Christopher B. Leinberger, a professor at George Washington University School of Business, is president of LOCUS, a real estate developer program of Smart Growth America. Michael Rodriguez is research director at GWSB and at SGA.
Walkable urban market share gains are similar to the drivable market share gains of the 1980s, only in the opposite direction. Sprawl may be over.
The metropolitan Washington area ranked second in our Foot Traffic Ahead 2016 survey of walkable urban trends in the nation’s 30 largest cities. We found that walkable metro areas come at a premium price: Walkable urban office, retail and apartment rents are 66 percent higher here than in business parks, strip malls and isolated apartments.
What’s more, walkable urban space has captured 91 percent of all new occupied office and apartment space for the past six years in the area. This demand will take years, if not decades, to satisfy.
So, will gentrification be a constant source of social inequality? Our research says no. Surprisingly, our findings show that walkable urban metro areas in the country are the most socially equitable. How could this be, given huge rental premiums?
George Washington University looked at the spending of moderate-income households making 80 percent of the median household income of the metro area — $73,404 here. We focused on housing and transportation spending; both are part of social equity. Housing and transportation are the two highest household spending categories, and they are related.
Moderate-income households in the most walkable urban metros, such as Washington and San Francisco, spend more on housing than moderate-income households in the most drivable metro areas, such as Las Vegas and Tampa. But the difference is less than 1 percent of income for housing (41.5 percent in walkable metros vs. 40.9 percent in drivable metros). Housing costs in the Washington area are 36 percent of household budgets.
But the rent is still too high; housing costs should be 30 percent.
However, moderate-income households in this area spend substantially less on transportation than those in drivable metros. Moderate-income households in drivable metros spend 29 percent of income on transportation, because of the high cost of car ownership. In metro Washington, moderate-income households only spend 17 percent of income on transportation, primarily because of our transit system.
We also add another factor to the mix: accessibility to employment. Accessibility to jobs here is two times that of drivable metro areas.
In addition, walkable urban metros such as Washington have dramatically higher income per capita than drivable metros. The Washington area’s is 50 percent higher than that of drivable metros. That gap in income per capita is the same as the gap between Germany and Croatia and Latvia.
Overall, walkable urban places are the most socially equitable. But the rent is still too damn high.
There is a crucial need to create more attainable housing, especially close to job locations, such as Tysons, Reston Town Center and downtown D.C. One recommendation is for business improvement districts, Main Street programs and others to expand their scope from clean and safe areas and economic development to include developing more attainable housing.
We must also redouble our regional commitment to transit, especially Metro. It will keep transportation costs low for all of us, and particularly the poor, while giving the market the walkable urban places it wants.
What funding sources could pay for regional transit improvement? Los Angeles has a half-cent sales tax for its transit system expansion, and that may increase by another half-cent after a ballot measure this fall. We estimate a 1-cent regional sales tax would raise amounts similar to the existing $845 million per year that regional governments haphazardly provide through subsidies. A dedicated funding source would enable the Washington Metropolitan Area Transit Authority to take advantage of new low-cost federal transit financing.
Another funding source could be capturing a portion of the benefit Metrorail provides to the private real estate industry. Those rent premiums shown above are because of public transit investment. Increased property taxes near rail stations have worked in many Asian cities.
The trend toward more walkable urbanism, in the District and the suburbs, is a major opportunity to build a more socially equitable region. Doing so will decrease transportation costs, increase job accessibility and boost incomes — which benefit all Americans, especially low-income Americans.