housing in the 21st century - urbancenter.utoronto.ca · presenter: ed blakely, university of...

Housing in the 21st C e n t u r yA Symposium Sponsored by the Urban Land Institute and the Center for Housing Policy

Washington, DCMarch 29-30, 1999

ULI–the Urban Land Institute1025 Thomas Jefferson Street, N.W.Suite 500 WestWashington, D.C. 20007-5201

A Symposium Sponsored by ULI and CHPii

ULI–the Urban Land InstituteULI-the Urban Land Institute is a nonprofit re-search and education organization that promotesresponsible leadership in the use of land in orderto enhance the environment.

The Institute maintains a membership represent-ing a broad spectrum of interests and sponsors awide variety of educational programs and forumsto encourage an open exchange of ideas and shar-ing of experience. ULI initiates research that an-ticipates emerging land use trends and issues andproposes creative solutions based on this research;provides advisory services; and publishes a widevariety of materials to disseminate information onland use and development.

Established in 1936, the Institute today has some15,000 members and associates from 50 countries,representing the entire spectrum of the land useand development disciplines. Professionals repre-sented include developers, builders, propertyowners, investors, architects, public officials,planners, real estate brokers, appraisers, attor-neys, engineers, financiers, academics, students,and librarians. ULI relies heavily on the experi-ence of its members. It is through member in-volvement and information resources that ULIhas been able to set standards of excellence in de-velopment practice. The Institute has long beenrecognized as one of America’s most respectedand widely quoted sources of objective informa-tion on urban planning, growth, and development.

Center for Housing PolicyThe Center for Housing Policy (CHP), an inde-pendent 501 (c) (3) nonprofit organization, wasformed in 1992 by the National Housing Confer-ence (NHC), the nation’s oldest bipartisan, non-profit organization working toward the provisionof decent affordable housing for all Americans, todevelop an understanding of America’s housing

policies and to enhance knowledge of those fac-tors that will influence policymaking in the fu-ture.

CHP’s interdisciplinary focus relates housing’s so-cial and economic benefits to public and privateinvestment. CHP draws upon the talents of a di-verse group of housing interests to examine theimportant role that housing plays in our commu-nities and the nation’s economy.

Project StaffRachelle LevittSenior Vice PresidentPolicy and Practice

Marta GoldsmithVice PresidentLand Use Policy

Jennifer LeFurgyAssociateLand Use Policy

Hershel LipowConsultant/Project Director

Nancy StewartEditor

Betsy Van BuskirkArt Director

Diann Stanley AustinAssociate Director for Publishing Operations

Martha LoomisDesktop Publishing Specialist

About the Sponsors

Housing in the 21s t C e n t u ry iii

The Urban Land Institute and the Centerfor Housing Policy would like to acknowl-edge symposium cochairs J. Ronald Ter-williger and Nicolas Retsinas for their

advice and support of this project. Their leader-ship and encouragement were an invaluable partof the process and they deserve our sincerestthanks.

ULI and CHP are also grateful to the symposiumsponsors: NationsBank; Freddie Mac; the FannieMae Foundation; the National Housing Endow-ment; First Realty Management Corporation;National Multi-Housing Council; Century Hous-ing Corporation; the Community PreservationCoporation; Kargman Charitable and EducationFoundation; and Kimball Hill, Inc. Special thanksto David Hill, Allan Kingston, Robert Lang,Bruce Silver, Jonathan Kempner and Mike Pitch-ford who were dedicated to making this sympo-sium a success.

Thanks also to Program Committee membersGregory T. Barmore, Larry H. Dale, Jane Fort-son, F. Barton Harvey, III, Gary Kachadurian,William Kargman, Michael Lappin, AngeloMozilo, Shekar Narasimhan, Ann B. Schnare, LilaSutton, John Weicher, and Ronald Witten for their insight, suggestions, and willing partici-pation.

Marta Goldsmith Robert ReidVice President, Director

Land Use Policy Center for HousingUrban Land Institute Policy

A c k n o w l e d g m e n t s

©1999 by ULI–the Urban Land Institute1025 Thomas Jefferson St., N.W., Suite 500 WestWashington, D.C. 20007

All rights reserved. Reproduction or use of the whole or anypart of the contents without written permission of the copy-right holder is prohibited.

Housing in the 21s t C e n t u ry v

About the Sponsors ii

Acknowledgments iii

Foreword vii

Welcome and Opening Remarks 1

J. Ronald Terwilliger, Symposium Cochair and National Managing Partner, Trammell Crow Residential

Nicolas Retsinas, Symposium Cochair and Director, Joint Center for Housing Studies

Trend Topic I: Demographics, Markets and Lifestyles 7

Moderator: Sandra Newman, Johns Hopkins University

Presenter: William Frey, State University of New York, Albany; Senior Fellow

Respondents: Nina J. Gruen, Gruen Gruen + AssociatesPatrick Phillips, Economics Research AssociatesTodd Zimmerman, Zimmerman/Volk Associates

Discussion and Question & Answers 21

Trend Topic II: Housing Policies, Production, and Affordability 25

Moderator: James Carr, Fannie Mae Foundation

Presenter: James Wallace, Abt Associates

Respondents: The Honorable Susan J. M. Bauman, Mayor, Madison, WisconsinMichael Carliner, National Association of Home BuildersWilliam Kargman, First Realty Management CorporationCharles R. Kendrick, Jr., Clarion Ventures, LLC

Luncheon Address: Where Will We Go From Here? Housing and Community in the 21st Century 41

Speakers: Joseph Coates, Coates & Jarratt, Inc.Susan Wachter, U.S. Department of Housing and Urban Development

Trend Topic III: Products, Technology, and Design 49

Moderator: Deane Evans, Architect

Presenter: Frank Anton, Hanley-Wood, Inc.

Respondents: Suzanne Cameron, Cameron & CompanyDavid Engel, U.S. Department of Housing and Urban Development

C o n t e n t s

A Symposium Sponsored by ULI and CHPvi

Mark Tipton, SMART HOUSE, Inc.

John Torti, Torti Gallas and Partners + CHK, Inc.

Discussion and Question & Answers 61

Trend Topic IV: Housing and Sustainable Communities 63

Moderator: Christine M. J. Oliver, Chicago Dwellings Association

Presenter: Ed Blakely, University of Southern California

Respondents: Donald Carter, Urban Design Associates

F. Barton Harvey, III, The Enterprise Foundation

G. Allan Kingston, Century Housing Corporation

Susan Maxman, Susan Maxman & Partners Architects

Trend Topic V: Global Markets and Local Lenders 79

Moderator: Ann Schnare, Freddie Mac

Presenter: Georgia Murray, Boston Financial

Respondents: Shekar Narasimhan, The WMF Group

Michael Lappin, The Community Preservation Corporation

Stephanie Smith, Bank of America

Closing Address: Flexible Approaches to Housing Delivery 95

Speaker: The Honorable Vincent A. Cianci, Jr., Mayor, Providence, Rhode Island

Roundtable Summaries 101

Participant Biographies 105

Sponsors and Program Committee Members 113

Housing in the 21s t C e n t u ry vii

The Urban Land Institute and the Center forHousing Policy sponsored a symposiumMarch 29-30, 1999, entitled Housing in the21st Century, to bring together leading hous-

ing policy makers, residential development practi-tioners, and community developers to examineprevailing trends and their implications for thefuture of housing and communities during thefirst part of the next century.

The symposium, held at the Hyatt Regency Capi-tol Hill in Washington, D.C., was an invitationalevent cochaired by J. Ronald Terwilliger andNicolas Retsinas and attended by over 200 repre-sentatives from the country’s leading housing, fi-nance, and real estate organizations and compa-nies.

The event provided a forum for leading thinkersand practitioners in the public and private sectorsto explore how and where Americans will live inthe next century and the role that housing andhousing policy will play in building communityand the nation. It began a dialogue that it ishoped will continue into the next millenniumabout how government, nonprofits, and privateindustry will meet the housing needs and desiresof future generations.

Five key trend topics were discussed at the sym-posium: demographics, technology, community

sustainability, finance and affordability, and

policy and governance. Each topic was addressedin a program session in which leading authoritiesprepared background papers presenting researchfindings and their own thoughts on the assignedtopic. A panel of respondents followed from gov-ernment, the private sector, and the academic andnonprofit community, and questions and com-ments were taken from the floor.

Symposium participants also met in roundtablesto discuss these presentations and to developlikely scenarios of America’s housing and commu-

nities in the next century. They focused uponevents likely to occur within the next 20 to 30years. These scenarios were captured by re-porter-scribes.

The program's two luncheons featured JosephCoates, a noted futurist, and Susan Wachter, adistinguished scholar and consultant to the De-partment of Housing and Urban Development, onthe first day, and Mayor Vincent Cianci of Provi-dence, Rhodes Island on the second.

These proceedings contain welcoming remarksand introductions by the symposium’s cochairs,remarks by the symposium’s noted participantsedited for brevity, and a summary of the “futurescenarios” developed by the symposium’s distin-guished attendees.

Participant biographies follow this text. Also in-cluded are the symposium’s sponsors, and pro-gram committee members.

Foreword: Housing in the 21st Century

Housing in the 21s t C e n t u ry 1

We l c o m eJ. Ronald TerwilligerSymposium Cochair and

National Managing Partner

Trammell Crow Residential

Atlanta, Georgia

My name is Ron Terwilliger. I’m the nationalmanaging partner of Trammel Crow Residential.And, more importantly to this meeting, I’m a ULItrustee and officer and cochair. And on behalf ofmy symposium cochair Nic Retsinas, I welcomeyou to the symposium on housing in the 21st cen-tury.

Our symposium cosponsors, the Center for Hous-ing Policy, as well as ULI, have put together forus a unique program that will span the next dayand one-half. And we think it will provide a lot ofwonderful discussion and take-home value foreach of you.

I would like to especially thank the members ofthe program committee who are noted in yourmaterials. I also thank our sponsors, who areCentury Housing Corporation, the CommunityPreservation Corporation, First Realty Manage-ment, the Fannie Mae Foundation, KargmanCharitable and Education Foundation, FreddieMac, Kimball Hill, Inc., the National Housing En-dowment, the National Multi-Housing Council,First Realty Management Corporation, FreddieMac, and NationsBank. Thank you again to all oursponsors.

I would also like to thank the Center for HousingPolicy and the Housing and Urban DevelopmentDepartment for their guidance in formulating thisprogram. And I would like to thank, last but notleast, Marta Goldsmith, Jennifer LeFurgy, LynnRamsay, and our coordinator, Hershel Lipow, fortheir work in putting together the program.

I think you all have the material that gives you anidea of how this program will work. But just togive you a brief overview, we have organized thetwo days into five panels. After each day’s panels,we are going to have break-out sessions. We hopethis will be an interactive opportunity for you totalk with one another about these issues that weare confronting as we look forward to housing inthe 21st century.

We have two featured speakers, one today andone tomorrow I think you will find them interest-ing. And we have a reception this evening whereeverybody will have a chance to network and getto know one another informally.

We have organized the panels into programswhere we are going to have presenters and thenrespondent panelists, so that the presenters willgive us some depth and focus on the materialsand the respondent panelists will bring more di-versity to it. And each panel will have a modera-tor.

I grew up in the area here, and I’m really inter-ested in talking with you these next two daysabout the housing challenges that face us. It is al-ways interesting to me to be back in the D.C.area. I grew up in Arlington in a house that mydad paid $6,000 for in 1941. And I never have fig-ured out the square footage. I think it’s about 400square feet per floor. So I was an early pioneer inaffordable housing of the World War II vintage.We sold that house 44 years later for $169,000, sohousing inflation has set in somewhat.

My company makes a living in building multifam-ily rental housing all across the country. I’m alsoon the board of the Atlanta Neighborhood Devel-opment Partnership (ANDP), where I chair thehousing development group, and a couple of ourpeople are here. Hattie Dorsey, who runs AtlantaNeighborhood Development Partnership and BillMcNeeley, who works with me in housing. So I

Welcome and Opening Remarks

have had an opportunity to be exposed to the af-fordable side and to the issues confronting thecity, to housing policy.

It is a fascinating issue, particularly when you tryto integrate it with the private sector, which I inthis country is a marvelous engine, but obviouslyone that needs to be channeled or tempered.

It is great to see so many people from diversebackgrounds here. I think we have approximately200 in attendance. We have people from the acad-emic side, the nonprofit side, the public sector, aswell as the private sector. And as membershipchairman of ULI, I want you to know that we arealways seeking diversity. So for any of you whoaren’t familiar with ULI, or would like to join,there is information in your packet, and we wouldwelcome more people from these various sectors.

To me this is a wonderfully appropriate time tolook ahead to the next 20 to 30 years. It is now 50years since the 1949 Housing Act provided a goalof having a decent home for every American fam-ily in a suitable living environment. It is interest-ing to note that latter component, because I thinkeven back in 1949, people were thinking aboutcommunities and not just focusing on the house it-self.

The demographics of our country are fascinatingto me, particularly as I have recently traveledabroad to Europe and seen virtually no growth inEurope. And, of course, growth is a challengingcontemporary topic for us here in this country, ascongestion and sprawl have become a part of thepolitical process.

The population of this country, 270,000,000 isgrowing at the rate of about 1 percent a year. Andof those 2.7 million net new people in this country,about 900,000 are immigrants. Immigration policyhas facilitated more immigrants in recent years.For housing, that is clearly both a challenge andan opportunity.

I think California is the first state where the Cau-casian population may become, early in this nextcentury, a minority. Ethnicity is growing in manyof the other states in the country. We are alsograying, as some of us in this room are aware.The leading edge of the baby boomers born be-

tween 1946 and 1964 is now 53 years of age. By2025, over 20 percent of our citizens will be over65.

And the household composition has changed re-markably. Now only approximately a quarter orslightly more than a quarter of our householdsare the traditional nuclear family, the husbandand wife with kids at home. There are clearly awhole lot more singles. People are marrying later,living longer. Senior housing, at least in the areaof assisted living, is becoming very popular and agrowth area.

Our first panel is going to tackle the issue of de-mographics, markets and lifestyles, somethingthat to me is very much on point. Even those ofus in the multifamily rental housing industryhave changed our product from small communi-ties dominated by one bedrooms in the 1970s tocommunities in the 1980s that were a little moreupscale—a little larger housing with a mix of twoand three bedrooms—to what we build now forlifestyle renters in the 1990s, houses that areownership houses for many people—direct accessgarage townhouses; more high-density, largerunits; more two, three and four bedrooms, be-cause more people work at home.

The economy for this past eight years has beennothing short of remarkable. In 1970s when Ibegan my real estate career also business school,we were coming out of the 1969 recession. Andthen we got hammered at Hilton Head in 1974,when prime went to twelve and one-half, and theeconomy went into a recession in 1975. The recre-ational community development industry wentinto a tailspin.

I was doing condo conversions in Miami in 1981when prime went to twenty-one and one-half. Isurvived the recession of 1991, which made us alllook like we were way out of balance in terms ofhousing supply and demand.

This past year has been pretty remarkable.About 1.6 million housing starts. Almost 1.3 mil-lion single-family houses. A 20-year high in sin-gle-family home production. In 1998 there weremore single-family home resales than in any othertime in our history.

A Symposium Sponsored by ULI and CHP2


There are now 70 million, more or less, homeown-ers, representing two-thirds of the households inthis country. This is also a new high, percentagewise as well as in absolute numbers.

Nevertheless, last year the industry I make myliving in built 260,000 new apartments. As near as I can tell, working with Ron Whitten on theApartment Market Outlook that we put outevery year, about 60,000, more or less, of thosewere tax credit houses. So there is affordablehousing being built. But it now is much lower as apercentage of housing than it used to be certainlyback in the slow times of 1993, 1992.

There is also a phenomenon that is taking place ina big way in Atlanta. But it is also a national phe-nomena and that is Americans moving back totheir urban centers, back to the cities. Maybesome of it is a reaction to congestion on our high-ways. Certainly some of it is affected by demo-graphics and people’s desire to live closer towhere they shop, where they work.

Sprawl and congestion have become bywords inthe industry. ULI has been convening programson smart growth for quite some time. Vice Presi-dent Al Gore seems to have picked up that con-cept in his plan for his presidential campaign. AndSmart Growth is a fairly pervasive theme.

In Atlanta, where I live, the Sierra Club namedus the poster child of sprawl. In 1996, we weregetting ready for the Olympics; we thought wewere the city too busy to hate. And now we feellike we are the city too busy to drive in. So thingshave changed a lot, and it is a very big issue.

The second panel we have is going to talk abouthousing policies, production and affordability. It isgoing to explore the federal and state role, therole of nonprofits, as well as the private sector, inbringing housing to a changing demographic pro-file.

After our second session, we are going to have alunch. It will be my pleasure to introduce SusanWachter, whom I have had a chance to work withat the Wharton School. Susan is now a consultantto HUD on housing policy, and she is going to saya few words. And then Joe Coates is going to pro-

vide his insight as a futuristic thinking person onhousing and community in the 21st century.

The third panel this afternoon, and final paneltoday, will be on products, technology, and de-sign—issues such as new materials, densifica-tions, innovative site plans, and mix of producttypes. It will explain, among other things, how in-novating design and technology can help usachieve and sustain affordability. In this timewhen more and more of us are better housed, weare leaving behind a large segment of our popula-tion.

The focus in Atlanta for our group at ANDP is onmixed-income housing. I am hopeful we as a soci-ety will come up with some new approaches tohouse a widely divergent population, both in ageand income.

We are going to have roundtables before we breakfor our reception today, and Nic Retsinas is goingto talk to you a little bit more about that. Theroundtable forum will provide each of you an op-portunity to talk in a small group about what youhave heard today—and to help us shape our think-ing about the future of housing.

Briefly tomorrow, after a review of the round-tables, we will have a fourth panel on housing and sustainable communities. We will discuss thesearch for balance between social, economic, andenvironmental pressures, and talk about the contribution or housing policy to sustainablecommunities.

And then finally, our fifth panel will focus onglobal markets and local lenders. It seems like wealways save finance for last. Everybody is inter-ested, and Georgia Murray will talk with us thenabout how we will pay for housing and what isgoing to happen in the mortgage markets—theinnovations to deal with the marketplace for thenext 20 to 30 years.

Last but not least, we will have a second series ofroundtables. And then the Honorable VincentCianci, mayor of Providence, Rhode Island, willspeak to us at a closing luncheon tomorrow.

Let me just tell you a few things about the logis-tics. In your packet, you will find a list of sympo-

sium sponsors, the program committee, speakersand their bios, registered participants, yourroundtable assignments and the agenda.

It is my pleasure to introduce next someone whoneeds little introduction. I found out last nightthat he just joined the international board ofHabitat for Humanity, which I think we all sub-scribe to. He is a wonderful affordable housingadvocate.

