The US lending crisis has cut homebuilding nearly everywhere, but walkable, transit-oriented developments are suffering least.

Housing construction across the US has dropped to its lowest volume since 1991, and many new urbanist developments are seeing their sales fall off. The latest Standard & Poors/Case Shiller Home Price Indices, released at the end of September, show that prices of existing single-family houses in 20 large metropolitan areas sank by a stunning 19.5 percent in the past two years.

Traditional neighborhood developments (TNDs) and other new urban projects have been wounded like the rest of the real estate industry, but generally not as severely. The downturn is more acute in the automobile-dependent fringes of metropolitan areas than in walkable, transit-connected locations.

One notable new urbanist undertaking that has run into financial difficulty is the 214-acre Vickery development in Forsyth County, Georgia, about 35 miles north of downtown Atlanta. Designed by Duany Plater-Zyberk & Co. and modified by Tunnell-Spangler-Walsh & Associates, the mixed-use Vickery project is well regarded by new urbanists in the Southeast, yet it has skated on the edge of foreclosure.

Vickery’s developer, Hedgewood Properties, was on the verge of surrendering many of the project’s residential and commercial properties to Wachovia Bank in early September — until the bank and Hedgewood agreed to continue searching for some other resolution. At month’s end, Wachovia, itself burdened by billions of dollars in bad loans, was in the process of being swallowed up by a larger institution, and the outcome for Hedgewood remained unclear. “We continue to work with our lender and prospective investors to restructure the project financing so Vickery can continue when the market begins to recover,” says Hedgewood co-owner Pam Sessions.

In May, Hedgewood lost to foreclosure the 26,000 sq. ft. ground floor of a four-story retail and residential building in Woodstock Downtown, about 30 miles north of downtown Atlanta. A CNU Award-winning infill development designed by Tunnell-Spangler-Walsh and Lew Oliver, Woodstock Downtown includes 336 housing units and 110,000 square feet of

Mixed-use buildings in Woodstock Downtown, in Woodstock, Georgia. Photo courtesy Tunnell Spangler Walsh.

commercial space. Delegations from other municipalities have often visited the project, hoping to start similar mixed-use developments back home.

The crash of real estate development in Woodstock has probably killed the prospect of establishing a tax allocation district (similar to tax-increment financing) that would have paid for a much-needed grid street network in the center of Woodstock, said Kyle Bennett of the Woodstock Visitors Center. 

Some new urban projects, like East Garrison in Monterey County, California, have been postponed because of the slumping real estate market. In Connecticut, where Governor M. Jodi Rell has envisioned a commuter rail line from New Haven to Hartford to Springfield, Massachusetts, with mixed-use centers around its stations, Rabina Properties in late August put a big transit-oriented development (TOD) in North Haven on hold for “the foreseeable future.”

“No one can start a project of this scale in today’s credit market,” developer Mickey Rabina told the New Haven Register, referring to the $500 million, 170-acre TOD his company had hoped to build north of New Haven. “Our assessment is that it will be quite a while before things turn around.” Cooper, Robertson & Partners had worked on plans for the North Haven development, which was to have 780 living units, office space, a hotel, entertainment, and more than 1 million sq. ft. of retail.

Urban advantage
    In the Chicago region, the worst foreclosure problems today are in the “collar counties,” the five counties surrounding Cook County and Chicago, says Scott Bernstein, president of the Center for Neighborhood Technology. A combination of high gasoline prices and falling house values has sorely hurt automobile-dependent outlying areas containing many first-time homebuyers with modest incomes, he says.
    By contrast, closer-in places are coping better. “Generally, prices are going up or holding their own along the train lines,” Bernstein says. Places with “good street networks, good travel choices, and adequate amenities nearby” are “much less exposed” to real estate troubles, in his view. One exception is condominiums in the city; many of those, even near mass transit, are performing badly because of the overbuilding of condos, he notes.
Despite the federal bail-out, he expects difficulties to persist in auto-dependent locations, and he thinks developers increasingly will gravitate to locations with transit service and pedestrian-friendly street networks. British Petroleum is moving 1,200 executives back downtown [from the western suburb of Naperville] to be close to the train stations,” Bernstein notes. “Employers are worried about the bad effect [auto] travel is having on employee access and turnover.”
    Chris Leinberger of Arcadia Land Company says his company expects to go forward with a 42-unit condo project adjacent to the Haverford train station in suburban Philadelphia and is developing a dense, mixed-use extension of the 18th-century village of Sadsburyville in Chester County, Pennsylvania. Both are examples of the bright future of new urbanist development, he suggests, though he notes that financing — which has ground almost to a halt in the national credit crisis — still must be lined up in Haverford.
    Art Lomenick, managing director of Trammell Crow Company’s High Street Residential subsidiary, says the downturn may be good in some ways. During the boom years, financiers and developers concentrated on what was simple and customary — single-use development, he says. City staffs were often too busy to take the time to orchestrate complex combinations of housing, retail, offices, and other uses. Now, says Lomenick, “municipalities have to think strategically about their long-term health.” They may be more willing to provide the public support that multi-purpose developments often need.
    Like Leinberger, Lomenick is concentrating on sites served by transit. “Seventy-five percent of our mixed-use projects are on rail,” he notes. Bernstein says new urbanists should look at the many communities that have rail freight yards that could be relocated; those sites could become tomorrow’s mixed-use communities. “There’s somewhere between 40 and 90 of these kinds of opportunities in the Chicago area,” Bernstein estimates.
    “I think we’re just starting to understand how high energy costs may reshape the landscape,” Bernstein says. “New urbanist developments in traditional towns do provide an economic advantage.”
    “If you don’t market that advantage,” he cautions, “you’re still stuck selling lifestyle, and I don’t think that’s good enough in this market. I think people are going to be a lot more sensitive to cost-of-living reduction.”

This article is available in the October/November 2008 issue of New Urban News, along with images and many more articles not available online. Subscribe or order the individual issue.