Monday, July 2, 2012

Cities Outpace Suburbs in Growth

Updated June 28, 2012, 2:57 a.m. ET


Many U.S. cities are growing faster than their suburbs for the first time in decades, reflecting shifting attitudes about urban living as well as the effect of a housing bust that has put a damper on moving.
According to Census data released Thursday, in 27 of the nation's 51 largest metropolitan areas, city centers grew faster than suburbs between July 2010 and July 2011. By contrast, from 2000 to 2010 only five metro areas saw their cores grow faster than the surrounding suburbs.
Viewed as a whole, U.S. suburbs have grown faster than city centers in every decade since the 1920s, when rising automobile ownership inspired Americans to begin fleeing cramped city quarters for leafy suburbs, said William Frey, a demographer at the Brookings Institution. Urban population growth accelerated markedly at the end of the last decade, he added.
One reason for the shift back to urban areas may be improvements in quality-of-life factors, such as safety, that traditionally drove residents to the suburbs. In the past decade, cities have become considerably more livable. Crime rates have fallen in some urban centers; downtown areas that once were dotted with closed businesses now feature new cultural amenities such as museums and baseball stadiums.
 A housing development in Diamond, Illinois, southwest of Chicago

At the same time, a decades-long migration of factories to the suburbs and rural America has rid cities of the heavy industry that used to make them smoky, loud and smelly. Take New York: In the 1940s, freight traffic ran on an elevated rail line on the city's west side. Today, that line is now the High Line, an elevated public park.
Among those favoring cities over suburbs are Sarah Talbot, a 35-year-old in Washington who works at a nonprofit. Ms. Talbot and her husband bought their Capitol Hill-area home in November 2009 and today have an eight-month-old daughter. They can walk to public transportation, grocery stores and parks, all while avoiding suburban gridlock. Ms. Talbot says they plan to stay at least several years as their daughter moves into elementary school, but will continue to reassess based on the quality of the school system.
"We're just going to have to do more research into the schools as she gets older," she said.


The change in living patterns could in part reflect evolving preferences for cities over the space and privacy of suburbs. In the short term, however, most of this is a legacy of the recession and housing bust, said Kenneth Johnson, senior demographer at the Carsey Institute at the University of New Hampshire. Skittish about buying in the suburbs or unable to get a loan for a home there, city-dwelling renters may be staying put instead of moving. Mr. Johnson said some of those city dwellers are likely to head to thesuburbs as the economy and housing market continue to mend. He points to Chicago as an example. That city grew by 8,800 residents, or about 0.3%, from July 2010 to July 2011, compared with an average annual loss of 20,000 people between 2000 and 2010. "I suspect the modest growth of the urban cores is a short-term phenomenon," Mr. Johnson said.
Home builders are betting that there is a longer-term shift under way. Many builders that previously worked entirely on single-family homes in the suburbs have refocused to keep up with what they say is a change in demand. Three of the largest publicly traded U.S. home-building companies—Toll Brothers Inc., TOL -0.02% Lennar Corp. LEN -0.36% and Hovnanian Enterprises Inc. HOV -2.76% —have in recent years built mid-rise and high-rise condominium towers in urban areas such as New York City, Northern New Jersey, Philadelphia and Irvine, Calif., looking to capitalize on consumers' rising distaste for long commute times and interest in housing that is closer to cities' cultural and job centers.
Toll Brothers has been particularly bullish on cities. In New York City, where the company has finished seven projects since 2003, Toll has nearly completed construction on the Touraine,a 22-unit luxury condominium building. The company has begun constructing an 80-unit building as well as 99 condominiums atop a rental tower to be built with rental-apartment landlord Equity Residential EQR -0.13% .To be sure, most of Toll's business is still in single-family homes in the suburbs. But Toll's City Living brand has grown in some recent quarters to represent as much as 20% of the company's revenue.
Few places have seen a more drastic shift than the nation's capital, which is in the midst of an apartment boom while suburb development has fallen below pre-recession levels. In 2011 building permits were issued for 4,285 units in Washington, more than one and a half times the total in any year during the real estate boom.From July 2010 to July 2011 Washington's population grew 2.4%, while its suburbs grew 1.5%.
Stanley Sloter, president of Paradigm Development Co., has built thousands of rental apartments in Washington's suburbs but today is focused on developing in the city and nearby Arlington, Va. He says young, affluent renters are fed up with suburban traffic and are drawn to revitalizing downtowns. His company recently finished a 390-unit apartment building one mile north of the National Mall and later this year plans to start on another nearby.
"There's just a constant level of demand," he said of the city.
—Eliot Brown
contributed to this article.

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