Nic Retsinas came to Harvard University’s JointCenter for Housing Studies in 1998, after servingas the nation’s federal housing commissioner andassistant secretary for Housing at HUD. Nick isgoing to tell us some more about the round tablesessions.

Opening RemarksNicolas RetsinasSymposium Cochair and Director

Joint Center for Housing Studies

Cambridge, Massachusetts

Thank you, Ron, and good morning, everybody. Itis nice to see all of you today on this sunny day inWashington.

Let me first of all, before I talk a little bit aboutthe mechanics of the roundtables, join Ron in ex-tending his thanks to the people who helped putthis session together: the sponsors, whom weidentified; the members of the staff, who havedone a wonderful job organizing this; and a spe-cial thank you to the moderators, the presenters,and the respondents, who are the guts of thistwo-day session.

Let me also note the two cosponsors, the UrbanLand Institute, which has a wonderful trackrecord of organizing sessions and conferencessuch as these—and I think this just adds to theirretinue of good work that they have done—andthe Center for Housing Policy. I am now a mem-ber of its board of directors. The Center is an off-shoot of the National Housing Conference. I notethat Bob Reed, the president of the NationalHousing Conference, is here. Bob, thank you forjoining us, and thank you for your support of this.

As Ron indicated, I currently serve at the JointCenter for Housing Studies at Harvard Univer-sity. And part of our role in recent years has beento review housing markets and housing trends. Iwould be shocked if all of you do not receive ourstate of the nation’s housing report, equallyshocked if some of you don’t receive multiplecopies. And if you do, we can take care of that.And I do want to say a special thank you to EricBelsky, our research director.

Let me say just a couple of words about context.In 1999, there is a tendency to think everything isa version of a Y2K problem, or a Y2K issue. It isnot. But at the same time, it is a nice —the mil-lennium. It is a nice point to reflect on where weare and where we are going.

I now teach a class at Harvard on housing fi-nance and housing issues. As part of that classthis semester, we talked about housing policy andhousing issues, and housing studies at the begin-ning of this century. What little was done then interms of those reports focused on the physicalconditions and the squalor that existed in many ofthe larger cities at the time.

So if you read those reports, you will see wonder-ful, literate phrases such as a “clammy cellars,”one of my favorites, or “water-rotted roofs”—allabout these sort of physical conditions. Certainlyover the course of this millennium, this century,we have different expectations and different stan-dards in terms of housing than we might have hadat the beginning of the century.

But at the same time, I think it is clear to all of usthat a part of that agenda remains unfinished, re-lated to housing affordability. But affordability incontext, because Ron is right to observe thatwhat marks housing policy in the United States,in large measure, is that it is delivered and imple-mented by the private sector. And what those re-lationships are, indeed, is part of our discussionover the next couple of days.

What we hope to do with the roundtables thisafternoon and through tomorrow is really changeyou from audience into participants. During thecourse of the sessions, the speaking sessions to-day, you will hear people talk about their notion



of what is happening along the lines that Ron al-luded to.

You already have been assigned to particularroundtables. In your packet, you will see yourroundtable number. At those roundtables, youwill have a chance to reflect on what you heardand to say, yeah, I think he got it or, no, I thinkshe didn’t get it, as the case may be. And then youmay add your own notion to some leading ques-tions.

When we get toward the end of the day, I will bemore specific, but the idea is to have this be thebeginning of what we hope is an ongoing conver-sation. What form that conversation takes in thenext millennium remains to be seen. But it is im-portant for you to listen, and to think. And wetrust the session today will facilitate that.


S u m m a r yWho will we be housing in the next two decades?This session explores how America’s populationwill change over the next two decades as the postmillennium generation comes of age, and webecome an older, knowledge-based society.

Dr. Frey’s presentation recognizes a new regionaldivide in America’s population patterns, reflect-ing the concentration of new immigrants in gate-way cities and a growing domestic migrationthroughout the rest of the nation. These regionaldistinctions are likely to increase as these groupsare incorporated into different parts of the coun-try into the next century.

Dr. Frey describes this phenomenon as the “mul-tiple melting pot,” which is characterized by in-creasingly young, multiethnic populations inolder metropolitan areas, newer white dominat-ed, middle-class population centers, mainly in thesmaller metropolitan and rural areas of the South-east and Rocky Mountain West, and white-blackcommunities in the South.

How and where these “region-based constituen-cies” choose to live will have a great influence onregional growth and the affordability and avail-ability of housing—what some have described asdemographic balkanization. Studies suggest thatin some areas up to twice as many city residentsmay move out than move in, if issues of urbandecline and quality of life are not addressed. Tothe extent that demographic forces lead to neigh-borhood decline and social isolation, these region-al divides will lead to increased polarization, butthis type of “demographic destiny” is not inevi-table against the backdrop of other social andmarket forces foreseen over the next 20 years.

As an example, many empty nesters and babyboomers are interested in trading their suburbantract houses for more unconventional residences

Trend Topic I: Demographics, Markets,and Lifestyles

in the city. A number of middle-class suburbanresidents are beginning to return, as cities learnto capitalize on niche groups looking for tolerantand vibrant urban environments. This dynamicand its impact on housing market behavior havesignificant implications for development patterns,as well as for building regional and metropolitancoalitions.

Panelists portray a potentially dynamic interplayof local housing markets able to accommodate anincreasing spectrum of lifestyle choices and val-ues among ethnic and immigrant populations,whites born in the late 1970s and early 1980s, andtheir aging parents and grandparents. By themiddle of the 21st century, no ethnic or racialgroup will be able to claim a majority. With this“tossed salad” mindset, it may be possible, re-gardless of regional dynamics, for diverse urbanand suburban neighborhoods to coexist withplanned communities inside and outside the city.

I n t r o d u c t i o nDr. Sandra NewmanActing DirectorInstitute for Policy StudiesJohns Hopkins UniversityBaltimore, Maryland

For the next 90 minutes, we are going to be talk-ing about what housing demand is going to looklike as we move into the next century. I’m de-lighted that I was asked to moderate this session,because the only way we can really talk aboutthis topic is by reaching well beyond the bound-aries of the field of housing, per se, and settinghousing in a much broader context. I don’t seemany people in the audience that I know, butthose of you who do know me know that this isan approach to the housing field that I have beenpushing for quite a while.


I think we have known for a long time that hous-ing policy decisions are not made in a vacuum—whether those decisions are made by governmentor by the private sector. This is true when we aretalking about housing assistance policy for thepoor, a particular interest of mine. In this area Ithink welfare reform is demonstrating veryclearly the strong inter-relationships betweenhousing policy and welfare policy.

It is also true when we are talking about thebroader dynamics of housing markets, wheredemographics, which is the main topic of today’spanel, really play a very important role, andsome might say a determinative role.

Demographic data and analysis tell us in thehousing field about the size, the characteristics,and the growth and decline of the population.They are also very important for what they tellus about the geography of housing demand—where we can expect an intensification of demand(due to the growth of particular households withparticular characteristics) and where we can ex-pect a softening of housing markets (due to ashrinkage of demand). The presenters on ourpanel today have some very interesting insightsto share with you on these demographic topics.

Any of you who have tried to work with demo-graphic data realize that this is not an easy task.Even more difficult than getting a handle on thedata is trying to understand the implications ofthe data—what the data are actually trying totell us. As I was thinking about my remarks to-day, I recalled an experience I had about 20 yearsago when I was a visiting scholar at HUD, andLarry Simons was the FHA commissioner. I hadbeen invited down to the sixth floor of HUD toparticipate in a briefing that had been arrangedfor Larry. This briefing was given by a youngassistant professor in anthropology fromWellesley College in Massachusetts.

She had conducted a number of in-depth inter-views with about 30 Boston housewives on avariety of topics, and among those topics was thefamily’s housing consumption decisions. In herpresentation, she noted that the probability thatadditional homes would be purchased or addition-al apartments would be rented was very highly

correlated with whether there was a divorce or aseparation in the family.

Now Larry’s interest, admittedly, had been wan-ing during much of this presentation. But whenshe made this particular comment, he reallyperked up and said, “Now, let me see if I’ve gotthis right. If I’m interested in growing housingdemand, which I am, then the implication of whatyou are telling me is that I ought to find ways tocause a lot of divorce and separation. Is that it?”

This was well before the era of family values inAmerica. I very much applauded Larry’s attemptto simplify a complex issue, but he clearly violat-ed an important piece of advice that AlbertEinstein gave, which was, everything should bemade as simple as possible, but no simpler.

We are going to start with a presentation by Dr.Frey, and then we will move to each of our re-spondents, who will take a few minutes to giveyou their remarks. I am then going to give Dr.Frey and the panelists a chance to have a bit of aconversation among themselves, and then we aregoing to turn to you in the audience.

A m e r i c a ’s Demography in the NewCentury: Boomers and New Immigrantsas Major PlayersWilliam H. Frey, Ph.D.Senior FellowMilken InstituteandCenter for Social and Demographic AnalysisState University of New York at AlbanyAlbany, New York

They always say, “Demography is destiny,” butdemographers don’t really predict that destinyvery accurately. Of course, we keep trying, and Iam gong to make some predictions today. Someof them, I hope will be right. I think that whenyou are considering the myriad of forces that aregoing to shape the demographic landscape of theUnited States over the next 10, 20, or 30 years,probably two of the most important actors in thisscenario will be: (1) the baby boomers and (2) thenew immigrant minorities. These two groups arereally going to have a large effect on the demo-


graphic dynamics of regions, metropolitan areas,and neighborhoods. Both will have a huge impacton housing demand, housing preferences, andrelated kinds of consumer behavior.

The Baby BoomersWe are all familiar with the baby boomers. Wehave been following them for decades. We knowthem. We love them. Many of us are them. Wehave seen them go through the high school yearsand later on to college and to Woodstock. Wehave seen them get into the labor market in the1970s, and then the stock market in the 1980s and1990s. Now we are going to project them goinginto retirement communities, into second homes,and to assisted living as well as other kinds ofelderly activities. I am going to talk a bit aboutthe boomers today and where they stand in thewhole picture of demographic change in the nextcentury.

The new immigrants are also going to be impor-tant. Beginning with the 1965 immigration lawchange, the new immigrants have been movinghere in especially large numbers—about a milliona year since the 1980s. Most are from LatinAmerica and Asia, but they hail from other partsof the world as well. They will account for wellover half of the 50 million people who will beadded to our population over the next 25 years, ifyou count these immigrants and their children.So, the boomers and the new immigrants will beimportant population segments that are going toaffect our growth.

Let’s first look at the magnitudes of householdchanges by age of householder during the firstdecade of the next century (Figure 1).

The biggest gains will clearly be with the 55 to 64year-olds. These are the early baby boomers,born between 1946 and 1955, who will make thetransition from empty nesters to preretirees.Many of them will retire from their regular jobs,so to speak. But they won’t retire completely.Recent trends show that retirement is somethingthat will be phased in—through bridge jobs orpart-time jobs. These early boomers are going toremain active in one way or another. They arelikely to make some moves during this period,although not a large number. They will certainly

be a force to be reckoned with in the first decadeof the next century.

The group making the second largest gains is alsobaby boomers. These are the late baby boomersborn roughly between 1956 and 1965. These folkswill still be in their prime career ages and primeearnings ages. Many will be looking to upgradetheir housing. Compared with past generations atthis stage of the lifecycle, they will have fewerchildren. These late boomers are more likely tobe empty nesters than other early generations,which will give them more freedom concerningmigration and housing choices.

The third group that is growing is compiled ofthe 65 to 74 year-olds, the younger elderly. Theseare folks who were born during World War II ora little before. They were fortunate to come intoadulthood during the prosperous 1950s, whenthey had good jobs, including benefits and pen-sions. As parents of the baby boom generation,they have plenty of children to help them throughtheir elderly years. While a smaller component ofthe household growth trend, this is a relativelylucky cohort of folks who are moving into elder-hood during the first decade of the next century.

Turning to the negative side of things, let’s lookat the 35 to 44 year-olds. These are people whowere born into the “baby bust” generation, be-tween 1966 and 1975. These small cohorts contin-ue to lurk in the shadow of the larger baby-boom

-3,500,679

1,922,839

1,140,031

6,548,652

217,355

3,607,427

Figure 1Household Changes in 2000–2010

25–34

35–44

45–54

55–64

65–74

75+

Source: William H. Frey

cohorts and will not be a growing market. A smallincrease can be seen for the late “generationXers” born in the late 1970s and early 1980s. Andnot shown in Figure 1 is the relatively largegroup that is going to be bubbling up into theirfirst home-buying years in the second decade ofthe 21st century—the “echo generation.” Theseare folks who were born to the late baby boomersand also to some of the early boomers who want-ed to delay their childbearing.

So this is the scenario for the next decade. Let’snow see what changes the large boomer cohortswill effect on specific age groups over the next 30


years—the first three decades of the 21st centu-ry, as projected. Of course, the 45 to 54 year-oldempty-nest age group will soon turn from a largegaining market in the 2000-2010 decade to a largedeclining market, as the “busters” move into thatage group during 2010-2020. This is really a verylarge market that will turn negative in the not-too-far-distant future. This is so with the pre-elderly group, persons aged 55 to 64. The pre-elderly population will be pretty large and con-tinue growing over the next 20 years. And it isone to pay attention to (Figure 2).

Moving on to the elderly cohorts, I am now goingto make an important distinction between what Icall the “yuppie elderly” and the “needy elderly.”The yuppie elderly are those folks who are be-tween the ages of 65 and 74. More than half ofthem live in married-couple households. They aregenerally in good health, and they have high dis-posable incomes. The needy elderly are olderthan 75. Particularly in their eighties and there-after, they tend to be surviving spouse house-holds, mostly widows. They are people who gen-erally do not have high incomes, particularly thecurrent generation of them. And they are depen-dent on the assistance of their family and othersocial institutions. As such, they are not as desir-able a population group to attract to areas as arethe yuppie elderly (Figure 3).

As you can see from Figure 3, the “yuppie elder-ly” segment will grow substantially in the seconddecade of the next century. It will be one of themost valued, most sought-after markets that wehave seen for a long time—in terms of buildingretirement communities and other amenities andconsumer items that will be targeted to thisgroup. We have already seen that the major mag-net states for the elderly have gone beyond Ari-zona and Florida to states in the Southeast andother parts of the West, from larger metropolitanareas to smaller communities. This “spilling out”of yuppie elderly into all parts of the country willcontinue into the next century.

Now I have a question I want you to think aboutbefore you look at the next figure. Conjure upthe “Leave it to Beaver” family of the 1950s—afamily with a husband who works full time andthe wife stays at home as they raise one or more

2000–2010

Figure 3Population Changes in Next Three Decades

Yuppie Elderly(65–74)

Needy Elderly(75+)

12,000

10,000

8,000

6,000

4,000

2,000

0


2010–2020

2020–2030

2000–2010

Empty Nesters(45–54)

Pre-Elderly(55–64)

12,00010,0008,0006,0004,0002,000

0-2,000-4,000-6,000-8,000


2010–2020

2020–2030

Figure 2Population Changes in Next Three Decades


children under 18. What percentage of all house-holds today fulfills this idea? You probablyguessed way too high. The “Leave it to Beaver”family comprises only 7 percent of all households,according to the latest 1998 statistics. Moreover,only 13 percent of all married couples conform tothe famous 1950s stereotype (Figure 4).

The real disqualifier, for most of today’s families,is the “traditional homemaker” role of thewomen. Today, most women work at least parttime. This was simply to dramatize an aspect ofhouseholds that has changed quite a bit in thekind of family neighborhoods we used to thinkabout in the 1950s and the 1960s.

Even in the last 20 years, there has been a demo-graphic flip-flop between the number of house-holds of married couples with kids (irrespectiveof whether or not the wife worked) and nonfami-ly households, persons who are living alone orwith nonrelatives. In 1990, for the first time,there were more nonfamily households thanthere were married couples with kids (Figure 5).

This is a backdrop for immense change. Let’s goback to our life-course idea again. Shown in Fig-ure 6 are the household types associated with dif-ferent age groups. The share of nonfamily house-holds is significant for several groups. I especial-ly want to call your attention to the 55 to 64 year-old age group. People who are married with nokids are significant in this group—which willbecome a very large segment of the population inthe next two decades. The number of “emptynesters” and people who have never had childrenwho are in their prime career and pre-elderlyyears, is increasing. They will be much more foot-loose and flexible in terms of their housing andmigration patterns than were previous genera-tions at this age.

Now let’s talk about how the empty nesters andthe elderly, particularly the “yuppie elderly,” dis-tribute themselves across metropolitan areas.Much has been written about these groups hold-ing the potential to revitalize central cities. Yetwhen we look at the current distribution ofhouseholds between cities and suburbs, it be-comes clear that the suburbs constitute the domi-

13% of All Married Couples

Figure 4Husband Works and Wife Stays Home with Kids



Figure 5Household Type Changes, 1970–1998

19751970

50

40

30

20

10

0


Married couples with kids Nonfamily households

1980 1985 1990 1995 1998

Figure 6Household Type by Age, 1998

15–24 25–34

35–44 45–64 65+

Married with kids

Married without kids

Non family

All others

nant place of residence among households aboveage 35.

However, among the 45 to 64 year-old population,poised to enter their elderly years, couples withor without kids are especially likely to reside inthe suburbs. The “aging in place” of this groupwill likely take place in the suburbs. As we moveinto the future, we need to be concerned aboutwhat is going to happen, particularly in the outersuburbs, to elderly folks who were dependent onthe automobile in their younger years. Now liv-ing in a dispersed suburban community, they willbe in greater need of medical services and otherkinds of social services. The reality is that veryfew of today’s soon-to-be elderly cohorts willmove back to the city. The challenge will be toaccommodate them in a more dispersed suburbansettlement system (Figures 7 and 8).


The New Immigrant MinoritiesThis is the first set of actors I wanted to empha-size—the soon-to-be elderly baby boomers. NowI would like to talk about the new immigrantminority population that has been growing, inlarge numbers, over the past two decades. As Iindicated earlier, they come at about a million ayear. They are unevenly distributed on mostsocial and economic measures. That is, there is ahigher share of immigrants who do not have highschool diplomas than in the rest of the population;but there are also a larger percentage of themwho have PhDs. The foreign-born population inthe United States is now about one out of ten,but they represent a somewhat larger share ofthe rental population and a smaller percentage ofhomeowners.

Yet these new immigrant groups are unevenlydistributed, geographically. I am not only talkingabout distributions across neighborhoods, butacross broad regions of the country. Figure 9 liststhe ten metropolitan areas that have attractedthe most immigrants over the first eight years ofthe 1990s.

During this period, as in the previous decade,two-thirds of all immigrants to the United Stateswent to these ten metropolitan areas, which arehome to only about 30 percent of the total U.S.population. There is a high clustering of immi-grants, and they tend to concentrate in these par-ticular metropolitan areas.

However, most of these high-immigrant-attract-ing areas actually lost domestic migrants overthe 1990s. Among people moving within theUnited States, more are leaving these areas thanare moving into them. (Houston and Dallas arethe two exceptions.)

