After Rush to Urbanize, Suburbs Again on Top

Filed in Land Development, Multifamily by on July 10, 2018 0 Comments

Populations in cities’ core urban areas grew at a rate that nearly matched growth in America’s suburbs, a sharp shift from a decades-long trend that prompted demographers to declare the 2010s “the decade of the city.”

A recent report from the Urban Land Institute showed the growth rate in that period for urban neighborhoods was 3.4%, compared to 3.7% for suburban neighborhoods. From 2000 to 2010, the urban growth rate was just 1% compared to 13% in the suburbs.

Urban areas still primarily attract home buyers without children. But between millennials waiting to have kids and retiring baby boomers who have already raised theirs, many more potential buyers have been available to urban developers.

“Many younger buyers live downtown for an extended period of time and they learned to value the convenience and lifestyle differences,” said Bill Sanderson, vice president of land acquisition and development for Knez Homes in Ohio and member of the NAHB Land Development Committee. “Likewise, empty-nesters want to be close to the activities they enjoy, like sporting and cultural events. In Cleveland, that means living close to downtown.”

Example of Knez home design near downtown Cleveland.

Despite conventional wisdom, there is still land to be developed in core urban areas. Knez Homes focuses on building single-family homes on vacant infill lots or on lots where businesses have closed. The homes are designed to compliment existing housing and the look of the neighborhood overall.

But multifamily housing still dominates urban building. The ULI report showed that rental apartment development is now concentrated in urban locations. Between 2010 and 2017, the rental apartment inventory in urban neighborhoods increased by 32%, compared to 16% in the suburbs.

Development in urban centers has challenges unique to densely-populated areas. “There are always NIMBY concerns in any development, and many groups oppose what they view as gentrification,” said Dean Schwanke, NAHB vice president of multifamily housing. “The main different in urban areas is that there are so many more of them.”

Home builders of traditional suburban developments still have little reason to worry. The population growth trends from the early part of the decade may be turning back to the suburbs.

Recent Census Bureau data suggests that population growth in 2016 and 2017 was highest in low-density suburbs and small towns or exurbs. The rate of growth in rural areas also ticked up.

Much of the building in these areas has mimicked urban areas, though, Schwanke notes. Mixed-use developments with high-density residential, retail and office units have been popular for years and are gaining momentum in inner and outer suburbs.

For more information on the NAHB Land Development Committee, contact Debra Bassert. For information on the NAHB Multifamily Council, contact Dean Schwanke.

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