Executive Insight: Boutique Cities on the Way

Renaissance Downtowns specializes in “authentic downtown revitalization.” The Plainview, N.Y.-based developer draws from more than 35 years experience in residential, retail, office, hotel, recreational, marine and mixed-use projects. Today, more than ever, the Renaissance team is focused on the significant structural shifts taking place in the U.S. as increasing numbers of Americans reject the notion of suburban sprawl. MHN Editor-in-Chief Diana Mosher recently talked to Brandon Palanker, director of new business development and public affairs at Renaissance Downtowns, about the popularity of downtown living in “boutique cities” along transit lines.

What are boutique cities, and why are they on the rise?

“Boutique city” is another word for suburban downtown. Usually we focus on those that have rail connections and that are located within the mega region where we think there will be a predominance of growth. The Urban Land Institute estimates that by 2050, the U.S. population is going to grow to 400 million, or perhaps even a little more. And at that point, the urban population is expected to double from 150 million to 300 million. A lot of this urban living will be absorbed into the urban nodes in suburbia. That doesn’t mean there’s not a market for single-family homes. But there’s a growing market for multifamily options in these downtowns.

I hate to use the term paradigm shift—it’s so beaten to the ground—but we’re really at a tipping point in this nation in terms of how and where we live. The suburban way of life, starting with Levittown, Long Island, seemed like a great idea at the time. But it was replicated over and over and over again for the last 60 years as the only alternative to rural or big-city living. We see that pendulum starting to swing back, and there are some really interesting statistics.

We did a study with Zimmerman/Volk Associates that details the pent-up demand for urban-style living in suburban areas and the fact that 90 percent of the household growth until 2050 is going to be one- or two-person households.

These are not folks who want a large yard or 4,000-square-foot home. It’s your Boomers who have become Empty Nesters. It’s your young professionals that either can’t afford or don’t want to have that sedentary lifestyle. The Zimmerman/Volk Associates study found that 30 to 40 percent of households want to live in walkable, urban communities, but only 5 to 20 percent of the current housing supply fits that category. So right there you see that delta of what the market wants. This is a national trend.

Why is suburban sprawl a problem?

Anything is good in moderation, but growth in this country over the last 50 to 60 years has been so centered on the suburban way of life. When you have that as your exclusive option outside of rural or big center city living, it’s a tremendous stress, fiscally, on the municipality. Every single-family home that’s built within the community represents a losing proposition monetarily. For one, more families with children are likely to live within a suburban home, so if you have communities that have almost exclusively single-family homes and very little multifamily, you’re going to have that many more school-age children to support.

There’s also that much more road that you have to build and maintain and police. There are also municipal services, such as garbage pick up or snow removal. Again, that many more homes, that much more space, time and cost. So, in the end, it’s a losing proposition in terms of the taxes that a municipality brings in from a single-family home vs. what is going to have to be spent on the folks living there and supporting that way of life. In addition, the roads are clogged and people are having to move farther and farther away to afford a home or to find a home that’s available. So they drive farther and commute farther to their place of work.

And, in fact, vehicle miles traveled have been pointed to in a number of studies as one of the characteristics and key factors in terms of judging if someone is going to perhaps default on their house. Why? Because people move 60, 80, 90 minutes from their place of work because that’s what they could afford. They’re not taking into consideration the fact that they’re going to need two cars. Commuting could add another 25 to 30 percent of their income in terms of the cost. They’re spending 40 percent of their income on housing, 30 percent of their income on commutation and not much is left for the rest. So in terms of fiscal and environmental impact, and stress level impacts, it’s simply not a sustainable model.

What are you working on now?

We got involved in boutique cities about five years ago with Glen Isle in Glen Cove, N.Y. I was executive vice president of the Chamber of Commerce, and a gentleman came in with a vision for $1 billion-plus of private investment. I just thought, “Wow, this could reinvent my town.” This is easily a model project for Long Island. If we focus our development on downtowns and on large-scale redevelopment of transit-oriented centers, Long Island would preserve 99 percent of its land mass.

There’s been $140 million of public investment on that site, which would never have happened if not for the private investment from our end. Glen Isle is where we learned about large-scale, mixed-use, transit-oriented development. There will be a ferry from Glen Cove to New York City. Ground was broken and the ferry will be operational in a year or two. We hope to break ground on Glen Isle in 2011.

Glen Isle has helped us understand how to do this and we parlayed our experience into a downtown program where we were specifically in that three-quarters square-mile area, including the old Central Business District within downtown. In order to actualize a vibrant mixed-use district, you need to have involvement of key community stakeholders so that every parcel is taken into account and there are no “missing teeth” in the urban fabric. We’ve been named master developer in three municipalities according to this model, including Nashua, N.H. and Bristol, Conn.

What percentage of your organization’s product is rental and what percentage is for-sale?

That is very much a market choice, but at the end of the day it could very well be a 50-to-50 split. For example, here on Long Island, there’s a tremendous dearth of rental options, and that’s true in a number of mature suburbs because the suburban way of life became the only way of life and people were afraid of what [negative elements] multifamily might bring. We see it quite differently. On Long Island, taxes are going up and housing values are going down. The only way to combat that is through economic growth. What are you going to build if you have no land, or you determine suburban sprawl is not the answer? We need to focus these developments within downtowns that have already been developed but are underutilized. We’re in the doldrums now, but when the market returns, there will be at least a temporary shift toward rental living, especially within these downtowns, because that’s what people will be able to afford before they can save up for actual down payments. (It’s not 2006 anymore—down payments will be required once again). So from an investment opportunity, rental will likely lead the way when the market returns, followed by the value that’s built for the for-sale units later to come.

What are some of the challenges inherent in developing boutique cities?

Public/private partnership is immensely key to making this work. Also, there needs to be a synergy between land use policy and transportation policy. Washington is finally understanding that this is so very important to creating walkable, transit-oriented centers. HUD (Department of Housing and Urban Development), the DOT (Department of Transportation) and the EPA (Environmental Protection Agency) need to be working together; this would streamline, for example, the process of obtaining a brownfield grant if environmental remediation is required. At the end of the day, to reinvent a downtown, federal and state dollars leverage the private investment, and private investment leverages public investment.

Do you have plans to partner with other like-minded organizations?

We are self-funded to date and we can handle a number of these projects, but at some point we are going to look to partner with folks so that we can expand—as long as we can stay true to our vision. The chemistry has to work, and the math does, too. We hope to open up an office in Northern and/or Southern California in 2011. There are some great folks out there who do urban infill downtowns. But we feel, especially in these boutique suburban downtowns, that it’s very difficult to make infill work. If you go to Bristol and you put up 250 or 500 apartment units, and you don’t look at the whole downtown, we don’t think that’s going to be a successful project—it won’t transform that downtown. It would be very difficult to make it pencil out. We’ve been speaking to national brands that are leaders in residential—in condo and rental—and they’re interested in this model. In terms of our over-arching vision, if there are folks of a like mind to us who have this type of comprehensive and holistic approach, we’re always willing to talk. These are heavy lifts.

To comment on the story, e-mail Diana Mosher at dmosher@multi-housingnews.com.