On the other hand, if you look at the bottom partof Figure 9, you will see metropolitan areas thathave gained the most domestic migrants over the1990-1998 period. And these areas, with the ex-ception of Dallas, are not really gaining all thatmany immigrants. So there are immigrant mag-nets and domestic migrant magnets drawing twodifferent kinds of folks.

Figure 7Metro Households Residing in Suburbs

0 10 20 30 40 50 60 70 80 90 100

15–24

25–34

35–44

45–54

65+


Percent

Figure 8Suburban Metro Households Ages 45–64

0 10 20 30 40 50 60 70 80 90 100

Non-family

Marriedw/o kids

Marriedwith kids


Percent


Why do new immigrants tend to cluster in metro-politan areas that many domestic migrants areleaving? The former has to do, in part, with ourimmigration policy and tradition, which is veryoriented toward family reunification. The “chainmigration” of individuals with similar nationalorigins is to destinations where they have friendsand family support systems to anchor them in asmall number of immigrant gateway areas.Domestic migrants, in contrast, tend to movewhere the jobs are. They are not as constrainedas the immigrant groups. They tend to move toplaces that are growing in one period and thenmove on to another place that might be growingin the next period. During the 1990s, Atlanta anda lot of the Southeast, as well as the RockyMountain and western states, have been majorgainers of domestic migrants.

Figure 10 shows the states that gained the mostimmigrants: California, Florida, Illinois, NewJersey, New York, and Texas. Three-quarters ofall immigrants tend to go to these six states.They are the traditional ones that we know pret-ty well. Figure 11 shows the states that gainedthe most domestic migrants during the 1990-1997period. California is not one of them. Illinois,New York, and New Jersey are not among themeither. These high immigration states are all los-ing domestic migrants. So we see that there is adisparity between large metropolitan regions oreven states that gained domestic migrants andthose that gained immigrants.

An important part of this migration process wasthe interplay between California and the rest ofthe West in the trend during the 1990s in annualmigration rates. Immigration who positive inCalifornia for all those years, but the domesticmigration rate was negative—and it was particu-larly negative during the economic downturn in1992 and 1993. This helped to fuel the West’s pop-ulation growth through domestic migration. Wecan see in Figures 12a and 12b that the West wasgrowing almost entirely from domestic migrationas part of this pattern. A similar dynamic wasalso at work between the industrial Northeast(especially the greater New York metropolitanarea) and the growing South Atlantic states(Figure 11).

The out-migrants from California to the West andfrom the Northeast to the South Atlantic regiontend to prefer smaller metropolitan and non-metropolitan areas. When you think of the peopleforming the new “rural renaissance” in theUnited States, some stereotypes come to mind.One is the “yuppie elderly” moving to placesaway from the highly dense urban environment.Then there is the itinerant professional or movie-star populations who are locating in out-of-the-

Figure 91990s Immigration and Domestic Migration

High Immigration Metropolitan Areas

Rank Metro Area Immigration Net Domestic Migration

1 New York 1,045,347 -1,551,591

2 Los Angeles 990,981 -1,425,464

3 San Francisco/Oakland 342,206 -303,576

4 Chicago 251,582 -403,896

5 Miami 212,515 -37,802

6 Washington/Baltimore 189,513 -149,227

7 Houston 169,073 -55,425

8 Dallas/Fort Worth 133,946 -154,298

9 San Diego 125,507 -158,263

10 Boston 101,294 -182,493

High Domestic Migration Metropolitan Areas

Rank Metro Area Immigration Net Domestic Migration

1 Atlanta 53,284 371,061

2 Las Vegas 22,027 307,585

3 Phoenix 48,214 294,024

4 Portland, Oregon 37,437 177,851

5 Denver 35,604 157,069

6 Dallas/Fort Worth 133,946 154,298

7 Seattle 52,872 136,262

8 Austin 21,104 125,295

9 Orlando 33,399 124,369

10 Raleigh/Durham 10,715 122,087

11 Tampa/St. Petersburg 28,891 116,780

12 Charlotte 9,649 112,281

13 West Palm Beach 35,176 101,436



dynamic into the suburbs. In 21 of the 29 countiesin the greater New York metropolitan area(CMSA), there is a net out-migration of domesticmigrants while, at the same time, there are gainsdue to immigration. This pattern spills out intothe inner and even middle suburbs of the NewYork metropolitan region. So we see that immi-grant growth is not just a central city phenome-non. In high immigration regions, immigrants arethe main source of population growth not only inthe city but also in large parts of the suburbs.More patterns can be observed in Los Angeles,San Francisco, and some of the other high immi-gration magnets.

The clustering of immigrants is also related toother socioeconomic characteristics like race andethnicity. Figure 13 shows that home ownershiprates differ by race-ethnicity, as well as by for-eign-born, native-born, citizenship status.Therefore, areas with lots of new immigrantminorities have different levels of home owner-ship. They have different levels of density, hous-ing use, and so forth. It is important to take intoaccount regional distinctions in immigration for avast variety of housing characteristics.

The clustering of immigration patterns will affectthe race-ethnic profiles of states, in the future(Figure 13). In the year 2025, we project that 12states will be less than 60 percent white. Therewill be 25 states that will be more than three-quarters white, and 12 will be more than 85 per-cent white. This is a broad-brush picture, but itdoes indicate divergences across regions that arebeginning to emerge. I want to wrap things upby reemphasizing that there are two very impor-tant demographic dynamics occurring as wemove into the next century. One will be the agingof the baby boomers: folks getting into their pre-retirement years, then into their “yuppie elderly”years. These trends suggest very different demo-graphic profiles for different regions of the coun-try in terms of their race-ethnic makeup, as wellas their age profiles.

One implication will be the emergence of what Icall “a racial generation gap.” In California in theyear 2025, the child population is projected to beonly 25 percent white (Figure 14). It is also esti-mated to be more than 50 percent Hispanic. The

Figure 10High Immigration States, 1990–1997


Figure 11Net Domestic Migration, 1990–1997


way places with high amenities and other attrac-tions for people with significant disposableincomes. Still another stereotype is the “would-be suburbanites.” These are people who, in thepast, would have lived in the suburbs but arenow moving to smaller places or nonmetropolitanareas because of affordability and because of thecongestion and other disamenities they see inlarge metropolitan areas. Many of these peoplemove from metropolitan areas that are the highimmigration magnets.

Within the high-immigration metropolitan areas,there is also a spreading out of the immigration

Greatest gaining states(10)

Greatest losing states (5)

Other gaining states (22)

Other losing states (13)

Our firm has done several empirical studies thattend to confirm this. And they were interesting.Studies of outmigration in states like Californiaduring the 1990s showed that it was a lot of thelower-middle class white and Black householdsthat were moving out.

People were moving out for two primary reasons:the high living costs in California and the depres-sive effect that the influx of low-wage immi-grants had on wage rates. And these were thepeople that spearheaded the outmigration.


working-age and home-buying age populationswill be only about one-third white and more thantwo-fifths Hispanic. The older population will stillbe over 50 percent white. So you have differentmarkets for different age groups, with differentinterests in schools and children for Hispanics, onthe one hand, and in elderly concerns, medicalservices and so forth, among the still predomi-nantly white, elderly age group, on the other.

The situation will be different in Utah, where, inthe year 2025 the racial profile will be mostlywhite across the entire age spectrum. It will bedifferent than California. Both will be differentthan Florida, or Texas, or Ohio, or Pennsylvania.My main point is U. S. statistics—with respect torace-ethnicity and age, and their demands forhousing and many other consumer items— willdiffer sharply across regions.

The “racial generation gap” idea emphasizes thelong-term implications of the aging of the babyboomers and the clustered nature of immigration.The local implications of both of these trends areimportant to note as we move into the new mil-lennium.

Selected ReferencesWilliam H. Frey, “The Diversity Myth,” Ameri-can Demographics (June 1998): 38-43.

—“The New Demographic Divide in the US: Im-migrant and Domestic Migration Magnets,” ThePublic Perspective, vol. 9, no. 4 (1998): 25-30.

Response: Nina J. GruenExecutive Vice President/Principal SociologistGruen Gruen + AssociatesSan Francisco, California

Bill, you have done an outstanding job character-izing America’s new sociodemographic and spa-tial divisions. And you have provided an impor-tant insight to us that the primary motivation fordomestic migration patterns tends to be econom-ic opportunity, while the foreign immigration pat-terns tend to be based more on kinship relation-ships.

Immigration

Figure 12aImmigration and Domestic MigrationCalifornia, 1991–1997

91 92 93 94 95 96 97

450350250150500

-50-150-250-350-450


Year

Domestic Migration

Immigration

Figure 12bImmigration and Domestic MigrationRest of the West, 1991–1997

91 92 93 94 95 96 97

450350250150500

-50-150-250-350-450


Year

Domestic Migration


Now while smaller in number, higher-income pro-fessionals also have moved to these nonurban,locations that offer them the desired quality oflife. Technology has made this possible.

We just completed last month another study inNorth Scottsdale, which is the northern, upscalepart of the Phoenix metropolitan region. I wasastounded to find how many owners or firmslocated there told me that 90 to 100 percent oftheir market was outside the region. Now thesewere people who picked that area for their quali-

ty of life, not because their market was anywhereNorth Scottsdale.

As Dr. Frey pointed out, America is becomingbipolar with respect to both age and income, withsignificant growth in the higher-income, olderCaucasian households, as well as significantgrowth in young, poor minority households. Andhe also pointed out how critical the baby boomgeneration is as a demographic force. I don’tthink we would have half as much talk about sav-ing Medicare if it wasn’t for the baby boom gen-eration. But you know what I like to say aboutthat generation: the baby boomers have seentheir parents age and have decided against it.

So I would like to state what I consider to be thehousing dilemma over the next decade. Thosewith the income will not have an obvious needand those with the need, will not have the incometo translate this need into demand. I would liketo repeat this. Because if you go away with onephrase, I hope you take this with you. Those withthe income will not have an obvious need, andthose with the need will not have the income totranslate this need into demand.

The higher-income, over 55, primarily Caucasianhouseholds will have the dollars to purchasehousing. But before these dollars turn into a pur-chase, someone has to create the need for thishousing. Now car companies have been successfulat creating these needs for years. And it seems tome that those developers who are going to besuccessful are going to have to become moreadept at doing so over the coming decade.

I agree with Bill that most of these higher-income people will live in suburbs, but if you arereally talking upper income, they will move tothe center cities, if the cities offer relatively safeenvironments like San Francisco, New York,Chicago, and Boston. But this is a small, very,very upscale market.

Many middle-income and upper middle-income55-year-olds are going to opt for a resort environ-ment. The type that Dell Webb does so well. Andthey are going to continue to move to the Sunbeltstates. They also will have more opportunitiescloser to home. Dell Webb just built Huntley Sun

Native born

Figure 13Homeowners Nativity by Race

White Black Hispanic

100

80

60

40

20

0


Foreign born

Noncitizen

Figure 14Net Domestic Migration, 1990–1997


Percent white in state60 – 75% (11)

75 – 85% (12)

<60% (14)

>85% (13)


City outside Chicago. And I think it is doing verywell already with these units.

What do these people get? They get a whole newlifestyle, a resort environment, if you will. Andthey get a new unit, while smaller, with all sortsof features they didn’t have in their existinghome. Media walls and jacuzzis and all sorts ofcomputer hook ups. And so these units are goingto be very successful.

Now on the other end of the scale are the young,lower-middle-income minorities. And this in-creasingly is going to be a problem. Ninety per-cent of California’s future growth is likely tostem from immigrants, both legal and illegal, andfrom minority births. I would like to give you afew statistics that show what is happening.

In 1980, non-Hispanic white births accounted for56 percent of all California births. And by 2005,there are going to account only for one-third, Thereverse is the pattern for Hispanic births. By2005, one out of every two births in that statewill be Hispanic.

“Smart growth” policies, to the extent this termis synonymous with restrictions on the develop-ment of the urban fringe, decrease significantlythe amount of affordable housing in that region.And outright government subsidies only providea drop-in-the-bucket solution, given the magni-tude of that need.

In California, smart growth policies all too oftenreduce the amount of development land at thefringes, on the premise that infill housing can beprovided. But if you have ever tried to developinfill housing in California, you know it is diffi-cult, indeed, and the costs are extremely high,after you pay all the mitigation costs.

What you are going to see in states like Califor-nia is going to happen elsewhere—a tremendousamount of doubling and tripling up in housingunits. No one that I know has adequate data onthis. And I doubt if you are going to get veryaccurate data even from the 2000 census becausewe are not sure these people are going to be veryhappy about giving this information. We knowalready that there are Vietnamese living in con-

tainers in places like the San Jose, Silicon Valleyarea. This whole problem has not been looked at.

So what is the result of this housing dilemma? Inhigh-cost locations like California, where demandfor affordable housing will be far in excess of sup-ply for the foreseeable future, there will bedownward pressures on housing quality. Land-lords will have the incentive to undermaintainthe quality of units because there is a continuousstream of people willing to pay anything to getone. Almost certainly, these pressures are goingto result in new blighted areas, or what we usedto call slums.

Upper-income households whose dollars providethem choice will increasingly move either togated communities, a la Mexico and CentralAmerica, or to communities in the center citieswithout gates but with the security guards andeverything else that gated communities can offer.Middle America will be going into domestic loca-tions, domestic migration locations that will tendto be very suburban in nature.

What do I see as the bottom line for all this? Mybottom line is that these distinct regional divi-sions will ultimately be far more homogeneouswith respect to race- and class-segregated com-munities than we have yet seen in America.

R e s p o n s ePatrick PhillipsSenior Vice PresidentEconomics Research AssociatesWashington, D.C.

I’m going to touch very briefly on specific mar-kets and how they relate to these demographictrends. Then Ialso touch on a couple of topicsfrom the headlines that you have already heardabout in terms of new urbanism and smartgrowth.

We are seeing three broad phenomena out therein markets. And this is primarily from looking atsupply trends and at what is happening withdevelopers. Interestingly, we are seeing a highlyvisible, but as Nina noted, quite limited in termsof absolute numbers, resurgence of downtown


cores. The resurgence is in surprising places likeDallas and Houston, which is partly demographicand partly a result of the repricing of downtownreal estate assets whereby housing is now eco-nomically viable in these downtowns.

We are seeing very striking values in places likedowntown Denver, for example, where realestate values on a per square foot basis in theseold block buildings are reaching unprecedentedheights. We are also seeing, obviously, an ongoinggreenfield development at the urban edges. It isbeing driven by the same factor it has alwaysbeen driven by, which is primarily value.

We are also seeing a resurgence in infill develop-ment of all scales. This is a widespread phenome-non around the country in close-in neighbor-hoods, still proximate to major employment cen-ters and enhanced by the kinds of urban ameni-ties that older neighborhoods tend to have, fromtrees to transit As Ron pointed out earlier, trafficcongestion in the suburbs is partly a factor.

Now these are largely nonimmigrant-relatedphenomena. They are driven, in part, by theboomer demographics that Dr. Frey talked about.But they are really related to new development.To the extent that immigration is correlated withlower income, immigrants are, of course, morelikely to live in older housing. But what I findinteresting, again, from the perspective of some-one who is looking at specific submarkets, is theprospect of these widely divergent incomegroups existing together within central and mid-town areas. And this appears to be particularlytrue in the kind of immigrant magnet metroareas that Dr. Frey talked about.

I think of San Francisco and Manhattan andWashington, D.C., for example, where you have ahigh concentration of urban amenities that tendsto drive or retain or attract those folks with highdisposable incomes that have suitable demo-graphic characteristics. But clearly you have bur-geoning immigration. You have vibrant commer-cial districts, in some cases, as a result. And youhave fairly diverse and rich urban neighborhoods.

More troubling, I think, are the data that appearto show a continued outward movement of white

affluent populations in these metro areas. Andone can’t escape the implications—the ongoingerosion of central area tax bases and pressure onschool systems and concentration of the poorwithin central cities.

Real estate investment patterns show the emer-gence or the reinforcement of these high-endenclaves, who consume relatively few public ser-vices, particularly public education, but by virtueof age or income are high consumers of urbanamenities. We are also seeing, of course, stronggrowth in distant outer suburban markets for theaffluent places like Princeton, New Jersey, andHopkington, Massachusetts, and so on.

The domestic migrant magnets, metro areas inthe West and the mountain states that were men-tioned and the South, face the range of issuesthat most high growth-areas face, which areproblems of infrastructure finance, taxes, andtraffic—the typical sort of middle-class growthmanagement issues that resurge again and againwith real estate cycles.

We also see, perhaps, a more fearful and lessaccommodating approach to the perceived illsassociated with diversity. During the rapidgrowth in Colorado of domestic migrants fromCalifornia there were lots of quotes like, “wedon’t want to see what I left behind.” The impli-cation, of course, was that a certain ethnic orincome diversity was less desirable.

Now, to the topics in the news. We will probablyhear about this new urbanism this afternoonwhen we talk about product types and designissues. While originating, I think, as a suburbanlargely middle-class phenomenon, its lessons arenow being applied to the regeneration of olderneighborhoods. And I think that will be an inter-esting trend to watch. It is clearly responsive tothe opportunities that these new markets in infilland mixed use and transit-enhanced neighbor-hoods produce. On the other hand, the likelihoodthat new urbanism’s evil twin, gated communi-ties, will emerge in central areas, is, I think,quite strong.

On smart growth, it appears to me that there isan interesting collision between the more conser-


vative politics of these domestic migrant mar-kets, places like Denver and the mountain states,and the typical middle-class concerns regardingtaxes, schools and traffic. And it is very enter-taining sometimes to read the editorial pages ofpapers like the Rocky Mountain News . There itis really anathema to regulate anything exceptthe other guy’s land use and development prac-tices.

Smart growth policies limit the opportunity toflee to the urban edge, to grow at the edge.Perhaps, smart growth policies may, in fact, endup alienating their core constituency, a well-edu-cated middle class. That, combined with the chal-lenges related to affordable housing supply, Ithink, may make its political future more tenuousas well.

R e s p o n s eTodd ZimmermanManaging PrincipalZimmerman/Volk Associates, Inc.Clinton, New Jersey

It is at the local level that housing must beunderstood. Housing is local. National statistics,except for the mortgage rate, don’t count. Allhousing markets are submarkets. That is one rea-son why there are very few housing enterprisesthat work on a national level.

The question is not so much which metro. Thequestion is who will settle where in each metroand how one defines those areas. We must paymuch greater attention to the different demo-graphic and housing dynamics of the exurbanitefringe, the existing suburbs and the urban core.

