The Crisis of Credit Visualized from Jonathan Jarvis.
Now that the bottom seems to have fallen out of the debt markets (for the moment) it seems like you can’t get away from obfuscating financial commentary in every newpaper and network news station, but perhaps the best summary of what happened in the past year was done by Jonathan Jarvis above. All of this talk has lead me to start thinking about where our pro-ownership policies have and will be taking us.
Obviously, there’s been a lot of discussion about government intervention in the housing market contributing to the real estate bubble. When most people talk about this, they’re referring to the last five to ten years at most. As a result, I’ve started to re-address some old thoughts on how policy affects real estate development.
We all know transportation policy has a lot to do with it. The transition from land-grant, semi-private railroad companies to government funded, federal highways in the 1940’s helped to spur a huge shift in the way people move around the country and of course caused massive changes in land value. Farmland that was once remote suddenly became accessible to the masses. Sub-urban land that would have taken years for a traditional urban grid to grow to, now seemed close by comparison. But I’ve also begun to consider the ownership structure supporting all of this growth.
Before condominium laws existed nationally (circa 1969), it was virtually impossible to purchase individual units in a multi-family apartment building. The notable exception to this is the housing cooperative format popular on the east coast, where the buyer actually owns shares or a percentage of the building (usually as a limited stock company). This is a cumbersome financial vehicle that frequently makes real estate transactions too time consuming or difficult for the middle class. So for fourty years or more, from the creation of Fannie Mae in 1938 to the rise in popularity of the condo format in the 1980’s, urban property was considerably more difficult to own for working families. In other words, we went from 45% to 65% homeownership in the same period of time that urban dwellings were nearly impossible to finance in a conventional way.
It’s no wonder cities suffered from an exodus of residents in the 60’s and 70’s, the opportunity for ownership was literally 10 newly paved miles away. Now that the condo format is well known to the banking industry, you can have ownership in any type of building you like. Urban dwellings can be built and sold just like suburban sprawl. Is this what’s driving re-investment in our cities?
Most New Urbanists will assert that people are simply expressing a latent preference for urban living – I think it’s more complicated than that and I’m betting the incentives placed on homeownership and transportation combined with our innate preference for social living contain a more accurate description of what’s going on. Andres Duany once argued that the goal for New Urbanists is not to bring urban form to suburbs, but suburban policy to cities. Now I think I understand what he meant by that.