The ‘burbs have gone bust
I thought I’d share a recent report from Joe Cortright (CEOs for Cities) titled Driven to the Brink: How the Gas Price Spike Popped the Housing Bubble and Devalued the Suburbs. Urban sprawl and transportation issues are one of my favorite topics, so this report was right up my alley.
You can find the full report here, but for those of you too lazy to click I’ll highlight some of the interesting bits.
Basically Cortright’s analysis find that the recent collapse of the U.S. housing market has partially obscured an even “tectonic shift in housing demand.” The report finds that housing price declines “are generally far more sever in far-flung suburbs and in metropolitan areas with weak close-in neighborhoods” and:
“Housing in cities and neighborhoods that require lengthy commutes and provide few transportation alternatives to the private vehicle are falling in value more precipitously than in more central, compact and accessible places.”
Basically, all you chumps who bought into the idea of living in the 5,000 sq ft house out in the suburbs are majorly screwed and cities that have good transit are better able to withstand the housing collapse.
There are many juicy tidbits in the report, but what I found fascinating was the section looking at core vitality that starts on page 8 of the report, specifically Cleveland (CLE) and Detroit (DET). Cleveland and Detroit share many similarities – depressed economies, urban blight, white flight.
But, if you take a look at the figures from the report reproduced below (click to enlarge), Cleveland has faired better than Detroit both in terms of the percentage housing prices have dropped and the rate of foreclosures.
[Graphs taken from Cortright, Joe (2008) Driven to the Brink, pg. 9]
The first graph shows Cleveland housing prices faring far better than Detroit’s (almost 10% less) and the second that foreclosure rates in Detroit that are nearly 2% higher than Cleveland.
Now, I didn’t do any real analysis to come to this conclusion, but the first thing that comes to mind which can account for these differences is this: Detroit has virtually no mass transit. And I mean none (unless you live somewhere along the 2.9 mile loop the People Mover makes downtown). Yes, Detroit has a bus system, but have you ever tried to take one? Not exactly an efficient mode of transportation.
Cleveland, on the other hand, at least has a functioning tranist authority which covers 458 sq miles and has an actual, useful LRT system.
So, can the variations between Detroit and Cleveland’s respective decline as a result of the housing bust be attributed solely to mass transit? Probably not. But I am comfortable at least working with the theory that it at least is playing a major role in allowing Cleveland to weather the storm (even marginally) better than Detroit has.
As Cotright proposes, “Now that the era of cheap gas is over, demand for development on the fringe is down, and consumer interest and market potential lie in developing and redeveloping neighborhoods closer to the urban core.”
So, for Detroit and the Detroit metro area, which lacks any significant mass transit, it might be too late to crawl out of the housing hole. But for cities such as Cleveland, the bust may present a terrific opportunity to reassess which growth patterns are sustainable – the ‘burbs or the core.