Dr. Frey’s reference to the metro melting pot isan intriguing example. Commentators still pre-sent ethnic diversification in the context of themelting pot image of the late 19th and early 20thcenturies. The melting pot often remains anappropriate metaphor in the homogenizing land-scape of the new suburbs, but the urban core ishost to a different dynamic. It is more akin to atossed salad, as each ethnic group struggles toretain its cultural heritage, its group identity.Assimilation into the dominant culture was once

measured in generational terms. Now it is bettermeasured in spatial terms: in contrast to theurban core, the exurbanite fringe looks remark-ably the same, regardless of the racial or ethniccharacteristics of residents or even the location.Thanks to the efficiencies of the mass market, anew subdivision in many locations across thecountry can have only superficial differences.

The exurbanite fringe is where the image ofAmerica continually is made and remade. I don’tdoubt Dr. Frey’s assertion that only 7 percent ofAmerican households have a working dad, stay-at-home mom, and children. That statistic seemsso startling because our image of ourselves isformed not by demographic reality, but by thevivid scenarios painted by the companies that areselling us minivans and washing detergent. Westill think that we are the Ozzie and Harriet fam-ily because that is what television advertisingtells us we are.

There has been a disturbing shift over the pastfew years in what the television ads are showing,however. The advertising images of traditionalneighborhoods with tree-lined streets with picketfences are being supplanted by raw subdivisionswith the dramatic repetition of “snout house”garages. This is, I guess, one signal of genera-tional changes in ad agency creative talent as thebaby boomers are supplanted by the Gen Xerswho grew up accepting that the image of our newsuburbs is one of production efficiency.

Image is very, very important. Just look at themass market house that gets built across most ofAmerica, from New England to the PacificNorthwest, and from Georgia to Texas. (Thenthere’s the other house that gets built in Floridaand the Southwest.) These puffed-up houses forfull-nest traditional families are the product ofimage, born of a particular confluence of econom-ics and demographics.

The recession in the early 1990s coincided withthe nesting of the peak of the baby boomer gen-eration. Leading builders responded by produc-ing four-bedroom, two-and-a-half-bath houseswith a family room. They delivered as big a boxas possible for the lowest cost per square foot.The mass market responded, and these houses


became the new standard, defining the newAmerican landscape in a very powerful way forthe full-nest baby boomer households and theirpretenders and emulators. As you can see fromthe demographics, the full-nest households, par-ticularly the conventional full-nest households,are not as dominant as they would appear to befrom popular images of ourselves. Yet to fit intothe strange geometry of the new American sub-urb, households must appear to live the full-nest,traditional lifestyle.

Since I was asked to look forward over the next20 years, I have a few points that I want you tothink about, with titles drawn from cultural iconsof various degrees of seriousness:

—My Generation: “I hope I die before I getold.”I am the first baby boomer. I was born 9 monthsand 20 minutes after the Japanese surrendered,so the baby boom has not yet turned 53. Thathappens on June 22d of this year.

The baby boomers have been consistent in onlyone thing: they have steadfastly refused to followpredictable behavior at any life stage. They sim-ply repudiate the patterns set by predecessorgenerations. So all bets are off until the babyboomers are gone. For example, this notion thatwe are all headed to a Del Webb retirement envi-ronment in 2020 is wrong. We don’t know whatthe right notion is, but we do know that expect-ing the baby boomers to follow predictableretirement patterns is wrong. We strongly cau-tion those who are planning age-associated orage-qualified communities large enough to have adecade or so of absorption ahead of them, thattheir community planning must be very flexible.

Twenty years from now the leading-edge babyboomers will be in their mid-seventies. The peakbaby boomers, the top of the bell curve, will be intheir mid-sixties and the trailing edge will be intheir mid-fifties. From my perspective, despitethe gray hair and the glasses I need to read mynotes, these are young people. And they’re deter-mined to stay young. Life Extension Institute isadvertising on television now.

One of the frightening things regarding babyboomers is what Dr. Frey characterized as the“racial generation gap.” I predict it will have dra-matic ramifications. It certainly has significantimplications for school funding. The cascadingimpact of underfunded schools on housing values,and the impact of lagging housing values on set-tlement patterns, could alter the landscape ofthose areas with a pronounced racial generationgap.

—The Completion of Nat TurnerI’m sure William Styron will never see my muti-lation of the title of his book.

I think that despite immigration, Blacks, after400 years, are finally going to make it into themainstream American economy. We are seeing italready in cities around the country. We are see-ing very powerful, genuine social and economicintegration. We are seeing the beneficial conse-quences of affirmative action programs.

This is going to have astonishing ramificationsfor the way the mainstream Americans—which isa code word for white, Anglo-Saxon Protestantsand their emulators—respond to this multicultur-al change in our cities and in our suburbs. We willsimply be a better, more comfortable nation.

As a footnote, let me point out that the first post-baby boomer cultural movement is hip-hop, notjust rap music but the whole hip-hop culture. Thehip-hop style, with its urban African-Americanand West Indian roots, may seem strange andforeign now. But 20 years from now it will be asmain stream as the jazz influence became in the1920s and 1930s.

—Revenge of the NerdsIn the digital future, knowledge workers will callthe shots. In the new economy, where companiessettle depends a great deal on their ability toattract and retain knowledge workers. In thecompetition for those employees, salary and ben-efits are no longer enough. Affordable housingstock is no longer enough. Quality of life becomesincreasingly important.

The small, nimble companies and even the big,fat, slow companies are making decisions on relo-cations and expansions based on the kind of life


that they can offer their potential employees. Notjust housing costs, not just school quality, but thequality of daily existence.

Collaborative Economics in Palo Alto has madethe case that the new economy values vital cen-ters with a choice of living options in a placewhere natural systems are preserved and yetaccessible. These new and remade companies willseek locations that provide a variety of housingtypes in compact and sustainable communities,surrounded by nature—in essence, neighbor-hoods structured according to the principles ofthe New Urbanism.

Since our practice is immersed in redevelopmentand development using compact and sustainableforms, and since I was one of the group thatframed the charter of the Congress for the NewUrbanism, I find it hard to view any housingissues without seeing them in the neighborhoodcontext. I am proud to report that the NewUrbanism was recently called the most covertlyradical movement in America. It is radicalbecause the New Urbanism seeks to get to theroot of the problem.

We can argue about issues ranging in importancefrom how long the livingroom is going to last tohow we can make decent housing available to allAmericans. But when one views housing as thefoundation of neighborhood-based community,then the big question for the future is not somuch what kind of house, but rather how arehouses arranged in the landscape? How does thatarrangement affect the lives of residents? Forexample, affordable housing does not accomplishmuch for its residents if it is not in a neighbor-hood with access to employment and convenientgoods and services.

What kind of settlement pattern will we see inthe future? Will we continue to relinquish theefficiency inherent in passed-over or redevelop-ment sites by emulating the suburban form inurban locations? Will we continue to build hous-ing subdivisions with narrow price bands, wherethe young and the old live lives isolated fromcivic life?

We can instead build and rebuild communitiesfilled with choices: choices of housing types andtenures, housing options for a broad range ofincomes and ages, transportation options, andmaybe most important, the option to participatein civic life. We can build and rebuild genuineneighborhoods.

Discussion and Questions & AnswersFrey: One of the things that Nina pointed up hitthe nail on the head regarding the main implica-tions of these trends. What will they mean interms of segregation, homogeneous communities,and this sort of thing? And I guess I don’t knowthe answer to that.

Gruen: I think I do. Unfortunately, and I hatesaying this because it tends to be a downer, butI’m not as optimistic as Todd is that we are allgoing to go happily into the urban neighborhoodstogether. I see your gateway metros, that youwrote so brilliantly about, as being primarilyrepositories for the underclass, however we callit, and the high-income.

It is because the high income, one way or anoth-er, can insulate themselves. And I see yourdomestic patterns as being very extensively mid-dle class. Now I’m not saying there won’t be richand poor in the domestic migration areas. Ofcourse there will. But proportionately you aregoing to have far more middle-class households inthese domestic migration areas. And you aregoing to have far more high income and lowincome in your gateway metros.

It is the first time I see America really goingthat way. So when I said the metros are going tohave a Mexican, South American, CentralAmerican pattern, that was a euphemism. I’ll sayit now very straightforwardly. I see bipolariza-tion of income, class, and race in the metro areas.

Frey: Well, let me sound a more hopeful note. Tothe extent that we are going to have a meltingpot in the United States with good race relationsand low levels of residential segregation, exceptmaybe for these few gated communities, it willexist in your Los Angeleses, your New Yorks,your San Franciscos. To the extent that there


will be this accommodation of the second genera-tion, the third generation.

I think the assimilation will occur in these multi-ethnic areas. And the whites and the minoritieswill accommodate, somehow, perhaps not interms of everybody getting into the middle class,but in terms of lower levels of segregation, moreincorporation into the communities. Rememberthese people vote.

Gruen: Well, in California, and I can’t speak forall areas, when I talked to housing developers, ifthey build a development in southern California,they will tell me it is 90 percent Asian, or 90 per-cent something else, in the entire development.There may be 300 housing units.

I think you will see integration in the generalcommunity. I’m not so sure you are going to seeit so cheek by jowl within a housing development.

Zimmerman: It’s also a function of what the mar-ket is offered, and how the marketing is posi-tioned. We still have this notion that really smartmarketing is target marketing. We segment inever finer slices and then do a very, very goodjob at designing and marketing to a very specificgroup. The increased sophistication of housingmarketing over the past 30 years has been one ofthe things that has led us to these isolated podsof very narrowly defined places for very narrow-ly defined markets.

There are a couple of hopeful trends out there,with regard to resettlement in multicultural,mixed-income, mixed-age, mixed-tenure commu-nities: the charter school movement, and HUD’sgrand experiment with the HOPE VI program.

Audience Member: You look at Proposition 187,and Congress seems to be following that

trend as well. And I just want to know how yousee that affecting the housing situation?Especially in places like northern California. Wepass 187 and talk about a melting pot happening.

Gruen: I wasn’t talking about a melting pot hap-pening. I was the only one, I guess, on the panelnot doing so. I think you will see class integra-tion. In other words, it won’t matter about race

or ethnicity very much, but it will matter aboutclass. It always has in America. So I think youwill see mixtures of Hispanic, Asian, Black,Caucasian, non-Hispanics, if they all are from rel-atively the same class structure.

What I don’t think you are going to see in anylarge number is the middle class (any of thesecombinations) living with underclass of whateverrace or ethnicity. It has never happened success-fully in America. I don’t think it ever will. And Ithink a lot of New Urbanism is a way of havingthe middle class preserve its turf.

Certainly, you are going to have larger communi-ties that will have all classes in them. I just don’tthink you are going to have housing develop-ments and smaller neighborhoods with a widevariety of classes.

Zimmerman: An integration of a wide socioeco-nomic spectrum outside of the center city isunlikely because you don’t have the density toaccomplish that. When you have a low-densityenvironment, every unit has a metaphorical neonsign above it identifying, from the street, themarket to which it is targeted. We can’t get awayfrom that. I’ll agree with you there. But onlythere.

Frey: I will also agree with the class argument. Ithink my remarks about more incorporation inassimilation are hopeful with respect to theupward mobility of these groups. And they dovote. I don’t think 187 will pass again if it comeup in five years. I don’t think 187 would passagain if it came up in five years again inCalifornia. The demography has changed interms of the electorate in California.

Audience Member: I’m with the City of San Jose,in California. I would have to take issue withsome of the things that Ms. Gruen said because Idon’t think they are true in San Jose as much asperhaps has been discussed today.

Actually, San Jose has been extremely successfulin dispersing a wide range of affordable housingthroughout the community. In fact, a studyshowed, I think it was in 1993, that San Jose isthe least segregated city in the country. Or at


least at that time it was one of the most integrat-ed—in the top five, I believe.

That success is due to a number of housing poli-cies and a commitment by the city council to dis-burse affordable housing throughout the citythrough all income areas. And, consequently, wehave also had very good success with racial dis-persion and economic integration throughout thecity.

But at the same time, the poor people in SanJose—granted, few compared with some othercities like Detroit—have no place to go. As a con-sequence, our median income for a family of fouris $80,000. That means a low-income family offour of $50,000 can’t find housing in San Jose.

Gruen: Quick response. Okay, I would like to saythat San Jose has had a policy of building high-density housing near their light rail system andany public transit system. But at the same timethat the community has been promoting high-density housing near the rail systems, they havenot permitted housing when they could have ininfill situations. They are one of my infill stories.

The result is the high cost of rental housing andother housing. Garden style, walk-up apartmentsin that area cost anywhere from $20,000 to$24,000 a year in rent. And that housing costrelates to the lack of supply, just in the City ofSan Jose. In some ways it has been better thanits neighbors, like the City of Santa Clara.

Audience Member: I am a first generationLatina, which defies some of the stereotypes ofwhat a first generation Latina might be in termsof assimilation. And having studied the housingconditions of the Latinos in this country, I thinkwe still have a lot more to learn about whatassimilation means for the Latino population.

We need to know more about how Latinos exer-cise their affective housing choice and what im-pedes the effective demand for housing from thispopulation group. This is a population group thatis the most underhoused in many of the worst-case scenarios that we talk about.

Also we have a very low home ownership rate,and yet this is the part of the population that has

great potential demand. And so instead of lookingat it from a standpoint of dysfunction, I think weneed to look at the socioeconomic factors andhousing factors that contribute to what appearsto be dysfunction.

And I will part with one last word. The Latinopopulation is going to conform more to thatstereotype of the “Leave It to Beaver” familythan the mainstream population. And I hesitateto use mainstream, because I think we are allpart of this mainstream. It is all one.


S u m m a r yHow will housing be provided in the comingdecades, and how can housing policy influence theway housing needs are met? This sessionexplores the impact of governmental policies,regulations, and programs on housing, and howthe residential development process mightchange in the future to reach and move beyondthe1949 Housing Act’s goal of “providing adecent home for every American family in a suit-able living environment.”

Dr. Wallace’s presentation focuses primarily uponthe role of the federal government in creatinghousing policies and programs, and the lessonslearned from the failures of “one-shot solutions”to address America’s worst housing needs. Overthe years, direct construction incentives, such asthe low-income housing tax credit, and “filteringdown” strategies that rely on the existing hous-ing stock, with or without ongoing subsidies,have been employed with limited success.

Despite years of unprecedented economicgrowth, millions of families still struggle tosecure decent, affordable housing. As Dr. Wallacestates, “we need to step back and look at thetotal social costs of the demolition and replace-ment of housing and the family and communitydisruption that results.” This is the case for bothpublic and privately owned housing.

In undertaking such an examination, the panelsuggests that we look beyond housing policy forsolutions to housing problems. Beyond fundingshortfalls, many housing difficulties stem fromfragmented domestic policies dealing in isolationwith such matters as employment and social pro-grams. State and local regulatory policies alsoaffect the cost and availability of housing in dif-ferent areas around the country.

Trend Topic II: Housing Policies,Production, and Affordability

A new approach to housing policy would also rec-ognize not only the need for additional housingsubsides and assistance, but also the need forhousing programs that relate more directly tofree market forces and to economic incentivesthat provide a reasonable return to investorsover the full term of their investment. This newapproach would place greater emphasis uponbuilding the political will to support long-termsolutions, which bring living wages to poor com-munities through public-private partnerships, taxincentives, and economic development.

Recent surveys indicate that the majority of thepublic supports creating such partnerships toinvest in our cities, and that many cities havebeen successful with these initiatives by empow-ering residents and by strengthening communityassets. Many of these initiatives bring servicesand amenities to the housing site, while others,such as the HOPE VI program, actually redevel-op housing from the ground up.

Introduction James CarrSenior Vice President for Innovation, Research,and TechnologyFannie Mae FoundationWashington, D.C.

Our panelists today will address a complex set ofissues. This has been an extraordinary centuryfor housing and community development. Andthe past decade has been particularly rewardingand challenging.

Recently, the national home ownership ratesoared to record levels. And just between 1993and 1997, a net 4,000,000 new homeowners joinedthe ranks of home ownership. Of that group,more than 40 percent were minority households.Not only are we seeing record levels of home


ownership, but we are seeing home ownershipacross a broad spectrum of households.

This strong growth in home ownership has beenfueled by record low interest rates, strong eco-nomic performance, aggressive outreach tounderserved borrower groups and by importantefficiency gains in the mortgage lending process.In short, the home ownership market has neverbeen more healthy.

Add to this the fact that we know more aboutwhat works and does not work in the context ofbuilding healthy, viable, and sustainable commu-nities than we have at any point in the past. Thenonprofit community development community,which for decades has struggled for legitimacywithin the investment and finance communities,has never been more respected and appreciatedfor the tremendous value that it can bring to thetable in a local community development initiative.

Creative partnerships and a focus on comprehen-siveness and sustainability are increasinglybecoming the norm for many community revital-ization efforts. And looking at downtown, as wasdiscussed on the panel earlier, we are seeinghousing increasingly being used or considered asan anchor for broader community development.

The bottom line is that the housing picture lookspretty bright. So do we really need any housingpolicies, or can we just continue as we are? Well,we need some policies if you look at the other endof the spectrum. Despite the remarkable econom-ic recovery over the past six years, worst- casehousing needs show no sign of retreating.

Housing affordability leads the pack as the mostpressing issue. And the continued existence ofworst-case housing needs is occurring during aperiod of extraordinary economic growth andproductivity. What will happen with respect toworst-case housing needs when the economyfinally goes South? How can we successfullyaddress these needs at that time, if we are unsuc-cessful at addressing them while the economy isbooming?

Add to that fact, the record numbers of immi-grant households entering the United States,many with few skills and little education. They

are pouring into gateway city destinations andplacing strains on already tight housing markets.

Also, the population in the United States aged 65and older is swelling in size and will swelltremendously by the middle of the next century.This growing population will need a variety ofspecial services, including special residentialfacilities for the frail elderly who are unable totake care of themselves adequately on their own.Many of these households will not have theincome or the wealth to adequately acquire theseservices themselves.

While there is growing awareness of the impor-tance of mixed-income housing in communityrevitalization efforts, the spatial concentration ofboth poverty and wealth continues. Some sociolo-gists raise this as a major issue for Americansociety that extends far beyond housing policies.

Add to these issues the fact that suburbansprawl continues to promote environmentallyinsensitive development patterns. Homelessnessremains an all too common feature in manyAmerican cities. Research shows that housingdiscrimination continues to deny important hous-ing opportunities to minorities and other protect-ed-class households.

And while the housing conditions have improvedmarkedly over the past half century, many areasof the country, such as the Mississippi Delta andAppalachia, continue to experience severe andunique housing problems. Add to all of thesechallenges the fact that a refocus of federal policyduring the last two decades has resulted in a vir-tual cessation of new incremental low-incomehousing assistance. The bottom line is, we are inneed of some good, solid, thoughtful insight onhousing policies as we enter an exciting and chal-lenging new millennium.

Our panelists this morning will help us refine andbetter understand the major challenges that faceus, and they will help us understand how to chartthat course to a successful future. They will notaddress all of the issues that I have highlighted,but they will address many of the most critical.


