Inward momentum: Residential growth in American center cities

EPA Residential construction cover

You’ve probably seen some of the anecdotal evidence in newspaper stories or other outlets recently about how many center cities have experienced a resurgence of residential growth within their borders over the last 10 to 20 years.

Many of us had wondered if there had been any systematic examination of building permit trends to document the anecdotal evidence we’ve all seen and heard about “inward momentum” toward the core in many metro regions. But it didn’t appear that anyone had measured the data to see if the facts bear out with the anecdotal evidence.

John Thomas at EPA’s smart growth division picked up the challenge, and EPA just released his results in “Residential Construction Trends in America’s Metropolitan Regions

Across the country, many urban neighborhoods are experiencing dramatic transformations. Parking lots, underused commercial properties, and former industrial sites are being replaced by condos, apartments, and townhouses. In spite of the many impressive projects, a central question remains: Do such examples add up to a fundamental shift in the geography of residential construction?

To answer this question, EPA examined residential building permits in the 50 largest metropolitan regions. The main goal was to clarify: 1) if there has been a shift toward redevelopment; and 2) in which regions the shift has been most significant.

The trends indicate that the distribution of residential construction has significantly changed over time in many regions. In more than half of the largest metropolitan areas, urban core communities have dramatically increased their share of new residential building permits.

  • The central city has more than doubled its share in 15 regions.
  • The increase has been particularly dramatic over the past 5 years.
  • Data from 2007 show the trend continuing in the wake of the real estate market downturn.

While most growth in these metropolitan regions was still taking place in suburban or exurban areas, the center cities were increasing their share of new residential construction significantly. Look at this chart from page 9 showing the growth in central city share of new building permits in five major metropolitan areas, where you can see that they all increased their share of new growth.

EPA Residential construction chart

Even in the areas where new center city growth fell during the real estate downturn in this decade — like Miami, Washington, D.C., and Philadelphia — “they fell less dramatically than new construction in suburban and exurban jurisdictions.”

It’s important to recognize that this growth isn’t being generated by smoke and mirrors; this is the result of the market responding to what people want as American households get older, have fewer children, grow tired of long commutes and living far from their work, and in generally look for housing in places where they can get around easily and experience a high quality of life.

The Urban Land Institute and other real estate experts have been giving this advice to any developers who will listen. From p. 5 of the report:

This acceleration of residential construction in urban neighborhoods reflects a fundamental shift in the real estate market.  Lower crime rates in central cities and changing demographics are often cited as forces driving this change.  The increased demand for homes in walkable communities close to high-paying jobs has also been documented by a number of studies (Leinberger 2007, Nelson 2007, ULI 2006).  For example, the 2007 edition of the annual Emerging Trends in Real Estate report singles out infill and mixed-use development as “best bets”:

“Energy costs add fuel to the fire—people want greater convenience in their time-constrained lives.  Far-flung greenfield homes may cost less, but filling the gas tank burns holes in wallets. Both empty nesters and their young adult offspring gravitate to live in more exciting and sophisticated 24-hour places—whether urban or suburban—with pedestrian-accessible retail, restaurants, parks, supermarkets, and offices.  Transit-oriented development at subway or light-rail stations almost cannot miss.”  (ULI 2006, p. 14)

Read the full report from the EPA’s Smart Growth Office.