Transcript – “Smart Money on Smart Growth”, Evan Richert. Summit 2012, 10/23/12

SMART MONEY ON SMART GROWTH
GROWSMART MAINE SUMMIT, OCTOBER 23, 2012
EVAN RICHERT
I want you to meet some old friends.  We first met them 15 years ago in a survey of recent homebuyers.  They are the [SLIDE 2] Small Town Civics, the Young Turks, and the Introspectives.  For different reasons, each had an affinity for traditional neighborhoods. Many were looking for community, others for affordability or the convenience of a city, and all wanted to be close to services and to find their own balance between private and social lives.
•    After we first met them, we realized the impact that large-lot, single-purpose, suburban zoning was having on a large part of the home buying public.  [SLIDE 3] These friends were fully 51% of the home buying public, and nearly 4 in 10 of them had just bought homes that did not match their lifestyle preferences.  Why?  Because the myths around what home buyers want and what is good for the public’s welfare had led developers to build one type of product and towns to zone for one kind of lifestyle.  Our friends were being denied the opportunity to live in the kind of place they wanted to be.  Some could find existing homes in older neighborhoods.  But if they wanted a new home, their only choice was to find a cookie cutter lot on a cul de sac from which they had to drive to everything and their kids would take the school bus.

•    And it dawned on us then that our message of the impacts of sprawl – its damage to the countryside, its public costs, its weakening of downtowns – was the wrong one.  In fact, that message had us on the defensive, opening us up to accusations of social engineering with our ideas of more compact communities.  Instead, here was a large part of the market that wanted to live in traditional neighborhoods not because it was better for society, but because it appealed to their lifestyles.  And we weren’t the social engineers preventing them; the social engineers were those decision-makers who were insisting on large lot zoning as the backbone of their land use systems.

•    And what we had so persistently heard from conventional developers – that they were only building what the market wanted – was not entirely accurate.  A bunch of their buyers were buying products that would not have been their first choice.