Housing Policies, Production, andA f f o r d a b i l i t yJames WallaceVice PresidentAbt AssociatesCambridge, Massachusetts

I want to focus primarily on the role of the feder-al government in housing policies and production.Clearly, the federal role in housing has set the cli-mate, particularly in the role of tax policy andaffordable housing. How do we see the govern-ment’s role in affordable housing evolving in thecoming decades? Much depends on political willto address the housing needs of the poorest ofAmericans and those who may need special assis-tance such as the elderly and disabled.

The Challenge of Affordable HousingAs noted recently by HUD, “despite 6 years ofunprecedented economic growth, millions of fami-lies still struggle to secure decent affordablehousing (“Waiting in Vain: An Update onAmerica’s Rental Housing Crisis,” March 1999).”The Joint Center for Housing Studies of HarvardUniversity has documented the problems ofextremely low-income households, those withannual incomes of less than 30 percent of areamedian rents. Of the 8.6 million such householdsin 1995, only 2.9 million were receiving someform of housing assistance. Of the 5.7 million notreceiving housing assistance, 4 million were inbad housing or paying over 50 percent of theirincomes or both. (Joint Center, “State of theNation’s Housing,” 1998, p. 36.) The 1.6 millionextremely low-income renters receiving housingassistance or income assistance are in a precari-ous situation. Loss of either form of assistancemay well result in homelessness for these per-sons. As “Waiting in Vain” reminded us, the fed-eral government reversed a trend from 1977through 1994 by not adding to the number ofassisted households. From 1994 to 1998, HUD-assisted households dropped by a total of 65,000.

Major Alternatives in the Provision ofAffordable HousingIn the United States we have taken two very dif-ferent approaches to the provision of affordablehousing. One is direct construction of housing

held for occupancy by lower-income households.The low-income housing tax credit program isthe largest-scale current example, although pub-lic housing, the Section 236 program, and theSection 8 New Construction program were earli-er examples. This approach generally requireshigher levels of assistance for a household of agiven income level than the use of existing, usedhousing, where it is available.

At the other end from new construction, we gen-erally operate under the assumption that housingwill “filter down” to those at lower income levels,with or without assistance. However, as “Waitingin Vain” pointed out, the number of units withrents affordable to very poor households (takenas $300 per month, adjusted for inflation) declinedby 1.3 million units from 1996 to 1998—a stunningdrop of 19 percent.

The filtering assumption is consistent with thecultural assumption that housing is an expend-able consumer good. U.S. housing tends to bebuilt with the expectation that, even with main-tenance, it will need to be replaced within a mat-ter of decades. It becomes available to the poorthus toward the end of its useful life. Abandon-ment occurs for lack of habitability or financialfailure, as available rents are insufficient to coveroperating costs. The option of providing moredurability in original construction and facing theadditional costs, as is often done in Europe, hasnot been given serious attention here. We need tostep back and look at the total social costs of thedemolition and replacement of housing and thefamily and community disruption that results.

History of Affordable Housing ProgramsU. S. housing policy is a history of programs thathave attempted to address the problem of thelack of decent housing for low-income persons.Following World War I and the Great Depres-sion, the earliest federal involvement in housingcame with the creation of wartime housing and,toward the end of the Depression, of public hous-ing. The public housing program, initiated largelyas a public works program, was and envisioned asa housing of transition out of temporary povertyof the “deserving poor.” The framers of the pro-gram imagined that with an initial capital subsidy(effectively underwriting the entire cost of pro-


duction), this housing would be able to sustainitself on the rent payments made by its residents.In the decades since, it has become clear thatpublic housing, because it continues to providehousing to some of the poorest of the poor,requires operating subsidies. Not only that, buteven housing intentionally built as durable even-tually requires capital repairs and improvementsto sustain an adequate level of housing services.So public housing has also required moderniza-tion funds.

The public housing program now serves approxi-mately 1.4 million households. However, there isnow increasing concern that this concentration ofthe poorest of the poor may not be the best. TheHOPE 6 program is spending considerablemoney to try both to rebuild and reconfiguresome of the most desperate public housing and toprovide better income mixing within the proper-ties and better integration with the community.Public-private partnerships are being attempted,largely through use of the low-income housingtax credit. Because the United States does nothave an entitlement program for housing assis-tance, even the proposition of income mixing inpublic housing carries with it the problem ofusing some assistance funds for those who arenot the neediest, effectively reducing the rentalassistance available for the poorest.

Perhaps the most vexing and recurring challengeis to provide affordable housing over the longterm when it is under private ownership. Notonly public housing but also affordable housingprograms based on private ownership have facedthe problem that the original formula providedaffordable housing for a limited period. Laterfixes have been required, with the arrival of theend of the original planning period.

One example is the Section 236 interest subsidyprogram of the 1970s. It provided another formof capital subsidy. (Interest reduction paymentstook the effective interest rate down to 1 per-cent.) The subsidy was inadequate when operat-ing expenses began to rise, fueled particularly bythe energy crisis of the mid-1970s. Rental assis-tance from the Section 8 “loan management set-aside” program was needed. The end of the 20-year contractual requirement for restricted use

(a requirement to provide rentals for low-incomehouseholds at limited rents) started arriving inthe 1990s. There was a short-lived effort toextend the period of affordability through ownerbuyouts under “low-income housing preserva-tion” acts, but these quickly were regarded as tooexpensive and were withdrawn. Nonprofit com-munity groups bought some of these properties,some have continued to operate with the sametype of tenants, and some have been sold as mar-ket properties in the better markets.

Another example is the Section 8 NewConstruction and Substantial RehabilitationProgram of the late 1970s and early 1980s. Itenvisioned providing enough rental assistance(20-year contracts) to encourage conventionallenders to provide the financing. However, whenconventional lenders were unwilling to providethe financing, it became necessary to provideFHA-insured mortgages. The result placed fed-eral financial commitments in conflict: the FHAinsurance fund faced claims to the extent that theSection 8 assistance provided did not keep theseprojects afloat and jeopardized their ability tosupport the mortgage payments. This conflictwas even more profound as the 20-year contractsapproached their end. Enter the Mark-to-Marketprogram, in which HUD is negotiating restruc-turings with owners to reduce the amount ofmortgage obligation and take partial claimsagainst the FHA fund in order to set up theseproperties to operate at local market (“street”)rents.

The Mark-to-Market Program represents anoth-er finite-period affordability solution, eventhough the required period for the program is 30years. The guiding principle of the mark-to-mar-ket program is to catch up on deferred mainte-nance and reset property finances for operationwithout further federal intervention (except foryear-to-year extension of Section 8 assistance tosupport market rents). The original notion wasthat once again the rental assistance obligationcould be separated from the FHA insurance fundexposure. Most of these properties continue withtheir restructured FHA-insured mortgages orrefinance with FHA. The owners are required toaccept Section 8 tenants and Section 8 assistance


contracts as long as they are offered (on a year-to-year basis) over the 30-year affordability peri-od. In the event that Section 8 assistance fundsare not available, properties are expected to beable to operate at market rents. A major compli-cation will be faced in this eventuality, as ownersmay find it necessary to evict low-income tenantsunable to pay the rent without assistance.Further, there are some early indications thatthe provision for reserves to meet future capitalrepair and replacements in these properties isinadequate. If so, the properties will be allowedto deteriorate by their owners or will requiremid-term action, either through additional grantsor loans for rehab expenses or through refinanc-ing.

The predominant current approach to provisionof affordable housing has been to address theissue of affordability directly, through the Section8 Existing Housing program. Some 2 million eli-gible households lucky enough to get a Section 8certificate or voucher are able to rent in the pri-vate rental stock and pay 30 percent of householdincome. This program has added incrementalunits practically every year since its inception in1974. Still it does not fill the gap between thetotal of income-eligible households and thoseassisted by public housing, the tax credit pro-gram, and the properties still supported underthe earlier programs of subsidized, privatelyowned multifamily housing.

Tax PolicyA very large component of implicit U.S. housingpolicy has been embodied in features of the taxcode. The implicit subsidy of the deductibility ofhomeowner mortgage interest and propertytaxes has lowered the effective cost of home own-ership, including condominium and cooperativeownership, for millions of Americans. Recordfractions of the U.S. population now live inowned homes. Because this subsidy is more valu-able to high-income taxpayers, it provides thelargest benefits to those who need it least. Forthese households, the deductions may serve toincrease the amount of housing they purchasebut have little effect at the margin of the decisionto rent or buy. Criticism of this skewing of bene-fits continues and has led to the creation of a cap,

albeit high, on the amount of interest deductibili-ty. We can expect to see continued pressure tolower this cap or at least to allow inflation tolower the real value of the cap. Reductions in thesize of the homeowner deductions could beexpected to produce some transient softening ofdemand, particularly at the upper end of thestock. Any attempt to interfere with these deduc-tions will likely be opposed by home building andreal estate interests.

Tax treatment of multifamily rental housing hasbeen through major swings in recent decades. Wehave a history of the five-year accelerated write-off for qualifying rehabilitation expenses in the1969 tax act, accelerated depreciation for low-income housing production in the 1970s, 18-yearaccelerated write-offs for all housing productionin the 1981 act, then dramatic curtailment of thistype of subsidy in the 1986 act. The 1986 TaxReform Act both lengthened depreciation periodsand imposed severe limitations on the passivelosses that had been a primary tax shelter bene-fit for many investors. These swings in tax policyhave motivated housing production and overpro-duction and then caused a near collapse of multi-family production before the recovery of multi-family production in the 1990s.

The low-income housing tax credit programenacted in the 1986 tax act is now the primaryvehicle for production of affordable housing and amajor part of all multifamily housing construc-tion. It is likely to stay alive for a number ofyears. It is widely supported by the housingdevelopment community and by affordable hous-ing advocates. However, other production-orient-ed affordable housing programs have hit a fund-ing wall. Could this happen to the tax credit?Under the current statute, $1.25 per capita ofnew first-year credit authority is allowed, creat-ing a potential of $300 million per year. Uponreaching a steady state after ten years (the taxcredits run for ten years) we would have a maxi-mum annual budget of $3 billion.

The tax credit program has provided a vehiclethrough which profit-motivated developers orfor-profit subsidiaries of community developmentorganizations (about 20 percent) take advantageof the capital that can be raised through sale of


interests in the ten-year flow of federal incometax credits. As the sale of credits has moved pri-marily to corporate limited partners able to usethe depreciation benefits as well as the full valueof the tax credits, the efficiency of capture of cap-ital has increased. Developers of tax credit pro-jects now are often able to raise investedamounts on the order of 70 percent or more ofthe ten-year value of the tax credits (Wallace,1998, p. 51). Invested amounts often are spreadover the early years to maximize the total invest-ment in a project, with bridge loans used tofinance whatever portion of the additional invest-ment is needed during the development of theproject. The program has thus become institu-tionalized, with a variety of stakeholders sup-porting it. The program also has become moreefficient, thereby deflecting criticisms of this useof tax policy on efficiency grounds.

Criticisms remain because the program, throughthe tax credit subsidy alone, does not reach thepoorest of the poor. It must be supplemented byother subsidies, such as Section 8 rental assis-tance or special grants and concessions from localgovernments or other sources. This is the casefor a major fraction of tax credit projects. Creditsare provided only on units rented to householdsunder 60 percent of median income (at least 40percent of the project) or under 50 percent ofmedian income (for at least 20 percent of the pro-ject). The income and expense numbers work forprojects that have been able to make substantialreductions in capital expenses through the taxcredit investments. For many projects, however,Section 8 or other operating expense assistanceis needed to make the projects work for tenantshaving incomes of 50 or 60 percent of median,never mind reaching lower in the income distrib-ution.

Whether tax credit projects make possible long-term provision of affordable housing in the nextcentury depends on what happens after the endof the ten-year tax credit period and the mini-mum 15-year restricted use period. Owners ofmost projects will be interested in disposing ofthem as soon as permissible rather than continu-ing to operate under restrictions on tenantincomes. Although the period of restriction was

increased from 15 to 30 years, owners are never-theless allowed to make an unrestricted sale at15 years if neither the owners nor the credit-allo-cating state housing finance agency are able tofind a buyer. Buyers typically will be sought fromamong interested nonprofit groups. Presumably,the sale price will reflect the limits on net operat-ing income because of the continuing use restric-tions. At the end of 30 years, disposition of theproperties and the income levels of their tenantswill depend on the markets in which the proper-ties are located and the types of rental assistanceavailable at the time.

The FutureThe short-term character of many U.S. housingprograms could be addressed by recognizing theongoing need for housing supports for affordablehousing. We are going to have to find ways tosustain programs that address the housing needsand the living environment of our poorest citi-zens over the long term. The challenge for afford-able housing will continue to be exacerbated inthe next century by two major factors.

First, as income disparities widen, even the hous-ing assistance that is currently provided to thefortunate few will become increasingly inade-quate to the need. The degree of homelessness inthe United States is testimony to this problem.While the welfare reform efforts under way maysucceed in some measure in linking poor personsto the mainstream economy and world of work,some are going to be unable to make this transi-tion or to find incomes possible above subpover-ty, and the policy dilemma will remain.

A second challenge is the demographic composi-tion of the population. There will be an increasingnumber of aged persons, many of whom willrequire special aids for living. This will eventual-ly require an even larger spectrum of housingand other service and care supports than nowexists, and in larger supply. Another demograph-ic challenge is the growing population of immi-grant households, largely from Mexico, CentralAmerica, and Latin America, but also from Asiaand Africa. Part of what is happening here is thatthe country ends up receiving refugees fromplaces with political oppression and instability. Orimmigrants simply hoping for better economic


circumstances. We are, in a sense, “importing”cheap labor. But that means that even with twoor three jobs, the immigrant family is unable topay for adequate housing. The result is doubled-up and tripled-up households. The housing prob-lems of these households need to be met throughliving wage options and, at least for a transition,through rental assistance.

Depending on the political climate and the politi-cal leadership, it is possible to envision two verydifferent scenarios for the future of housing andhousing production in this country. On the onehand, we may see an increasing callousness to theplight of the poor and find ways to divert ourattention. We could see increasing instances ofwalled communities and individual houses withmore and more elaborate security systems. Wecould experience patterns seen in the thirdworld, where the relatively few well-to-do wallthemselves in behind razor wire.

Or we may move toward policies that are sup-portive of efforts of the poor to obtain education,get jobs at living wages, and enter the main-stream of U.S. society. During what is likely to bea very long transition in this case, housing sup-ports would continue to be necessary.

The Section 8 Existing Housing program contin-ues to get support from many quarters. Budgetsin virtually every year since the inception of theprogram have added incrementally to the num-ber of households served by this program. Maybesome day we will reach the stage at which thereis a declared or effective entitlement to housingassistance for those who need it most. This wouldbe a way in the future to address the issue ofdecent housing from the “bottom up.” TheHousing Allowance Demand Experiment in the1970s showed that the increased demand forhousing quality produced by an entitlement hous-ing subsidy created pressures for repairs andimprovements in existing housing. We may beable to allow economic forces to provide a mini-mum for adequate housing and to limit the needfor housing quality regulation to environmentalconcerns such as lead-based paint.

Finally, there will be a continued need for hous-ing constructed (or preservation of existing

assisted housing) to focus on special affordablehousing needs. This includes at least housing forspecial-needs elderly and the disabled, housing inareas where housing supply is tight (low vacan-cies), and housing that is needed as an anchor incommunity stabilization and development.

R e s p o n s eWilliam KargmanPresidentFirst Realty Management CorporationBoston, Massachusetts

I would like to focus on the private partneraspect of the public/private partnership that is apart of creating successful housing in the future.In my view, in order to create affordable housingfor the lowest or the lower-income groups, wewill always have to have government participa-tion at all levels, the federal, state and local.

And in contrast to the programs of the past,which Jim has called the one-shot programs,future programs really must offer the concept ofa true partnership based on mutual respect andtrust between the partners.

Now I know that the federal government has hada lot of crises on this issue of mutual respect andtrust, because scandals blow up under each HUDprogram, but the cure, I think, is pointing us in adifferent direction. Most of these early programs,if not all of them, paid the most attention to theproduction of housing. A classic example is theSection 8 housing in the 1980s, when there was atremendous flurry to produce housing at anycost. One of the reasons that the Section 8 hous-ing that we have today in the marketplace is soout of kilter is because the financial cost is veryhigh.

In addition, when the market changed and inter-est rates went down, in conventional real estatethere would be refinancing that would adjust thecost of that debt service down, and, therefore,rents could reflect the fact that the debt servicewas lower. That did not happen significantlythroughout the country as I understand it. And,as a result, we got into this mark-to-market situ-


ation where they were looking at the higher rentproblem, due to the higher debt service.

My concept of the way we have to look at hous-ing in the future partnership is that housing hasto be more related to the traditional conventionalmarket forces. Profits, rather than being upfrontprofits for developers or for syndicators, have tobe long-term profits that the conventional builderof conventional apartments sees. And the profitshave to match the rate of inflation or the chang-ing market conditions.

The federal government programs did not oper-ate in that way, and that is what is causing someof the problems that we have today, and the pres-sures for the opt outs and the refinancings.

Housing is a business product. It is really likeany other business product that is subject tomarket forces like conventional real estate.

We would like to design a program for affordablehousing that would be as cycle proof as possiblein order to entice the private sector to partici-pate in that program. But we would have to offerreasonable market-comparable profits that wouldkeep pace with inflation and changing marketconditions.

The private partner should not be penalized inthe marketplace for accepting government assis-tance in order to provide an affordable compo-nent to its housing. That is one of the biggestproblems that we have seen in the past withrespect to the housing programs in the last 30years.

Now what kind of housing do I see as acceptablefor integrating the low income, the very lowincome, and the moderate income in the future?Well, I think I have just defined it. It is mixed-income housing and mixed-use housing.

The public-private partnership, in order to createa viable, successful product, has to consider whatit is that makes mixed-income housing successful.And what do we need to do to produce that prod-uct? My experience has shown that housing com-munities, compared with housing complexes,work very well for mixed-income families.

And when I say communities, I’m referring to arecreation of the neighborhood concept. The fed-eral housing programs of the 1960s and 1970screated housing apartments, boxes, for people tolive. And in quite large sizes, which was contraryto the way housing was naturally developed afterthe war or during the war, when people lived inneighborhoods with local centers. They hadstores, drug stores, markets, et cetera, wherethey met. And it was mixed neighborhoods as faras income goes. There were families of all incomelevels living in these neighborhoods. These werevery successful kinds of communities.

The development of these box apartment commu-nities destroyed neighborhoods. And it wasn’tuntil I would say the mid-1970s or early 1980sthat people started to realize what was happen-ing and tried to build back community servicesinto the federally funded or assisted complexes.And as we started to do this, we found that werecreated a sense of community within thesehousing complexes. we started to build housingcommunities.

