We’re living in an urban boom. To find evidence of it, all you need to do is look around at all the cranes in the sky around downtown Dallas. Over the past decade, urban-style apartments have sprouted up in Uptown and in the outer suburbs alike, many neighborhoods have become more walkable, and areas of the central city that were once undesirable now boast some of the hottest real estate markets in town. Complementing these trends is the fact that Dallas has joined the ranks of cities like San Francisco and New York with regard to how its booming real estate prices have sparked a crisis in housing affordability.
But what are the real values of urban neighborhoods? How do they function economically? What kind of price premium comes with building walkable communities? How do they impact other factors of life, such as economic mobility and social equity?
A few weeks ago, the Center for Real Estate & Urban Analysis at George Washington University, released a report that attempted to answer some of these questions. Following methodology developed for similar reports on Washington, D.C., metro Atlanta, southeast Michigan, metro Boston, and metro New York, the researchers attempted to identify all the urban, walkable neighborhoods in the 16 counties of what they define as North Central Texas. The report drills into economic, housing, employment, and real estate market data to determine how these walkable communities—which the report terms “WalkUPs”—factor into the regional economy.
What the analysis found is remarkable.
The report identifies 38 established walkable communities in DFW, ranging from places like downtown Dallas to Bishop Arts, Preston Center to the old downtowns of suburban communities like Plano, Grapevine, Weatherford, and Corsicana. The report also identifies 17 auto-oriented areas that are emerging as viable walkable neighborhoods, including areas on the fringe of downtown Dallas, like Ross Ave. and the Cedars, as well as suburban locations like Frisco Square and Watters Creek. There are also 22 potential WalkUps, or areas that could become walkable.
Thirty-eight. That’s not a lot. Put another way, DFW is the fourth largest metropolitan area in the country, and yet it has relatively few true “urban” places. The 38 established walkable neighborhoods in DFW identified by the report comprise only 0.12 of one percent of the region’s land mass.
But here’s where things get fascinating.
Those 38 areas account for 12 percent of DFW’s economic output—it’s Gross Regional Product (GRP). Think about that. One-tenth of DFW’s economic activity is produced by 0.12 of one percent of DFW’s land mass. That’s how economically productive and efficient walkable, urban spaces are.
The report digs deeper into the data. The average rent in “WalkUP” neighborhoods is 37 percent higher than the regional average (on a vacancy-adjusted, rent per-square-foot basis). Homes near “WalkUPs” have a 103 percent price per square foot premium over suburban housing in DFW. Houses sold within a half-mile of a walkable district have a 71 percent per square-foot premium over the average DFW house.
The market has taken notice of these value differentials. The report found that suburban development is losing market share in DFW, and in the current real estate cycle, 26 percent of new multifamily rental housing in the region was developed within the areas the report identifies as established or emerging “WalkUPs.” The report offers hard data to back up the simple observation that urban places are economically powerful, and cities are the engines of regional economies.
But it isn’t just that urban economies are more productive and efficient than suburban areas. Urban and suburban and economies function differently, says Tracy Loh, a senior data scientist with the Center for Real Estate and Urban Analysis.
“With walkable urbanism, more is more,” Loh says. “It is not the usual linear and intersecting supply and demand curve. There is a cycle of value creation that is very unique to the product and very distinct from drivable suburban, which works the more typical way you would think of in terms of supply and demand.”
Loh says that urban neighborhoods vastly out-perform other kinds of built environments because they generate value cumulatively. When you invest in an area’s walkability, those investments positively impact all of the properties in a district. It creates what Loh describes as a “positive feedback loop.”
“It is the opposite of drivable suburban,” Loh says. “If you build a strip mall, you are absolutely competing with nearby strip malls. With walkable urbanism, the more traffic, the more value. That’s why some people refer to drivable suburban as a Ponzi Scheme—there is no way to create lasting value. We’re not making a moral value judgement, that’s just not how it pencils from a financial perspective.”
There is a flip side to this equation of economic productivity that the report also addresses. While the return to urban neighborhoods is creating plenty of wealth for real estate owners and developers, it has also driven up the cost of living in the region, and in urban neighborhoods in particular. Those urban value premiums the report identifies also contribute to the process of gentrification and displacement.
The report looked at how DFW’s urban neighborhoods compare with regards to social equity, and the result, again, is somewhat unsurprising. DFW neighborhoods aren’t very equitable. Issues such as high housing costs, a short supply of rental housing, and limited access to public transit are cited as contributing to an economic divide. It paints a picture of a region whose urban places have emerged haphazardly and halfheartedly.
Places that are strong economic performers—like Preston Center—fall far short with regard to social equity. Areas that are more affordable—like East Jefferson—may only be because the report offers a snapshot in time, catching the area just as the wave of gentrification sweeps south from North Oak Cliff. These kinds of comparisons in the report are helpful in illustrating how the market around urban places is not driven merely by value or demand, but has been shaped by public policy.
The simple limited number of neighborhoods that can be considered WalkUPs—despite the great market premiums developers could realize by building more walkable communities and the demand for those kinds of neighborhoods—are suggestive of the numerous political, social, and cultural obstacles to building more viable urban neighborhoods in DFW. The shortage of housing supply in and around walkable areas—often locked in place by widespread single-family zoning—helps to contribute to the high cost of entry to these areas. And the inherent value premiums of walkable spaces also mean that affordable housing will not materialize in WalkUPs by virtue of market forces alone.
“It is totally unrealistic that the market is going to provide an adequately high-number of adequate places to live that are affordable,” Loh says. “You are avoiding the real issue. It is not going to happen. Instead we need to think about the tools that we have to guide the market, incentivize the market, and subsidize the market.”
The Wake UP WalkUP report lays out a few suggestions, such as changing existing zoning to allow for more multi-family dwellings and accessory dwelling units. It identifies areas around the region that could become successful walkable communities with the right kind of investment and planning. And it offers a variety of tools and strategies for everything from building coalitions among neighbors to support a push for more density or to create more affordable housing.
But more than policy prescriptions, the report’s greatest value is the empirical evidence it offers in support of the economic potential of urban neighborhoods and its identification of which areas in the region can best meet that potential.
The report shows that the future demands allowing for more density. It suggests a need for more housing, perhaps following the lead of cities like Minneapolis, which recently removed all single-family zoning. It spells out the need for more investment in affordable housing and senior housing to get out in front of the market factors that fuel displacement and disruption. It outlines a strategy for educating residents on the social and economic value of urbanization, combating entrenched development assumptions and NIMBY attitudes alike. Here’s one statistic in the report that may help this discussion: urban neighborhoods don’t just come with a high price tag, they provide a high-density of jobs—upwards of 42.5 jobs per acre.
This new report shows that DFW hasn’t built enough urban neighborhoods and it hasn’t done a very good job of managing how those neighborhoods have emerged. That has to change. Hopefully this report will provide its promised wake up.