The rising foreclosure rate nationwide is usually, and reasonably, blamed on risky lending practices — so-called sub-prime mortgages — and a housing bubble that has deflated. The consensus is that it will have some, probably not major, effect on the economy. Lending practices will be reformed, mortgages to risky borrowers will be curtailed, and the nation will go on its merry way sprawling out into the hinterlands of metropolitan areas. Economists and Wall Street analysts have not grasped that the problem runs deeper and is related to sprawl itself. The financial problems in what are euphemistically called the “exurbs” — in reality hypersprawling suburbs — are just beginning and likely will take decades to resolve, not just a fiscal quarter or two.
Foreclosures appear to be highest where suburban sprawl is rampant — places like Thurston County, Washington; Adams and Weld counties in Colorado; Monroe County, Michigan; and Orange County, California. Media reports that have put a human face on the recent rash of foreclosures almost always show an unhappy looking family at the end of their street-facing driveway in some anonymous large-lot subdivision. That’s not to say that there isn’t trouble in more urban neighborhoods, but housing values have fallen further on the metropolitan fringe.
As Arthur C. Nelson of the Metropolitan Institute at Virginia Tech points out, large- lot houses are dangerously oversupplied and will be for the next quarter century at least (see the page 1 story “Market trends favor NU”). Demographics have drastically changed in the six decades since suburban sprawl became the default development pattern. In the middle of last century, far more American families had children and single-use subdivisions were widely — although not necessarily wisely — viewed as a better place to raise children than historic cities and towns. As families have changed, so have the views of the American public. As the consulting firm GfK Roper points out, walkable, mixed-use neighborhoods are back in demand.
ZONING LAWS BEHIND THE CURVE
Unfortunately, the nation’s regulatory framework has not kept pace with these changes. As Jonathan Levine of the University of Michigan has shown, zoning laws for decades have systematically created a bias in the market toward large-lot zoning. Reform is likely to take decades as a surplus in these houses continues to grow. Once someone builds a house, it tends to stay built for a long time. Unlike suburban retail stores, which are redeveloped every 15 years or so, housing lasts 150 years.
There’s also the issue of rising gasoline prices. Sprawl, especially the areas built in the last two decades, is completely automobile-dependent. As gas prices rise, life becomes progressively more difficult for cash-strapped families in the far-flung suburbs.
Gas prices are likely to trend higher as world supplies tighten and demand grows in places like India and China. A recession could temporarily reverse that rise, but a March report by the US General Accounting Office explains that not only is the idea of a worldwide oil production peak real, but it could happen anytime in the next few decades without warning. The international petroleum industry is barely able to keep pace with current demand as major oil fields in places like Mexico, the North Sea, and Kuwait are in steady decline.
So who’s going to want millions of houses on the suburban fringe after the Baby Boomers retire and oil prices rise? Americans have become accustomed to the benefits of steadily rising housing prices in the suburbs helping to finance everything from retirement to college educations for the kids, but that era is coming to a close. Those who hold big mortgages on large-lot houses purchased in recent years in automobile-dependent suburban fringe areas are especially vulnerable.
This article is available in the April/May 2007 issue of New Urban News, along with many more articles not available online. Subscribe or order the individual issue. |