Robert (Bob) H. Voelker

Transit efficient real estate

Business Development Coordinator, Munsch Hardt Kopf & Harr's real estate group, Mar 05, 10.

A recent Harvard Business Review article states that since the founding of the country, “the U.S. economy has been about ideas, experimentation, and exploration: businesspeople imagining new concepts and launching new ventures; entrepreneurs engineering new products or methods based on new ideas; marketers conceiving of niches for new products or new niches for old ones; managers and consumers assessing novel products; and financiers with strategic vision judging which innovations to back.“1

As a former real estate developer and now mixed-use/mixed-income urban real estate development attorney, this article raised a question — as we come out of the worst recession since the Great Depression, what are our new ideas and experimentation for real estate development in the future? This is the first in a series of articles exploring the path forward, focusing first on the housing downturn, the combined effect of housing + transportation costs and a new orientation for real estate development — transit efficient real estate.

Instead of developing expensive low-density infrastructure to support development and continuing to promote a “drive until you qualify” housing market, in this time of economic retrenchment we should reexamine the connectedness of development and infrastructure and how a holistic approach can lower the overall cost and impact on society and individual households of where we live and how we work and play.

Housing + transportation together are the two largest household expenses, totaling 57 percent of the average American household budget. Housing and transportation are closely linked — as families move further from job centers to find affordable housing, they spend more on transportation costs. Low-income families are most affected by this phenomenon, as the poorest American families pay 42 percent of their income for the purchase, operation and maintenance of automobiles and in excess of 35 percent of their income for housing.

In the midst of the drastic decline in single family housing prices over the last three years, housing in distant suburbs has been hardest hit. The supply and demand curve catches up quickly to these areas, as the percent of people who can afford the combined housing + transportation costs of living in distant suburbs declines rapidly in a recessionary, wage and job constrained economy with rising gas prices. And gas prices will continue to escalate as the United States, European and Asian economies recover. What do three to four dollars per gallon of gas and slow wage recovery portend for the thousands of newly built houses and the retail, restaurant and other real estate “support assets” in the exurbs in every major city?

In contrast, metropolitan areas with strong urban cores have experienced the lowest rate of decline in housing values. Combine the strength of real estate in the urban core with recent studies showing that national demand for transit oriented development (TOD) will more than double by 2030…

Full story: Transit Efficiency: New Orientation for Real Estate Development
Source: Munsch Hardt Kopf & Harr, P.C., March 5, 2010

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