In my experience, the introduction of supportservices for families and children greatlyenhanced the operation and the management ofthe community. Additionally, when we buildmixed-income housing, we have to build qualityhousing with amenities that will be competitivein the local marketplace. This housing has toappeal to the moderate-income rental person,rental family. And it would have to have a compo-nent for the lower-income family that would beassisted in some way by federal, state, or localgovernment.

The mixed-income community will offer greateropportunity for children to learn communitystandards and values while enjoying safer neigh-borhoods for growth and play. Mixed-incomehousing should also contain mixed generations.An active, nonworking senior population can pro-vide significant supplemental support servicesfor working families. These services have provid-ed foster grandparenting, household help, cook-ing assistance, and babysitting services.

A new affordable housing program will have tobe designed to create a strong sense of communi-


ty that will invite resident participation andinteraction. Every member of a community hassomething to contribute, regardless of his or hereconomic status. Participation ensures and con-firms a strong sense of community membershipand place. And it facilitates a personal reinvest-ment in the community on the part of the resi-dents.

In our communities, for example, we have seenolder children volunteer to help with programsfor younger children. And adults help otheradults with job training and other skills. Thedemographic discussions earlier talked aboutthis. We will have to meet the needs of the two-parent working families and the single-parentworking families, of all economic classes. Avibrant mixed-income community will most likelyhave to offer services such as day care forpreschoolers, after school programs, and recre-ational activities for school age children andsocial activities for seniors and nonseniors.

These services will also foster a sense of commu-nity. They will provide a forum for members ofthe community to get together and life enrich-ment activities and educational opportunities. Insome cases, communities may provide job train-ing or job preparedness programs for unem-ployed or underemployed members. Two exam-ples of programs that have been successful inbringing residents to work with other residentshave been the computer learning centers, wherecomputer literate and skilled residents have vol-unteered to help teach computer skills to othermembers of the community, and parenting pro-grams, where residents are trained to assist fam-ilies in overcoming issues related to the stressesof raising children and, consequently, preventingchild abuse.

The signs of successful communities are when thechildren of residents return to raise their ownchildren in the same community. My company hasten year anniversary parties where residentswho have lived at the property for over ten yearscelebrate their residing at the community. Andthe wonderful thing is we have children of chil-dren coming back to reside in these communities.To me that is very gratifying.

Finally, we must remember that a communityhas to attract moderate-income families, in mybelief, to be a true mixed-income community. Ibelieve the demographic trends mentioned earli-er. Multifamily housing will attract empty nest-ers, and we will have a new young senior classlooking for well-managed apartments with secu-rity and good maintenance provided.

The vexing challenge is how to enhance the pub-lic-private partnership. The challenge will be tokeep the private profit-motivated partners andtheir capital interested in meeting the needs ofthe country’s affordable housing program.

Our goal must be to create a true public-privatepartnership based on market goals and principlesthat will permit a new affordable housing prod-uct. Let’s design a program where profits willrise and fall without government restrictions andlimitations that are contrary to the tugs and pullsof conventional market conditions.

R e s p o n s eCharles R. Kendrick, Jr.Managing DirectorClarion Ventures, LLCBoston, Massachusetts

In the interest of limiting my remarks, and in theinterest of being positive, let me give you a cou-ple of policy considerations that deal with hous-ing. And let me use the analogy of the globaleconomy and all that you read every day aboutthe global economy and the necessity of havingsound public policy.

Regardless of what has happened in the currentadministration and its troubles in Washington,the Treasury and the Federal Reserve have donea fantastic job of conducting a public policy relat-ed to global economics that works. And the ques-tion is: can we construct a public policy thatworks for housing in the same sense?

The reason that is important, quite frankly, isthat for the metropolitan areas we live in to besuccessful generally, to have supportable housinggenerally, we have to pay attention to all of theeconomic factors that create competitive metro-


politan areas and deal with the global problemsthat we face. All one has to do is look at Japanand find out what happens in an economic senseif you get the public policy wrong.

So the policy issues are important, and we shouldthink about them in the context of Jim’s paper.There are two possible scenarios here. We cancreate, with our private sector partners, theMexico City syndrome, where we have walledcommunities and where wealth goes off someplace and lives its own life. On the other side,everybody else lives in chaos.

Not only does that policy not work very well,generally, but it works even less well in Americabecause our whole economy is based on a machinethat is at the upper end of the production scale.We are not a third world country. We don’t needhuge numbers of people in low skilled jobs to pro-duce whatever we produce to make our economywork. We are at the high end of this scale. So weneed to have policies that address that.

An example from history. When the GIs cameback from World War II, they were given twothings that changed America forever. They weregiven terrific financing for buying a home theycould afford. And then they were given an educa-tion, which they could simply get by taking ad-vantage of it. And if you think about those twopublic policies and what they did to the generaleconomic base of America in the period afterWorld War II, which was the only other periodwith the kind of wealth creation that we have now,you can see the positive effects of very straight-forward and simply conceived public policy.

So what do we do? What are the issues we haveto consider with respect to constructing positive,effective public policy. They are not easy.

One issue is that the policies that we have con-structed to date tend to concentrate poverty. Thecombination of the federal policies for housing,the local zoning and land use policies, tend to con-centrate poverty.

They tend to concentrate that poverty away fromthe kind of jobs that those people could take ad-vantage of. The City of Atlanta passed a metro-politan transportation policy recently, the first

such policy measure passed in over 25 years by amajor city in this country.

We have got to do better than that. We can’t doone every 25 years in one city. But if you concen-trate hard enough, you can do what Atlanta justdid. You can do what Governor McCall did in Port-land in the 1970s. You can do what Minneapolis/St. Paul has done. We just ought to do it moreoften.

I think we have to be careful about somethingelse in constructing public policy. We have tendedrecently to lump all kinds of social issues togeth-er with housing. So the working poor, whoseproblem is not earning enough money to pay therent, find themselves living not only with thatproblem, but with all the other urban pathologiesthat are the result of our concentration of poli-cies. Whether it is drug addiction or the fact thatwe have a lot of mentally ill people in these urbanneighborhoods. Those are not housing problems.Those are other kinds of problems and societyhas to somehow separate them.

Lastly, the creation of meaningful, affordablehousing in mixed use settings is not sufficient. Ifyou think of communities that work, they don’tjust supply good housing. They supply jobs. Thatis, they take into consideration those nonhousingissues.

R e s p o n s eMichael CarlinerVice President for EconomicsNational Association of Home BuildersWashington, D.C.

Jim Wallace spoke mostly about federal govern-ment policies affecting the availability and cost ofhousing for lower income people. And I want totalk, in my limited time, on housing availabilityand cost for lower income people, but not particu-larly on federal housing policies. The importantpolicies that are going to affect the supply andcost of housing are not federal policies—at leastnot housing policies and, in particular, not sub-sidy policies like the ones that Jim described.


Programs like the low-income tax credit programand housing vouchers are useful tools for stateand local government officials to be able to solvespecial situations. But it is totally unrealistic tothink that that is going to play a primary role inhousing affordability and housing supply in theyears ahead, as it is not now.

State and local governments don’t have verymuch to do with the tax policies affecting housingor with subsidy policies or financing policies.They are mostly involved with regulatory poli-cies affecting land use and related activities, aswell as some tax and fee issues.

The impact of these state and local regulatorypolicies on the affordability of housing is obviousif you take a look at the cost of housing in differ-ent areas around the country. In some placesthere are no housing affordability problems tospeak of. And in other places, where more hasbeen pumped in for decades, the problems ofhousing affordability really haven’t been eased atall. The number of HUD’s worst-case housingneeds continues to grow.

These differences in the cost of housing amongdifferent areas don’t reflect the cost of materials,which are pretty much the same across the coun-try. They don’t reflect the cost of labor, whichisn’t all that much different across the areas.There are a few places where there are physicallimitations on growth because there is an oceanin the way or something. That affects the cost.But the primary thing that makes some areasquite affordable and other places ridiculouslyunaffordable is the of government policies thataffect what can be built, where it is built, andhow much can be built.

While these are mostly state and local govern-ment policies, federal government regulatorypolicies, again not housing policies, are having aneffect. They may have much greater effects onhousing affordability. In most cases, they don’tmake housing more affordable. They tend todecrease housing affordability.

A lot of this is modeled on Portland, which isdoing some very nice things, but Portland, withits urban growth boundary, is one of the most

unaffordable areas in the country. And that isdirectly attributable to the artificial restrictionon the supply. Energy policy is another area thatcould significantly affect the cost of housing,especially the cost of lower-income housing.

In many cases, the effect on housing affordabilityis not given significant consideration. The policiesare produced with a general indifference to thecost of housing policy. But you don’t have to be ahard-core conspiracy theorist to see that manylocal housing policies think of making housingunaffordable as being one of the benefits of regu-lations.

Regulations not only raise the cost of equivalenthousing, but they can make the only housing thatis feasible to build luxury housing. If you haveregulations that say a minimum lot size of twoacres, then you can’t build affordable housing;you can only build luxury housing.

Many areas in California have moved away fromusing real estate taxes to pay for local services.The impact fees are usually on a per unit basisrather than a share of value. And if you say it is$30,000 for every unit, you don’t build a whole lotof $100,000 houses.

Irrespective of some of the efforts that were dis-cussed to revitalize cities and have more growthin the cities, which NAHB is participating in,most of the jobs are going to go. Most of the jobgrowth will occur in suburbs, in satellite cities,not because of government policies, but mainlybecause of changes in technology and changes inthe structure of the economy. If we make itimpossible to build housing for lower-income peo-ple in those areas, then the unemployment prob-lems among lower-income groups will be exacer-bated. The social divisions will be exacerbated.And so this is not just a local issue.

Whether we can expect to see suburban commu-nities feel some sense of responsibility, orwhether the state governments or local or feder-al government play a greater role, I don’t know.So far I haven’t seen much evidence that thatreally has been addressed. But I think it is a keyissue.


I disagree with Jim Wallace on the idea that weare demolishing a lot of units and that is why wedon’t have more low-income housing. The supplyof low- income housing, as described in his paper,is lost mostly because the rents were raised, andso the same units are no longer affordable to thesame income groups.

But overall, the number of units we are removingfrom the stock is difficult to measure, but itseems to be clearly fewer than about 300,000 ayear, less than about a quarter of a percent of thehousing stock. That is much lower than it was inthe 1950s and 1960s in absolute terms, and evenmuch, much lower in relative terms of the sharebeing removed.

A quarter percent removal rate implies thathouses built today will last about 276 years. Idon’t think that is quite true. But they are goingto be around for a while. The average age of thestock is going to grow. And much more of hous-ing investment over the next decades will begoing into preserving and improving existingstructures, rather than creating new structures.

In terms of federal government policies, I can’timagine we are going to have (nor am I sure thatwe should have) an expansion of the kind of hous-ing policy we had in the past. But the federalgovernment has an important role to play inmaking housing affordable. First of all, in keep-ing real interest rates low. In making savings andinvestment more attractive. In softening the fis-cal disincentive for suburban communities toaccept more low-income housing.

These communities don’t want to bring in thishousing, but I don’t think the reasons are allracially based. It is also because they feel that itis going to cost them more than they are going toget out of it. If the federal government were con-tributing more to the cost of building schools andstreets and sewers and water supply, then thatdisincentive for allowing in low- and moderate-income housing would be reduced. There wouldbe more opportunity to bring in more of thathousing.

In developing other kinds of regulations, energypolicies, environmental policies, trade policies,

not enough consideration is being given to theeffect on housing affordability. The area wherethere is a lot of consideration given to housingand regulatory policy is in the financial markets.But that is becoming less significant as a factor,and the private market, in fact, is getting aheadof what is being imposed by regulation in termsof providing financing for housing.

R e s p o n s eThe Honorable Susan BaumanMayorMadison, Wisconsin

Madison in 1998 was ranked by Money magazineas the best medium-sized city in the Midwest inwhich to live. We are a community of about203,000 people and we are a growing community.As an area that is a very good place to live, learn,work, and play, we find ourselves being an areawhere people are constantly moving to look for abetter place.

Because we are a positive community where wedo try to have mixed uses, where we do try toprovide the kinds of social services that Bill wastalking about earlier, we face serious issues ofaffordability, because of the law of supply anddemand. People want to live in Madison. Peoplewant, to a large extent, to rent.

We are the home of the University of Wisconsin,Madison, with its population of about 40,000.They are not the only individuals who rent theirhomes. Close to 60 percent of our community arerenters.

Much of what is currently classified as affordablehousing in Madison is located in about five or sixclustered neighborhoods, or what we refer to aschallenged neighborhoods. They are, for the mostpart, privately developed older buildings, multi-family buildings with, to a large extent, absenteelandlords. They are run by management compa-nies, some of which work very hard to screentheir tenants and to ensure a high quality of ten-ant that lives there.

However, we do have concentrations of personswho are clients of the probation and parole sys-


tem. Lots of people who have come to Madisonfollowing others looking for a better life. Peoplewho are unable to get onto the lease and arethere as an invisible community to some extent.

There are a lot of unemployed people. There arepeople who are in situations where they eitherare not working or are not earning a whole lot intheir current jobs. These are the neighborhoodswhere, for the most part, the landlords willaccept Section 8 vouchers or certificates.

We do have an intensive building inspection pro-gram, and, therefore, most of the units are notunits that are in need of repair. But between theinspection program, between landlords screeningand training programs, we do have a situationwhere we are constantly trying to find a bal-ance—making sure that there are homes for peo-ple of low income, people in need, but also main-taining the strength of the neighborhood.

We are a community where we believe verystrongly in building on our community strength,involving our neighbors and our neighborhoodsand making sure that every community, whetherit is one in which people are low income or not, isa place where the people’s voice is heard. We tryto get neighbors and residents involved in neigh-borhood associations and in telling the city whatservices they want, rather than us telling themwhat it is that they should have.

Because of the concentration of Section 8 vouch-ers and certificates in those particular neighbor-hoods (which are not viewed as particularlydesirable, either by the neighbors who live thereor by people who are not living there and don’twant to live there), we have begun a program totry to get landlords in other areas of the city toaccept vouchers and certificates to improve thedisbursement of people of low income throughoutthe community.

There are a lot of landlords who are very resis-tant to the concept and still believe that takingsuch aid has a take-one-take all aspect to it. Orthat it is an endless lease, and they could neverevict an individual for whatever behavior.

Affordable housing in the city of Madison is alsoavailable through the community development

authority, which is Madison’s housing authority.It operates a number of large complexes and anumber of scattered site buildings. The CDAgenerally provides housing for senior citizens,persons with disabilities, as well as low-incomefamilies.

The accessibility issue for persons with disabili-ties, to my surprise, is something that has notbeen mentioned yet today. At least in Madison,and I suspect throughout the nation, we are notproviding sufficient housing for this increasingsegment of the population. This is an area thatneeds more attention.

The fact of the matter is that currently the CDA,and some of the other areas that have what isdubiously called affordable housing in our com-munity, have vacancies, because a lot of low-income people have bad rental histories, badcredit histories, conviction records—issues relat-ed to their housing situation. And we are encour-aging landlords to screen tenants in order toensure the strength of the neighborhoods.

We have a problem in balancing neighborhoodintegrity, community integrity, with ensuringthat there is a place for everyone to live in ourcommunity that wants to. Striking the appropri-ate balance is something that we are strugglingwith. And we are struggling with finding addi-tional landlords to participate in Section 8 pro-grams. We are seeking ways to get more peopleinto appropriate housing.

Last December, I convened the mayor’s summiton affordable housing. It brought together about300 participants from all segments of the commu-nity—tenant advocates, landlords, building man-agers, developers, a more localized cross-sectionof what we see here today. The summited tried togenerate ideas and ways that we can improvehousing opportunities throughout our community.

We certainly came to some of the same conclu-sions about the need to bring together the publicsector, the private sector, the not-for-profit sec-tor. I sincerely believe that the future of afford-able housing is intertwined with social serviceprogramming, perhaps situated in more coopera-tive or communal or co-housing settings, where


services are available to assist in parenting, inchild care, in credit and job counseling. Such loca-tions might serve as temporary transitionalhomes, or they might be permanent locations forsome.

Community-based organizations, local not-for-profit groups, are the ones that are most likely toconstruct and operate those facilities with capitalfunding from governmental and private sources.At the local level, our strongest economic toolavailable is tax incremental financing, a tool thatMadison has used in the past very successfully indeveloping industrial parks and in the redevelop-ment of our downtown—primarily for the devel-opment of office buildings and for more high-end,primarily condominium, housing.

We are starting to discuss ways to redirect TIFtoward the development of affordable units, bothrental and owner occupied in other parts of thecity. Assuming that we find ways to reduce thecost of new construction using TIF, we still facethe challenge of ensuring that we can make unitsthat will remain affordable to the next purchaser.

The CDA recently embarked on a massive pro-ject to redevelop a large apartment complex inone of our challenged neighborhoods. Many, manyapartments and some townhouses had become“challenged”—probably too weak a word to uti-lize. It was basically a drug-infested area. CDApurchased those units and has closed, moth-balled, many. It is now in the process of recon-structing some of the units, tearing down anddecreasing density. And it going to rehab and sellthe townhouse units as condominiums—afford-able housing units that can be purchased in theneighborhood of $80,000.

Of course, the question is: will the next purchaserfind them affordable? If the redevelopmentefforts in that neighborhood are successful, theeywill become more desirable places to live, and thecost will rise.

Over the past couple of years, we have discussedthe use of Section 8 vouchers or certificates bypersons in appropriate circumstances to purchasehomes and to actually build some equity. Again,how can we make sure, or do we even want to

make sure, that in the future those units areaffordable units? Or should the price and thevalue rise? Will they return to market rates?

Another tool that has been used successfully thusfar is the land trust model. But long term will itkeep or maintain affordability? The MadisonArea Community Land Trust is purchasing land,building condominium units, selling the housingunit, but maintaining ownership in the underly-ing land. Therefore, the taxes aren’t going tokeep going up because, of course, that land is noton the tax rolls. This is a whole other issue.

How do we make sure that there is affordablehousing in the future? This is not the only ques-tion facing us. We also must look at the broadspectrum of housing units—not only family hous-ing, but single-room occupancies for people whoare transitioning from a homeless state. InMadison we have people who regularly work 40hours a week who are unable to afford housing orunable to obtain housing.

And there are two separate issues here. One isaffordability because of low wages. The other isthe inability to obtain housing because of a lackof a good credit history, a lack of good references,prior history as bad tenants because of alcohol orother drug abuse issues, and the like.

One part of the suggestions that came out of thesummit was the creation of a 15-member housingcommittee. This permanent committee would beongoing so that we could address issues of afford-ability in our community, rather than respond ina crisis situation.

That is the number one recommendation thatcame out of the summit, but there are approxi-mately 30 other recommendations. Some of thekey ones are the development of a database ofinformation regarding existing housing. We cur-rently don’t know where all of our rental unitsare. I mean, our assessor doesn’t know the num-ber of apartments, number of bedrooms in thoseunits, whether they are accessible, whether thelandlord takes or does not take Section 8.

