we utilize HUD grants to drive development into the cities in our region? Andy Knudtsen: HUD has allocated many different sustainability grants to cities in recent years, and there is a huge opportunity for cities to determine what it means to be sustainable, and how to direct future growth to be sustainable. Compact walkable developments meet so many of the criteria that HUD uses. But, we are trying to create a vision that, in some cases, is pretty different than what has been done before, so there is often resistance at the onset. Clark Anderson: One of the things people can do is to use those funds to set the table for desired development. Make investments that help to tee up your community for the development that people want. Can you address financing potential for compact walkable development—particularly for single family homes vs. multi-family homes? Andy Knudtsen: Lending requirements are definitely easier for single family developments—not only for developers, but also for buyers. The single-family developments are the “low-hanging fruit” with respect to everything that comes to financing. Financing policies for compact, walkable single-family developments are fairly transferable to conventional development. With respect to multi-family developments, we are seeing regulators and lenders become a little more flexible. Very recently, the secondary markets have become less stringent on attached product. It seems likely that the future is going to be better than the recent past as far as financing is concerned. Can you address infill development vs. new development as it relates to this presentation? Andy Knudtsen: We were very interested in trying to differentiate between compact walkable developments in the core vs. on the periphery. Specifically, we found that historic districts do have higher premiums. Compact walkable developments generally take a long time to build-out, and they get better as they build out. One of the biggest challenges is to sell the initial phases when the streets seem to tight and you don’t have the full network and grid and feel with a neighborhood. In core areas, you’ve already got that, because they’ve been building out for the last century. So in some ways it’s easier to sell, and the data show that there is a higher premium seen in these core areas. For new developments, the communities that are most successful have integrated retail and commercial areas, and you have walkable destinations that amplify the community relationship and enable people to cross paths. These little commercial nodes don’t have to be large, but they do have to be vibrant. This makes a big difference in the level of community enthusiasm and market potential. What are your questions about the RESET report? Leave a comment or contact us and we’ll give you answers!

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By: Alison Berry

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