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Building the Next Boom--and Getting it Right This Time

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Last week I wrote that, for the residential construction market, 2015 is going to be a lot different from 2005. My point was that, to whatever degree the housing sector recovers, the way we build is changing. The segments of the market that have weathered the downturn best--green building and urban infill--give the strongest clues about the direction the industry will take as it recovers. With the huge overhang of existing houses on the market--and resulting fire sale prices--no one is going to buy a new house that isn't a lot better than what they can find already standing. A story in the June 2010 issue of The Atlantic argues that location, transit, and community infrastructure are the keys to the kind of housing worth buying now.

Over the past decade, most house building occurred on the suburban fringe, in large part because that’s where houses could be built most easily and quickly. But now that the bubble has popped, we can clearly see that underlying demand in these areas is extremely weak, and oversupply is massive.

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Nationwide, houses on the exurban fringes are now generally priced below the cost of the materials that went into building them. That’s usually the first step in the creation of a slum. Owners have no financial incentive to invest in their houses if they will not get that investment back upon resale. Developers have no financial incentive to build in those areas either.

Urban-style housing in walkable neighborhoods—including those in the inner suburbs—is what’s in demand today. And for a variety of reasons, that demand will intensify in the coming years. Only by serving it can the country kick-start growth in an enormous and essential part of the economy

Developer- and community-funded walkable infrastructure and transit links will not only make new housing worth buying again, but may also be essential to reviving the economy as a whole.

... investment in rail, bike, and walking infrastructure, laying the groundwork for developing the kind of housing that is now in demand, is essential if we want to restore the economy to health. In the mid-to-late 20th century, the growth of the suburbs propelled America’s economy. Growth of walkable neighborhoods in cities and suburbs can play a similar role in the decades to come, sparking growth in the broader economy—but only if we start preparing today.

 I couldn't agree more. --B.D.S.

 

 

 
 

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