We are looking at development of a database ofinformation about the various programs that are


available to help tenants, to help landlords, tohelp developers.

For some reason, we have not done a good job oftelling members of the community all of thethings that are available to landlords, to tenants,to developers. So we are looking at creating adatabase to make that information available, aswell as security deposit loan programs that areavailable, and that we want to expand.

We are also looking at additional training andevaluation tools for both landlords and tenants. Afour-star program, as we have called it, for land-lords so that tenants could find out who are thegood landlords, who maintain their buildings andproperties, who is interested in helping toimprove the community overall. Support pro-grams are needed to ensure that people areactive participants in the community.

We are also looking at prequalification and sec-ond-chance programs for those tenants, of whichthere is an increasing number. Many are in a situ-ation where they are unable to find housing.

Wr a p - u pJames H. CarrSenior Vice President for Innovation, Research,and TechnologyFannie Mae Foundation

I want to make a couple of observations along thelines of the questions to which I would have likedthe panelists to respond a little bit. And I hopethese are issues that can be picked up in theroundtable discussions later.

First, we heard a lot about the need to build fullcommunities in order to create sustainability.Another issue that we heard a lot about was thenotion of creating partnerships. Obviously, themore individuals and institutions involved in aparticular project or initiative, the more vestedinterest in making sure that it works over thelong term.

And, finally, we heard a real strong focus on longterm. And I think these are all positive elementsof a future policy. But what I also thought Iheard from at least two, maybe even three, pan-

elists was a very strong focus on the role of thefederal government. And given the trend in fed-eral funding over the last two decades, I wouldchallenge the extent to which we can rely on thefederal government to solve the real andtractable problems that have yet to be solvedover the last 30 to 40 years. Which leads to thereal question: now that we know so much aboutwhat works and what does not work, are thereways in which we can put talented minds to workto create wealth within lower-income communi-ties that do not have it, but could have it?

Looking at the assets of low-income communities,can we figure out a way to capture some of thewealth that we are creating by investing in thesecommunities? Can we pass assets on to lower-income households in the form of housing subsi-dies or home ownership subsidies?

In my view, this is the frontier that requires thereal focus and attention. Looking at federal poli-cies, I think, leaves us exactly where we aretoday: a very robust market for those who canafford it and very troubling problems for thosewho can’t. One of the failures of past policies isthat programs aimed at lower-income communi-ties often assume that there is no value in thosecommunities.

And the reality is that many, many low-incomecommunities have enormous assets, and the realchallenge is to figure out how to identify thoseassets and how to benefit from them. Then, howdo we transfer the wealth that we are creatingfrom those assets to people in need?

One of the roles that federal, state, and local gov-ernments can play is figuring out alternativemeans to promote and encourage development ina way that does capture some of that wealth.


Joseph CoatesPresidentCoates & Jarratt, Inc.Washington, D.C.

It’s always a great pleasure to talk to anUrban Land Institute group because theattendees are so earnest. They are interestedin learning what one has to say and even

reducing it to practice tomorrow.

I will talk about three broad considerations influ-encing housing in the next quarter century. Firstis the factor that has to be basic to any hope orplan for changing urban development in any sig-nificant way. Second are some comments on thewidespread myth and misconception of the ideaof community. Third will be developments overthe next quarter century that offer opportunitiesto developers in urban and metropolitan areas.

If you are to bring about change in the housingsector, whoever you may be, there are certainthings that you have to keep in mind or nothingwill happen. To take a term from the political sci-ence literature, there is an “iron triangle” of rela-tionships thwarting change. On one side of theiron triangle are developers. A second side islocal and state governments. The third group,comprising the base of the iron triangle, is theadministrative bureaucracy, the people responsi-ble for enforcing laws and regulations. What hap-pens is that after awhile, everyone becomes cozyand comfortable with the relationships, making italmost impossible to break out of that iron trian-gle to do anything that is systemic or radical.

Hence, questionable practices go on intermina-b l y. For example, as long as I can remember,there has been the universally recognized prob-lem of multiplicity of codes, and the belief that itwould be great if we had uniform codes. Yet what

Luncheon Address: Where Will We GoFrom Here? Housing and Community inthe 21st Century

happens? Nothing, because the comfort of theiron triangle prevents change. Everyone is ad-justed to what exists and fearful of what changemight do.

The iron triangle is the number one factor tokeep in mind if you hope to bring about change.On the other hand, if you don’t want change, keepyour eye on the iron triangle, because that iswhat keeps things at a comfortable level ofexpectations.

Consider local government as a side of that irontriangle. Two million apartments have been builtsince the Disability Act was passed. In a recentstudy it was found that 50 percent to 75 percentof new apartment buildings failed to comply withlegally mandated handicapped access. A develop-er decides to cut a corner. The local governmentsays, “well, who cares. Nobody is voting this. Noone will pay any attention.” And what ends up isthe flaunting of the law and a less functionalbuilding.

The role of local government in the iron triangleis extremely important. For 50 or more yearstextbooks have reported a clear gradation in be-havior as you go from local to federal govern-ment. Local government is much more subject tocorruption and suborning, much more short termin focus, much more parochial in outlook, andmuch more responsive to local pressure groups.

It is ironic that in a national economy increasing-ly homogenized in its values, concerns, and needs,local government is often the fly in the planningointment. It is local government’s parochial,short-term focus that holds back change.

Sprawl is the premier failure of local governmentto deal effectively with an issue affecting ourordinary day-to-day lives. Something like 240 bal-


lot issues have been proposed in the last fewyears to control sprawl. Considering the iron tri-angle, the smart money has to be on sprawl.

Keep developers in mind. I have never met adeveloper I didn’t like. I have never met a devel-oper that I thought was, in any sense, an evilperson. But one has to face the question directly:why are developers in such bad odor? Why dopeople speak so poorly of them? What is it aboutdevelopers that constantly draws negative head-lines and accusatory articles?

The fundamental reason is that there are onlyfour core factors that drive the developer: prof-its, profits, profits, and law and regulation. If youhope to change developers’ behavior, it does nogood to be hortatory. It does no good to do sur-veys. It does no good to talk with them. It doesno good to counsel with them.

You must show them that money will either belost if they don’t change or gained if they dochange. Of course, lying in the background, ifthey don’t shape up, is the worst specter in theirfuture—new legal constraints.

There is an irony in developers’ short-term focus,coming out of the structure of the industry. Fewdevelopers have a 30-, 40-, or 50-year time hori-zon. And yet, structures they build last for 40, 50,or 60 years. The average lifetime of structures inthe United States, according to the best informa-tion I have, is about 40 years. And yet what de-veloper sees himself or herself responsible on a40-year cycle? The developers in our culture areintrinsically, not accidentally, short-term focused.They are micro- rather than macro-thinkers.Consequently, they are antilivable community.

There is a marvelous example of anticommunitychange here in Washington. Go down Pennsyl-vania Avenue, Northwest, to the stretch close toGeorge Washington University and the GeorgeWashington University Hospital. The North sidewas a lovely block full of small businesses, includ-ing a barbershop and restaurants. I would chal-lenge anyone in this room to look at the mon-strosity that now stands on that block and say itis great or even good. It looks like it was de-signed by an eight-year-old with his first set of

building blocks. For the next decades it will be anaesthetic and community insult to every personwho walks on that block. Worse, it will be aprominent factor in making the dark hoursthreatening and void of life.

If you prefer to cast the issue in more analyticalterms, it is the problem of quality control. Themoney boys don’t think in terms of quality con-trol, since quality comes in so many differentforms, most of which are not fungible.

Let us turn to our second issue, community. Thedevelopment of housing around the country hasbeen based upon a false premise that has re-ceived much publicity and governmental supportover the last five decades. That premise is thatthe desire for individual home ownership is uni-versal. It got its big impetus at the end of WorldWar II when we wanted to do something for thereturning GIs and to create jobs. Since suburbanland was cheap, that is where the developmentsconcentrated. That policy led to the gutting ofour cities.

Cities are where healthy communities can thrive.Yet we have a romance in America about thesmall town. Nobel prizes in literature have beengiven to American authors who have exposed lifein small-town America. It is isolating. It is paro-chial. It is hostile. It is xenophobic. It folds in onitself. There is rarely a fresh thought or open dis-cussion in small-town America. Let’s test thisenthusiasm. How many of you would want to livein a town of 2,000? Raise your hands. In a town of10,000? 50,000? Do I have 100,000?

Yet, what are developers largely involved with?Creating miserable, miserable, miserable fakesmall towns without even the amenities of tradi-tional small communities. It is the iron triangleagain and profit, profit, profit. Once you can con-vince local officials it is the way to go, what dowe get? Another 5,000 acres given over to HappyLand Developers.

Let us look at community and recognize whatcommunity is. The concept of community is a mis-shapen American myth. It goes back to thisnotion of the small town and all of the misleading


great movies made about a small-town Americathat never existed.

Historically, the small town is a homogeneouscommunity, whether by ethnicity, race, or reli-gious background. That sense of community hasone inevitable consequence. It automatically cre-ates the concept of “us,” (we who live in the com-munity) versus “them” (those whom we don’twant in our community).

That concept of community is antidemocratic,antisocial, and antiprogress. And yet how manymembers of the iron triangle are waving the ban-ner of community because it sounds so palsy-walsy, so cozy, so convivial. They claim they arein the community-building business.

Well, I don’t want them to build communities.The worst communities today in America are thegated communities. And why do you have gatedcommunities? Because those inside the gatesknow that all those bad, dangerous, threatening,undesirable people can be kept out with 98 per-cent reliability.

Is that what community is about in the democrat-ic society? Is community about all us Italiansgathered against the world? All us Jews gath-ered against the world? All us Irish gatheredagainst the world? I can think of a miserablecommunity embracing each one of those people inthe United States today. I can find them inBrooklyn, in Boston, and in Philadelphia.

None of you would want to live in those commu-nities. Community is an antidemocratic conceptand reality insofar as it mirrors life in the smalltown.

Now what could you say good about community?Let’s back off and look at what a good communitycould really be about. Community can be ad hoc.I live in a neighborhood. I have lived in the samehouse for 30 years. I know my left-hand neighborand his wife and his two children. I know myright-hand neighbor and his wife. I know them byfirst name, and we have even entered eachother’s homes.

Across the street is a group house. I smile atthem. A few houses down is a couple and two

children. I have watched the children grow tovery attractive teenagers. I don’t know a singlename in that house, family or given. Going downmy street, I know the name of the guy eighthouses away. On the other side of the street, Iknow one other person because I knew herbefore we moved to the street.

We have a weak but useful form of community.When a builder was going to put up an apart-ment house on the corner, we generated an adhoc organization. We had a lawyer and we gotsome concessions from the builder. I still don’tknow any of those people’s names. And guesswhat? We are all happy in that relationship.

In the modern effective community, propinquityisn’t what community is all about. We need adhoc arrangements to do things. That’s fine. Butlet’s look at some other aspects of good communi-ty and see if there is something there that can beplanned.

The school is becoming the new center of commu-nity. It used to be the church. You lived in thePolish community, and you went to a Polishchurch. In the Ukrainian community, it was theUkrainian church. In a Jewish neighborhood, itwas the associated synagogues, and so on. Thechurch, or its equivalent, was the centerpiece ofmany of the precontemporary neighborhoods.

The likely substitute today for the church role isthe school. And I don’t know any developers whoare taking advantage of that and building a com-munity around that concept. But schools are thethings that are most affecting families’ future.

Another element is safety and security. We don’thave to go to gated communities to find safetyand security. One of the things that one finds in ahealthy neighborhood community is that every-one is relatively safe and secure. I never lock mycar. I live on a safe street.

That weak kind of community is fine, and I stilldon’t have to know my neighbors’ names. I don’thave to socialize with them. I don’t do anythingwith them because my friends are spread overthe metropolitan landscape and beyond.


However, what really is happening, and killingthe sense of neighborhood community in any-thing like Irish, Italian, Jewish, Orthodox, orPolish areas, is the fact that the developers, incahoots with the other two elements of the irontriangle, have effectively wiped out the neighbor-hood social infrastructures that put people on thestreet every hour of the day or night. It used toput people where they could see each other andmake those streets happy, convivial places to be.I don’t think that any developer in his right mindwill do anything like that now considering thefour factors that drive them.

I don’t see any local government doing anythingabout promoting livable neighborhoods. The post-World War II experience in American cities hasbeen to fight aggressively against integratedcommunities (integrated in the sense that busi-ness activities and domestic activities existedside by side). Instead, because of the high landvalues in commercial areas and the uncontrolleddesire to optimize the value of the real estate, weget office buildings—which at the end of thework day become empty tombs with the streetlevel void of anything that would keep people outand about, with the exception of the cleaningcrews. The key to safe, convivial, happy streets isto have a situation of sufficient diversity andaround-the-clock needs that people are drawninto the streets at virtually every hour of theday, or at least from early morning to midnight.

Let me turn more directly to my third topic, thefuture, and suggest some of the things that willaffect the next quarter century, whether you likethem or not. If you are smart, you will like them.If you are not smart, you will see them as disrup-tive and will first deny them, then give them lipservice. And finally, when the money begins toflow in 15 years, you will slowly bring up the bag-gage.

There are big changes underway in work. Today,as a minimum conservative number, 5 percent ofAmericans work for corporations but don’t go towork at their business sites. They work at home,or in some few cases they work at satellite cen-ters or on the road. We anticipate that that 5 per-cent will grow to 20 percent by 2005 and perhapsto 40 percent by 2020.

There is a tip point in there somewhere. I don’tknow what the tip point is, 10, 15, 20, 25, 30, 35percent of people not going to work. Wherever it is, it means a radical shift in a dozen ordinaryrelationships.

It will be goodbye blue suit. It will be goodbye todress for success. Where will you eat? Who willyou socialize with? Who will need a $25,000 auto-mobile to drive 4,500 miles a year? Everything insociety will be changed in big or small ways formassive numbers of people.

What else will happen? Look at the house. A typical house has a bedroom for real people, andtwo shrunken bedrooms for children or visitingdwarves, a kitchen, living room, dining room, andso forth. When you look at what is actually goingon in America, the invasion of the home by workis transformational. How many developers aremarketing homes that have a study or an office?If they are not offering that, they are already tenyears behind reality.

One homebuilder here in the Washington arealooked around and discovered that there werelots of unmarried people living together withoutany sexual relationship. He said this big bed-room, small bedroom pattern is not what thosepeople need. He built houses with two big bed-rooms. Bonanza time. He responded to a trend.

The most important trend affecting work is dis-tributed work. If they don’t change the way theydesign and build housing, developers will bebuilding obsolescent homes for their customers.

What else is happening? Information technologyis affecting everything. Everything will be smart.What does smartness mean? Let me give you mydefinition. Every single device, component, ele-ment, physical thing in your life—the chair youare sitting on, the table you are eating off of, thesatchel that you carry to work, your car—will dothree things.

First, it will ask itself, am I working okay inter-nally? Am I noisy? Am I well lubricated? Second,am I performing my external task? If I’m a vacu-um cleaner, am I getting the dirt off the carpet?And third, if the answer is no to either of theabove, it will begin repair or call for help.


Take that concept and apply it to every singlephysical thing in your life. If you were a dull, hos-tile, uninterested audience, those walls wouldsense that in your pheromones and turn from thisnameless color gradually to pink and ontoenlivening red. Instead of allowing you to sitthere in a catatonic state, it would activate you,just by sheer color, to be more lively and atten-tive.

Since a large part of our lives is spent in thehouse and home, think about what is needed. Thedomestic kitchen is an obsolescent carryoverfrom the past made superficially attractive bycosmetic touches. The kitchen today reflects thefailure of two of the largest business sectors inthis society, people who sell food and people whosell appliances, to get together to do somethingproductive.

In 10 or 20 years, Mary will come home fromwork and announce, “Chair, this is Mary.” Tick,tick, tick, the chair will adjust itself to exactlythe way Mary likes to sit. She plops into it, andshe is in heaven.

It is getting close to dinnertime. Charlie doesdinner tonight. He hops out of his chair, makes a15- second transit through the kitchen, presses acouple of buttons, pulls a lever, talks to someappliances, and 20 minutes later there is a four-course meal for four people.

Who are those four people? Well, one is a machoman who wants his meat almost raw. The womanand the small child want it cooked normally. Andtoothless, old grandma living with them wantsher food cooked to a pulp. Everybody gets themeal exactly as they want it. And that is followedby seven minutes of cleanup.

Why don’t you have that today? Everything Ihave said is fully possible today. You don’t have itbecause nobody has taken the initiative to radi-cally modernize the kitchen by making it intelli-gent. You have a few feeble-minded things theretoday. You have a feeble-minded dishwasher. Youprobably have a feeble-minded microwave ortwo. But you don’t have any really intelligentdevices. What we need is the kitchen in whicheverything talks to everything else to do the

kinds of things that I have just described. Ifthose two industries, food and appliances, can’tget together on their own, why don’t developersget them together?

What else is happening? Information technologywill move into all of the things associated withsafety, security and monitoring of the building.The building will be smart. Even more impor-tant, all the home life functions inside the build-ing will be smart.

Demography will affect the home of the future.There are two big groups to keep an eye on overthe next 25 years. One of them is aging Ameri-cans. Why keep an eye on them in particular?You may think, “They are getting more and morefeeble. They can’t get around. They are out of theworkplace. They are not au courant with things.”You’re wrong. Think again.

A 65-year-old today is worth two 25-year-olds inthe voting booth. The single strongest socialcharacteristic of aging is the propensity to vote.As the baby boomers age, they will join thoseranks of insistent voters with their own newagenda.

When the people who brought us the environ-mental movement, the historic preservationmovement, and the auto safety movement, andwhatever other movement you care about, reachtheir geriatric years, they will not forget whatthey knew. They will simply be hell on wheels.

When they turn their wrath on the defective,inadequate, poorly designed, inappropriately laidout kind of stuff that is being built, their wrathwill be unforgiving. Furthermore, they will havetheir own agenda, an agenda concerning theusual issues of safety and comfort, but also con-cerning the things that have to do with aging—slowness, tottering, failing sensorium—don’t seeso well, don’t hear so well, talk too loud, all thesekinds of things. All these factors will be integrat-ed into housing design in the future.

As these baby boomers begin to retire, they willnot forget anything. They will be Internet savvy,and they will organize on an unprecedented scaleto get what they want. And if you are the targetof their wrath, you won’t ever forget it.


The second demographic group to watch is sin-gles. This has to do with the reality that those ofyou who are loving parents are inclined to deny.Every intelligent young person wants to get outfrom under your thumb. They, particularly youngwomen, want to be free. They want to live aloneif they have to. And so as soon as they graduatefrom high school or college, it is off to live ontheir own. Young men, of course, are an entirelydifferent species. They can lumber home, unem-ployed, and hover over the refrigerator at age 27unable to find a decent job. Mom, of course, keepsfeeding them.

