Christopher Leinberger: The New American Dream Will Be ‘Walkable Urban,' Defined by ‘Choice'

You have written extensively that the built environment-real estate and the infrastructure that supports it-is in the midst of a half-century structural change and that a new American Dream is being crafted. Why is that a critical idea?

The demographic changes that are taking place right now, particularly with the Millennial Generation, have resulted in a different image of how they want to live. They were raised in the suburbs. They became bored with the suburbs. Between my wife and I, we have five kids and none of them have the suburbs on their radar screens. That is true of many of the Millennial Generation.

The rising generation and the retiring baby boomers are the target market for walkable urban places. The vast majority of new households created over the next 20 years-the numbers are in the 80 percent range-will be singles and couples. What it ultimately comes down to is that it's not as if everybody is going to rush and sell their single-family home. It's a basic supply and demand question. We have over-produced drivable suburban and we have under-produced walkable urban because the subsidies tilt the scales very heavily towards drivable suburban.

The last issue of The Planning Report carried an interview with Joel Kotkin about why the middle class is leaving urban centers. How do you reconcile the new American Dream you are describing with the trend of people leaving cities like Chicago, New York, Philadelphia, and Baltimore?

For 20 years I ran the country's largest real estate consulting firm, which did hundreds of market surveys per year throughout the country. When you ask the middle class what they want, a large percentage of them would want walkable urban, if they could afford it. The reason they can't afford it is because there is not enough of it. It is a supply side problem.

There are two basic cost issues with a walkable urban development. Number one is that high density costs more to build on a price-per-square-foot basis. That's because it is a better product. If we build something high-density it has bigger footings; it has more load-bearing capacity; it just costs more to build. And because you put that product right up to the sidewalk where people are walking past it, you can't use spray on facades like you can in a drivable suburban place. That's probably 30 to 40 percent of the cost issue.

The other reason is because of the dirt underneath; but dirt does nothing. It just sits there. It is purely a supply and demand function. We don't have enough zoned walkable urban dirt that has the critical mass of walkable urban product on it. To me, one of the main issues of why the middle class have not been able to afford it is because we have not built enough of it that will drive the price of that type of land down.

The definition of the new American Dream is to have a choice-to have a choice during different parts of your life to live in a drivable suburban location, maybe when you're raising your kids, or living in a walkable urban location when you're younger, when you're older, or maybe also when you're raising your kids. We have been building one kind of product for ages. The market is saying, "We want choice."

You've written about the socioeconomic, health, and environmental consequences resulting from how America has been developing its built environment. Elaborate on those ideas so our readers can understand the cost benefit analysis.

When we started exclusively building drivable sub-urban development, we didn't know what the unexpected consequences were. I argue that building drivable suburban development exclusively has been the largest social engineering experiment in the country's history. As we put in these laws and subsidies, we were driving people to live one certain way. That's what domestic policy is. Domestic policy is meant to be a social engineering project.

What we didn't know about drivable suburban when we went into this social engineering experiment was that as we build more drivable suburban we get less quality of life. Los Angeles has suffered from that-the traffic congestion, air pollution, and asthma that this kind of lifestyle generates. We have done enough studies to now know that 40-60 percent of obesity and asthma are caused by land use-by the fact that we take nine, ten, eleven trips a day out of our household by car and we don't walk.

We also didn't know that the next strip mall wouldn't be welcomed because it decreased the open space, increased traffic congestion, and polluted the air. Those are things that people go to the suburbs to get away from.

We in real estate have forgotten how to build walkable urban. We got really good at building drivable suburban and now we have to re-tool our skill set to build this much more complex thing.

If it's true that developers are re-tooling their industry to serve this new paradigm, where do you see evidence of change?

Fifteen years ago when you would walk into a bank or an equity investor and start talking about mixed use development, you would get thrown out very quickly. From a financial point of view there was just no way they could comprehend it. I did lots and lots of presentations to mortgage bankers, Urban Land Institute, and to homebuilder organizations. They were saying, "Please explain to our financiers how this works because they will not finance it." Take a look at when the REITs came out-89 new REITs went public in 1993. I was on two publicly traded REIT boards at that point. All but two were in product silos: for rental apartment REITs, don't even think about doing retail on the ground floor. If you were in the suburban neighborhood shopping center business, don't even think about building walkable urban product in a city. The two that allowed mixed use were Federal Realty and Post Properties. Within three or four years, Wall Street fired their founders and CEOs, saying to their boards of directors to go back and keep it simple-go back to a suburban, single-product type.

