Future of Suburbs

Rise of the Subrubs

Transforming Suburbs

Emerging Suburban trends

History

The Federal Housing Administration (FHA) was created in 1934 following the great depression with the intention to provide programs to insure mortgages and stimulate growth. However, after the completion of World War II, the need for housing returning veterans and baby boomers became essential due to a growth in population. With the help of the GI Bill in 1944, which provided benefits such as guarantied home loans and low-interest mortgages, many Americans moved away from cities and into the suburbs. The government didn’t exactly give veteran’s money to purchase homes, businesses, or farms, instead, it pledged to back veterans’ borrowing which made it easier for them to get credit. In turn, this became a major driving factor of post war era prosperity. Techniques of mass production made it possible to build homes faster and cheaper than ever before. Using an assembly-line system, the construction firm Levitt and Sons built three giant "Levittown" suburbs in New York, New Jersey, and Pennsylvania. As a result, of low prices and veterans' benefits, more Americans could afford to own homes than ever before.

Evoultion of the Suburbs

Suburban housing dynamics increasingly reflect some of the most profound issues shaping our society, including aging, immigration, economic mobility, and evolving consumer preferences. Historically, the concentration of talented young workers has been seen as key to attracting large employers to popular cities in order to promote growth, however, with the increase of competition for space and the rent expenses that are rising faster than obtainable salaries, more individuals are deciding to move into the suburbs. With a large influx of people moving out of cities and into the suburbs, the suburbs are now taking a chance on mixed-use, walkable, millennials-attracting development. Moving forward, the suburbs will generate substantial residential development and redevelopment opportunities as well as challenges in the years ahead.

What is Hipsturbia?

Many Millennials and Gen Zers who once flocked to the cities are now migrating away into the suburbs in hopes to find affordable housing to start a family. The move from urban to suburban is not a new trend, however, Millennials and Gen Zers are making the move into suburbs that embody the same desirable city characteristics, such as: dining, shopping, entertainment and employment all within a walkable distance. This formula of live/work/play along with transit access, walkability and abundant retail, restaurant, and recreation options is why the suburbs are becoming increasingly sought after.

How Hipsturbia is shaping 2020

Where?

They are located on outskirts of large anchor cities, for example: New York City, San Francisco, and Chicago. These 24-hour cities serve as guidelines as to what Millennials and Gen Zers hope to find in the suburbs; a community that has an active downtown and thrives on convenience. Brooklyn, NY, is often referred to as the prototype of these hipsturbian suburbs due to its close proximity to NYC, however, now that this trend has increased in popularity, communities like Yonkers and New Rochelle in North of Manhattan and Hoboken, Maplewood, and Summit in New Jersey are on this rising trajectory. This suburban revival is also being experienced in college towns due to more people deciding to stay close after graduating, for example, Northwestern University in Evanston, IL.

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Impact

The main driving factors for this trend are affordability and walkability. Millennials and Gen Zers want to have the same experience they had living in city but now in a more affordable location. As a result, developers are implementing the same live/work/play formula they used to revive downtowns 2 decades ago but in suburban areas and we are seeing a significant impact. New development of offices, apartments/housing, multi-story and high-rise, mixed use urban living which is promoting growth. Millennials and Gen Zers are also deciding to do life together (co-living), single-family homes and multi-family rentals allows for home sharing, ride sharing (going green) and cost sharing, all of which are contributing to build a sense of community. The need to live near a job is slowly declining due to tech advancements and, interestingly enough, Baby boomers and empty nesters are also choosing to move to these active suburb centers to indulge in the convenience of having everything within close proximity.

Project Finaincing

Developers look to foundations, such as the Enterprise Foundation, or nonprofit lenders during the early/riskier stages, and as the project process goes on developers are able to secure commitments from conventional lenders and equity investors.

Example Subdivision Pro Forma

Here is an estimate of the development costs for 1 single-family home within a 50-unit subdivision, featuring 3 bedrooms, 2 baths, 1,200 sqft on 1/4 acre of land. Therefore, at the completion of all 50 units, the total development cost would roughly be about $5 million.

Future Hipsturbia

Leander, Texas is the home of a soon-to-be Hipsturbian development. This development is unique because this plot of land was previously undeveloped therefore this provides us with an idea of how a developer would develop a hipstuburbia from the ground up. The site features a 115-acre plot of land which is located roughly about 26 miles away from Austin, and it is proposed to be a mixed-use project called Northline. It will infuse Leander’s downtown with a blend of multifamily, retail, restaurant, and office space, and will include a hotel and a movie theater as well as easy access to Metrorail and the 183A toll road. The city and the developer estimate a 10- to 15-year build out for Northline, and that a fully developed Leander downtown could be valued at $800 million. As part of the development deal, the city has agreed to pay $15 million for infrastructure, including streets and parks; the developer is also investing $12.5 million in infrastructure. The total infrastructure costs for the project’s first phase will fall between $23 million and $27.2 million, however, since the project is in a tax increment reinvestment zone (TIRZ), TIRZ funds will cover the annual bond debt service payment and the city and developer will be reimbursed for the infrastructure costs with property tax revenue over the 13 years the zone is in effect.