•    [SLIDE 4] Thus was born the message around the Great American Neighborhood – not a message to consumers that a traditional neighborhood is good for you; rather, a message to towns that these consumers deserve a choice and to developers that there is a market to be tapped.
I wanted you to meet our old friends because the market has continued to evolve in the direction we spotted in that 1998 survey.  And I believe that the ranks of the Small Town Civics, Young Turks, and Introspectives are growing in the wake of demographic, economic, and technological change.
[SLIDE 5] Since the 2006 release of the first Charting Maine’s Future, which itself tapped into the sentiments of this market, the forces affecting it have been vast:
•    Great recession [SLIDE 6] was driven in large part by collapse of the housing market.  It is a cautionary tale about the risks of oversized mortgages for oversized homes at the urban-rural fringe – a tale that is not lost on the up and coming generation of home buyers.
•    Gasoline prices [SLIDE 7] have reached a new normal and are having a distinct effect on driving.  In 2006, when Charting Maine’s Future was released, prices already were rising and vehicle miles traveled were leveling off.  Then came the housing bust and the recession, a temporary drop in gas prices, but another quick rise into the upper $3 range, and a steady drop in vehicle miles driven.  This changes the equation for the cost of living at the fringe.  Most importantly, it is changing the “drive until you qualify” equation – that is, the trade-off between housing and travel costs.  Over the long run, this may have a bigger effect on the outward spread of development than regulation. The breakeven line is shifting inward, as travel costs erode the benefit of lower land costs.  
o    [SLIDE 8] In the Portland area, for commuters working in the city, I estimate that the point of equilibrium between housing and travel costs has shifted inward nearly 5 miles, after taking into account differences in household incomes.
o    [SLIDE 9] In the Bangor area, where housing costs in the city are more competitive with the suburbs, the shift is probably a little more, a little over 5 miles.  The property tax benefits in outlying towns do not outweigh the other housing and rising commuting costs, which, on average, make them more expensive than living in Bangor.
•    Connectivity A third seismic change since 2006 has been the revolution in connectivity.  The smartphone and BlackBerry were already around, but then came the iPhone in 2007 and the iPad in 2010.  And the explosion in social networking: [SLIDE 10] Facebook only became publicly available in 2006, and Twitter was established the same year.  And in Maine the potential to connect moved to a new plateau this year with the completion of the 3-Ring Binder, which brings high speed connectivity to many of our service centers throughout the state; and, using this network, GWI, in cooperation with the University of Maine, Orono, and Old Town launched Gigabit Main Street, which will allow users to both import and export information and ideas to the world at a gigabyte per second.
4.  And finally, demographic change.  Since 2006, the first Baby Boomer turned 65. [SLIDE 11] But perhaps more intriguing to my story today is that since 2006 the first wave of the generation that marketers call GenY or the Millenials entered into its household formation years.  This is the generation that I think is and over the next 20 years will be filling the ranks of the Small Town Civics, Young Turks, and Introspectives.
•    GenYers were born between 1983 and 2001, and it is a large generation.  Nationally, some estimates put it as the equal of the Baby Boom generation in size.  In Maine, they make up about 301,000 or 23% of the total.  This compares with 382,000 in the Baby Boom generation, many of whom are parents of GenY.  In 2006, when Charting Maine’s Future was published, the leading edge of this generation was just entering young adulthood.  Now it is surging into its household formation years.
•    Here is what we think we know about them:
o    First, they have grown up – or are still growing up – with computers, cell phones, texting, and instant online answers to questions.  Smart phones probably are more important to them than cars.  Tell a Baby Boomer that he or she could have either a car or a smart phone, and the quick reply almost certainly would be a car.  Give a GenYer the same proposition, and there would be at least a long pause.  Connectivity is the lifeblood of this generation.
o    Second, GenYers have never experienced a long-term, stable economy, with three hard-hitting recessions in their young lives, including the Great Recession that has left many of the older GenYers unemployed, underemployed, or not expecting job stability.  This has delayed many from striking out on their own and caused others to think carefully before jumping into debt for cars and homes.
o    [SLIDE 12] Third, where do GenYers who have reached adulthood live and work? According to a 2011 study by the Urban Land Institute, about half of the first wave of GenY adults who have become home owners live in urban settings: either in or near urban downtowns, in other in-city neighborhoods, or in small cities.   As they age and form families, this may change; a majority may find communities not unlike those in which they were raised.  In fact, slightly more identify themselves as suburbanites than as city people.  But with a big difference: they will provide the market impetus to urbanize suburban centers to meet their demands for convenience, affordability, choices in how they move about, flexibility in how they work, and technology.  The National Association of Homebuilders advises that they care more about dream neighborhoods than they do about dream homes.
o    [STAY ON SLIDE 12] And, as you can see, two-thirds of adult Gen Yers work in urban settings, and in five years 72% expect to be working in these places.  Fewer than a quarter work or expect to work in suburbs.  And of those who expect to work in urban downtowns a large share, 44%, also expect to live downtown.
o    [SLIDE  13] Nationally, there is a sharp downward trend among 18 to 34 year olds—a majority of whom now are GenYers—in the number of vehicle trips they take and the number of vehicle miles they drive.  I don’t know if this holds in a low-density state like Maine, but it is instructive.  Cars will still be the main form of transport for Gen Yers, but for some, cars are a burden rather than a rite of passage and less frequently needed if they are connected in other ways.  [SLIDE 14] And, according to the ULI survey, two-thirds will look for communities where they will be able to walk from home to shopping and social gathering places.
5.  All of these changes in the economy, technology, the costs of commuting, and demographics are changing preferences in the market place.  [SLIDE 15, click through] There is now a nucleus of developers in Maine tapping into the way different market segments want to live and work. For good business reasons, they are committed to infill, downtown, and the Great American Neighborhood development. These developments include, for example:
•    [SLIDE 16] Two traditional neighborhoods in Scarborough, one at Dunstan Corner and [SLIDE 17] one near Oak Hill
•    [SLIDE 18] The state’s first downtown co-work facilities:  Peloton Lab, Think Tank, and the Co-Work Lab
•    [SLIDE 19] The next wave of brownfield clean-ups and mixed-use mill redevelopments
•    [SLIDE 20] The redevelopment of downtown waterfronts as entertainment venues
•    [SLIDE 21] Infill development on small lots, responding quickly, for example, to flexible zoning that the City of South Portland adopted in 2007
[SLIDE 22]  Finally, the language of smart growth is creeping into the everyday language of municipalities and Realtors –Transit-Oriented Development TIF districts, TND zoning district, form-based zoning, and a walkability index.  And make no mistake:  GrowSmart Maine is part of that language and of the branding of this growing market.
6.  And so: The smart money is increasingly on smart growth.  That means we can be assertive rather than defensive about smart growth, running with the market rather than trying to change it, helping towns and cities clear the way for great neighborhoods and business districts rather than asking them to do something that is politically risky.  
It would be easy to overstate the preferences of Gen Y – this isn’t a radical generation, and their goals may not be much different than their parents’.  But the environment in which they find themselves and how they are adapting to and taking advantage of it all favors infill, urbanization of suburban centers, proximity to downtowns, and neighborhoods served by transit.  Other forces are at work, too, including mobile young retirees out of the Baby Boom looking for amenity- and culturally rich places to call their next home.  
The opportunity for a system of walkable, vital centers, small and large — from hamlets to villages to traditional neighborhoods to large downtowns – is upon us.  And that’s the way our old friends, the Small Town Civics, the Young Turks, and the Introspectives, wanted it.