Now, almost every REIT is getting into mixed use development. That's where the market is going-Federal and Post are now going back to the business that they were forced out of 15 years ago, with retail on the ground floor and primarily rental housing above. Wall Street is beginning to get it. They are now figuring out how to finance it.

How does advocacy for walkability fit into the Brookings' Blueprint for American Prosperity initiative?

The nexus is that the regional level of governance in this country is missing. Jane Jacobs' course # 201 is that the metropolitan region is the fundamental building block of the economy. Southern California, as a metro region, competes against San Francisco, Munich, and Tokyo, yet it isn't being managed. When you look at our 18th century Constitution, it says we have federal government, state government, county, and/or city government. Well, the metropolitan economy is in between the states and the counties and the cities, and there is no governance level there. Brookings is focusing on that regional level of governance. We need to find a way to provide leadership because if you don't manage the basic economic driver of your economy, you will have many problems as a society.

In many cases, the walkable urban place is not being effectively managed. These sub-regional walkable urban places are where regionally significant jobs are located and are a major component of the regional economy-whether it is in West Los Angeles, Downtown Los Angeles, or Newport Beach.

Twenty years ago, the Washington region had a preponderance of its economy in drivable suburban places. They only had two walkable urban places that have any kind of viability-Georgetown and Old Town Alexandria-both of which were tourist driven. Today they have 20 walkable urban places that are of critical mass and another ten that are emerging-more than any other place in the country on a per capita basis. That represents well north of $100 billion of new development over the last 20 years in those walkable urban places. As a result, D.C. is attracting the knowledge workers and the creative class that are drivers of the export sector of the economy. If you don't offer what they want, why would they go there?

Do the land use solutions you advocate for, especially with your examples in D.C., respond more to the creative class than to the needs of the blue collar worker, who also need an environment that works in terms of culture, jobs, etc?

The economy is driven by the export jobs. Export jobs, roughly speaking, provide about one-third of all jobs. As we shift from an industrial to a knowledge-based economy, those jobs will bring more people who are adding value from R&D, marketing, and finance, primarily in the creative class. There are still two-thirds of the jobs that are the "ripple effect" jobs, known as regional-serving or local-serving. Those jobs are going to be the grocery clerks, the schoolteachers, and the policeman, same as they were in the previous economy. These are generally middle class jobs and need housing and choice in housing just as the export workers do.

You have said that in the 1940s-1960s, when one was driving a car, one was getting wealthier. The industrial economy then was literally and figuratively being driven by the automobile industry and supporting industries. What industries will play that role in the 21st century?

Using software is the obvious answer but also by creating experiences that add value and that people are willing to pay for. We are entering the "knowledge and experienced-based" economy, which walkable urban places are built to satisfy.

The beauty of it is that it is a much more sustainable economy. The carbon footprint of a knowledge-based economy and a service economy is really pretty minimal. A transportation system that includes rail and higher mileage cars so you can get to the knowledge and the experience jobs will give us a low carbon economy.

What should be the appropriate nexus between transportation and land use? The reauthorization of the Federal Transportation Bill will be the subject matter of much debate. What would you like to see included in the reauthorization to support your notion of a new American development dream?

Probably the preface of all of this is that the country is broke. This has been one of the most irresponsible eras in the country's history, and it has been over the last 20 years, not just the last eight years. As a result, we have all been living beyond our means, borrowing beyond our means, and we are broke. We are going to have to be much more strategic in how we invest in infrastructure.

As far as the existing network of roads, we need to fix what we have. We need to engage in much smarter technology on those roads. We must complete repairs before building any new roads. We generally don't need another new road in this country. There will be exceptions to that, but generally speaking we need to be repairing what we have and making it more efficient. We are going to have to engage in tolling to pay for it. We can't subsidize the roads like we have over the last 50 years.

Number two is that we need a balanced transportation system that allows real estate developers to provide the choices the market wants. It is critical to understand that transportation drives development. The transportation system that "we the people" build dictates what we in real estate can develop. If we only build one system, highways, we are only going to get one outcome. If we build a balanced transportation system, including rail transit, biking and pedestrian trails, we are going to be able to build a much more complex built environment.

Number three is that we need to create transportation plans for metropolitan regions that are unique to their unique economies. We can't do one-size-fits-all like we have in the past. Los Angeles has a certain set of export industries, which will drive a certain type of transportation plan to support that economy.