A big market is singles. And who is designinghousing for singles? Housing is designed for fami-lies. Housing for singles would be really great.And those singles will come in two broad agegroups—the young singles and the geriatric andolder singles.

What else is happening? You have got to look atthe evil that developers have done, while notbeing evil people. That is, building suburbia andpushing this suburban sprawl. It goes back to thefalse belief I discussed on the part of middle-classAmericans. I have no doubt that through ageseven, suburban life is great. But find me ateenager who is happy in suburbia, and you prob-ably have found a cretin.

It is a commonplace in Western history that inevery country of Europe and in the United Statescivilization is an urban phenomenon. If you grad-uate from high school or college in North Dakota,it is bye-bye wheat fields; it is hello Chicago, NewYork, or San Francisco. Look around, closer towhere you live, at the suburban sprawl develop-ers have created. Any kid whose IQ is greaterthan his belt size wants to get out of there assoon as there is any hope of a job in a civilizedplace—the city.

Suburbia is a fundamental development problemand implies a fundamental need to break the irontriangle. There is potentially plenty of money tobe made in developing urban areas. There isplenty of money to be made in making cities liv-able. Why not break out of the iron triangle to dowhat is of longer-term social value, rather thanwhat has been done for 50 years now, making

easy money by more and more spread of the sub-urbs?

What else is happening? Urban crime is movinginto the suburbs. There will be more and moretechnology to deal with it. More cameras will bein individual homes or on busy streets.

We already have municipal systems that scanlicense plates ostensibly to look for people whorun the red light or behave improperly. That willcontinue to develop. There will be more and moreanticrime or crime control measures, as a poorsubstitute for viable neighborhoods.

Another point has to do with ethnicity and immi-grants. Immigrants today comprise about 33 perent of net population growth. By the time 2025rolls around, they will comprise 100 per cent ofnet population growth. What they bring to us aredifferent architectural models and different socialcustoms. They present an increasingly importantcustomer base.

For example, if I come from a Middle Easterncountry and am likely to be Islamic, how do Iachieve privacy? I achieve it in a way that noneof you do. This is my living room. I signal to all toleave me alone by standing in the corner with myback to the center of the room. In many Islamiccountries, there is one very large room thateverybody lives in. One achieves privacy, not inthe mechanical way that we achieve it, but by asocial gesture.

I don’t know whether the Muslims will amount tomuch numerically. They are about 3 percent ofthe population now, but are likely to grow innumber. Ditto with Hispanics from 12 differentcountries. Eastern Europeans are also cominghere in bigger numbers. How are they to be inte-grated into your planning?

Another trend, and one of the slowest trends wehave ever forecast, is manufactured housing. Idon’t think anyone in this room would say thatthe labor supply connected with building is satis-factory. I doubt that many of you find labor ade-quately trained.

We are in a labor crisis in the building and con-struction sector. The obvious response to that is


manufactured housing. The top price that I haveseen for a manufactured house is $600,000. I amnot talking about trailers or housing where thewalls rattle like TV thunder.

What I am talking about are houses and homesthat are just as good as anything you build any-where in the cities or suburbs in the UnitedStates. The advantage of manufactured housing,of course, is quality control that you can get in afactory that you can’t get at the job site. Diver-sity of design and sureness of delivery are amongthe good things that come out of a factory prod-uct. And why don’t we have them? Because ofthe iron triangle. Who can put up 500 manufac-tured houses? Nobody right now. The biggestdevelopers have the potential power to crack intothat as an experiment. Get the variances. Get thefreedom to do it. Manufactured housing wouldgive a tremendous positive jolt to housing.

Developers tell me that when the development isfinished, when the houses are occupied, they getan average of a dozen complaints from the newowner. How many complaints do you have aboutyour Sony? How many complaints do you haveabout your Lexus? How many complaints do youhave about your Cadillac? How many complaintsdo you hear for anything that even begins toapproach 10 percent of the value of what peoplepay for a house? It would be utterly unacceptableif you had to take your Cadillac back 12 times tobe fixed. Schlockmeisters appear to have a domi-nant role in building construction. There is noreason for that. (“Schlockmeister” is Yiddish fortrash merchant. Yiddish is the great language ofinsult.)

But you know why you aren’t doing somethingabout that. It’s because of the iron triangle.Nobody is squeezing developers hard enough tosqueeze out the poor performance. But what hap-pens if you did it? Would it satisfy the develop-ers’ first three design criteria—profit, profit,profit? I think it would.

Another factor is energy. Energy is interestingbecause its future depends upon an absoluteuncertainty now. And that absolute uncertaintyis whether greenhouse warming will prove to beboth real and significant.

The evidence that it is even anthropogenic isquestionable. Fully qualified climatologists willsay, no, not yet. We can’t assign human cause toglobal warming in full confidence. We do knowthat the temperature has risen about one degreesince the turn of the century. If you look in theNortheast or the Central Plains, the weather forthe last three years matches what the climatolo-gists have been forecasting as the early stages ofgreenhouse warming. But the evidence is not sostrong yet that they are ready to say, “Kids, it’shere!”

The consensus feeling—consensus feeling asopposed to knowledge—among climatologists isthat it will prove to be real. And if it proves to bereal, the single most important thing affectingyour sector will be massive energy conservation.

We already know how to build houses all aroundthe country that will be as comfortable, as safe,as warm, as what you now have, that use only 10per cent to 30 percent as much energy as a housenow uses. Virtually every house in America is ahot finger stuck up into the sky, wasting energyand, therefore, wasting fossil fuel and creatingmore unnecessary carbon dioxide.

Who is pushing that notion of energy balancedhouses? Must we wait until the crisis comes?Must we wait until there are infinite numbers ofcongressional hearings? The irony in delay is thatgreenhouse warming is likely to be great goodnews to homebuilders, because any massivemovement in building means boom time.

Subsidiary to that will be a boom in retrofit tocut energy consumption by 40 to 70 percent inhouses that now exist. Nothing better could hap-pen to your industry than greenhouse warming.And where is the plan? Where is the program?Where are the expectations? Where is the lead-ership? You are all stuck in your iron triangle.

Let me finish by suggesting one more idea. Houses simply aren’t designed to be recyclable.And yet, by the time 25 years are past, the housewill be in the same condition as the automobile.You may not know it now, but close to 95 percentof the automobile is now recycled. It is not neces-sarily high value recycling, but it is recycled.


What will happen to the design paradigm when itbecomes the law of the land that every building,when it is disposed of, must be recycled?

In summary, if you design and construct success-ful housing and other buildings for the future,they will have to include shops and stores open atleast 18 hours a day in residential areas. Anduntil that is done, we will not have happy stableneighborhood communities, either suburban orurban.

Thank you all very much.


S u m m a r yWhat will we be building in the next millennium?This session explores the kinds of housing Ameri-cans will want in the coming years and how to-morrow’s dream home is being designed, devel-oped, and marketed today.

Frank Anton’s presentation offers three forcesthat will determine future trends in housing de-sign and residential development patterns: atti-tudes toward homeownership, demographics, andtechnology. His pervasive theme—a position thatgenerated considerable conversation—is that sin-gle family homes, sited in conventional suburbansubdivisions, will continue to prevail as the “hous-ing of choice” for most Americans into the earlyyears of the next century.

As panelists describe it, creating homes to accom-modate different lifestyles and life stages will bechallenging. Housing innovation is full of riskswith potentially devastating financial conse-quences for failure. The public’s reluctance to en-courage such innovation and to accept new build-ing systems and products readily makeindustry-sponsored research and risk-taking allthe more difficult.

Once they are accepted, however, the public willfirst demand and then expect these improve-ments. Costs will decrease as benefits are proven.The installation of new wiring systems to handlestate-of-the-art integrated voice, video, and datafiber-optics is cited as a good example of howpublic acceptance and demand for new technol-ogy evolve. Green building and smart growth pio-neers face similar thresholds of public awarenessin gaining acceptance of recycling, waste reduc-tion, and the use of energy efficient materials andconstruction.

To gain such acceptance, the housing industry isincreasingly employing such techniques as open-

Trend Topic III: Products, Te c h n o l o g y, and Design

building design, similar to commercial develop-ment, in which residents and owners can cus-tomize living spaces to accommodate their chang-ing interests and needs. Future residentialstructures and mechanical systems will utilizethis flexible approach to provide amenities andmake home-based service delivery more cost-ef-fective. Modular and manufactured housing—HUD-Code Homes—will add affordability to thissystems approach. Affordability also will be amajor focus of the next century’s debate overland and resource consumption, discussed atgreater length by other panels.

In closing, panelists cite public and industry ac-ceptance of new architectural product types and“smart growth “ as promising opportunities topromote a greater sense of community and socialcohesion within new towns and exurban develop-ments, existing cities, and suburbs alike.

I n t r o d u c t i o nDeane EvansArchitectArlington, Virginia

While there’s been innovation in housing, it has-n’t been like other industries. One of the reasonsis that housing is still a very disaggregated in-dustry. It is very hard to move innovation intothat industry when you have 150,000 builders andhundreds of thousands of players in the chain toget an innovation into the process. Whereas, withDetroit, or the car industry, or the aerospace in-dustry, you can actually move innovation inquickly.

If it turns out that the manufactured home indus-try, the HUD code home industry, really movesas aggressively as some seem to think, you maybe able to get that aggregation and move innova-tion in more quickly.


We’re setting the stage the way we’ve had in thelast two panels—a general overview, and an opin-ionated one, about where housing is going to begoing. The other respondents will reply. I don’twant to box any of the speakers in. It is just ageneral allocation of discussion points, but I thinkit will cover the ground that we need to cover.

No Growth Is Not an OptionFrank AntonPresident, Hanley-WoodBuilder MagazineWashington, D.C.

I’ve spent almost 25 years in the housing indus-try, in publishing, as an observer, in sort of anarm’s length way, of the mainstream housing in-dustry. And most of you are not really partici-pants in the mainstream housing industry.

I also feel like an outsider in that so far as I cantell, I’m the only presenter who doesn’t have aPh.D. I do have a master’s degree in journalism,but that was mostly because I wanted to be asportswriter, not because I wanted to be smart.And probably because I wanted to be a sports-writer, and I like sports, I’m an optimist. What Iam going to say is, let’s just say, more upbeatthan what I think you may have heard this morn-ing.

Some baseline information about the housing in-dustry is that it’s a very messy industry. Thereare 150,000 builders in the United States. Theybuilt 1.5 million houses in 1998, so you can seethere’s nothing like a dominant player in thehousing industry. The biggest builder controlsbarely 1 percent of the housing starts.

There were 6 million houses bought last year.That means 6 million households, 6 million con-sumer groups bought a house. About 1 million ofthem were new, and 5 million of them were exist-ing. Tens of millions remodeled houses last year.Half the households in the United States remodelsomething in their house every year.

Now, what I’m here to say is that almost none ofthose people gave one second of thought to hous-ing policy or to any of that.

The builders deal with zoning, and they deal withgovernment issues, but what the builder is mostconcerned about is the consumer. What does theconsumer want? What the consumer is most con-cerned about is getting what he or she wants at aprice that the consumer can pay.

So it’s a big, big, messy industry. Now, what hasthat industry done in the last century? I don’tthink that you could argue that the difference be-tween the best-housed people in the UnitedStates and the worst-housed people in the UnitedStates is as wide in the year 2000 as it was in theyear 1900, but there is still a big gap.

However, the number of people on the best-housed side of the spectrum is enormously biggerin the year 2000 than it was in the year 1900. Idon’t know what the home ownership rate was in1900, but I’m sure it was less than 25 percent.Today it’s 67 percent. Two thirds of the house-holds in the United States own a house. So lots ofprogress was made in this last century.

I think more progress will be made in the nextcentury. And there’s been a lot of talk about help-ing the housing-disadvantaged. And the sense Iget is that everyone wants the industry to reachdown to help these people.

I think that the people in this room who are in-volved in housing policy and helping those kindsof housing-disadvantaged should reach up to theindustry as well.

About 15 years ago, the magazine Builder did astory on Habitat for Humanity. No one in themainstream housing industry really knew aboutHabitat for Humanity. Since then, the industrybuilders and suppliers have reached out to Habi-tat, because it reached out to them. And Habitatfor Humanity—now, this is an amazing statistic—is about the 25th largest home builder in theUnited States, which is an amazing turnaround.

So the industry will help, but there are otherthings happening that are bigger than the hous-ing industry. I think there are three things: atti-tudes Americans have toward home ownership,demographics, and technology. Each is a powerfulforce in its own right, but they all interact, andact as catalysts with each other.


Now, I’m going to tell you things that personallyI don’t really like, but they’re the things that Ithink are going to happen. And I say that so youdon’t throw things at me, because I think some ofthe things I say you’re not going to like.

But let’s talk about home ownership. What doAmericans think about home ownership? Some-one asserted this morning that the idea of owninga home was really promulgated by policy changesafter World War II.

Well, the fact of the matter is Americans stillwant to own a home. We did a survey two yearsago, believing that that was changing. The finan-cial advantage of owning a home just wasn’tthere from the mid-1980s through the late 1990s.Zero percent, if you factored out the inflationrate in housing values. If you took out inflation,the price of a constant-sized, constant-qualityhouse went absolutely nowhere from 1985 to1995.

But the survey we did showed that, at this pointin time, nine out of ten Americans still considerhome ownership one of their most importantgoals. They thought that the house providedthem with social refuge and financial security. Soowning a home is not just an issue of the head inthis country. It’s also an issue of the heart. And Idon’t think that’s going to change any time in thefirst half of the next century.

I’m not going to spend very much time on hous-ing design, but I want to ask all of you for someaudience participation right now. Does everyonehave a pen? Everyone take out their pen, and inten seconds draw a house.

How many of you drew something that looks likethis? It has two walls, and it has a roof, and it hasa door and two windows. How many of you drewsomething that looks like that? Isn’t it amazing?

The point is that Americans know what a houseis supposed to look like, so I don’t have to spendthat much time on housing design per se. Butwhen we talk about housing design, and I’m seri-ous, that’s how simple housing design is.

An architect taught me that exercise. His nameis Rodney Friedman. He’s an FAIA architect in

San Francisco, and he said, “You ask 100 archi-tects to do the same thing, and that’s what theydraw.” Everybody in the United States drawsthat form. People know what the basic designform is of a single-family house.

The part of design that’s important is that mostpeople want a single-family house. To me, that’sthe most important thing. Since 1991, we’ve builtmore than 1 million single-family houses everyyear. That’s seven years in a row. It’ll happenagain this year. That’s eight years in a row, in the1990s. Until this decade, there had never beenmore than three years in a row when the indus-try built more than 1 million single-family houses.

More than ever, the idea that owning a homemeans owning a detached home on its own lotwith a fence around it is very real. So if you’rethinking that in the next 25 years that you’regoing to see a major change in the way housinglooks, I’ll tell you the answer to that is no. If youthink it will be built in very different kinds ofsubdivisions, I would tell you no. I think that youwill see a proliferation of standard single-familysubdivisions.

You will see more and more houses that are com-monly called McMansions being built, and that’snot going to change. And I say that, even thoughI bought my Seaside, Florida, T-shirt in 1987. Iwent down to Seaside in 1987. I’m good friendswith Robert Davis. I love New Urbanism, but Idon’t really see that happening.

The average new single-family home is now 2,200square feet. I don’t think that the houses will geta whole lot bigger. That’s a pretty big house al-ready. Now the demand for those houses is alsobeing created by demographics. Here’s wherethey come in.

You still have millions and millions of babyboomers who are between 35 and 40 years old.They’re just getting ready to buy their second orthird house. There is no demographic shortage ofdemand for large single-family houses. That’ssort of the tail end of the baby boom. At the frontend of the baby boom, there are people like me,those born between 1946 and 1954. One of those


people is going to turn 50 every 10 seconds forthe next decade.

And they’ve been spoiled all their lives, they’vealways wanted what they want, and I don’t thinktheir behavior is going to change. It should cre-ate enormous demand for resort housing. Itshould maintain the demand, the growing de-mand, for remodeling. I only see that accelerat-ing, because housing is getting older at the sametime that these people are getting older andmore affluent.

And in a relatively short time it’s going to createa new type of housing, which the magazine callslife stages housing. Now, contrary to what Mr.Coates said at lunch, the industry is not ignoringaging baby boomers.

I’ll give you another statistic. Does anyone wantto guess what percentage of single-family housesbuilt already in the United States are manufac-tured? Twenty-five percent, and that’s going togo up.

Manufactured housing is already a major factorin the housing industry. This [slide] is a manufac-tured house. We called it a life stages house, be-cause it has been built and designed to adapt to acouple or a single person, probably about 50 to 55years old, who buys this house and really wantsto live there into their geriatric years.

This house is built with wide hallways and doors,so if someone ends up being in a wheelchair, thehouse accommodates them. The counter tops inthe kitchen electronically go up and down, so thatif you end up in a wheelchair, you can lower thecounter top, the sink, the work surfaces to con-tinue to be able to live in the house.

There is lots of natural light. There is a skylightthat spans the whole length of the house, andthat’s because older people have trouble seeing,even with artificial light. So the more naturallight you have in the house, the happier they’llbe. The house has rooms that convert over time.The secondary bedrooms turn into offices orstudies. A small suite off their master bedroombecomes a room for a nurse, if one or both of thepeople in the house become very infirm and needin-house care.

One of the most interesting ideas is the garagehas a door on either end, because studies showthat what happens when people get old is theycan’t back their car up. They’re always crashinginto the garage. So this way, you drive in and youdrive out. And it has a loop driveway. So thehousing industry is not ignoring older people.

Now, another demographic fact needs to be con-sidered as well. The home ownership rate is at arecord high now, 67 percent. But when you talkabout young whites, those under 35 years old,and when you talk about minorities, the homeownership story is a much different story. Foryoung whites under 35, less than 40 percent ofthem own a home. Forty-five percent of all blacksown a home, 41 percent of Hispanics, 50 percentof other minorities. The rates for all whites is 71to 73 percent. So there is a big home ownershipgap.

Now, among young whites, those under 35, someof that is cultural and social. People are delayingmarriage and delaying child rearing. But the big-ger issue for both those people and minorities isaffordability.

Now, as I see it, the laws of supply and demandwork in the housing industry. And the speaker atlunch said that builders care about profits, andthey do. They’re beginning to understand thatthere is enormous pent-up demand among youngpeople and minorities of all ages for home owner-ship. And I think the industry will respond tothis very quickly. I think they will begin buildinghouses for these people. I think they will beginbuilding affordable houses for these people.

I further think that almost none of those houseswill be in the city. You may want them to be inthe city, and you can talk about what you’d like tohave happen in the future, but the cheapest placeto build in the United States is still away fromthe city center.

And the push—the pull, I should say—toward ex-urbia is enormous in this country. As the main-stream building industry attempts to createhousing for the relatively housing-disadvantaged,that is where they’ll go. They will not go into thecity. The job market is away from the central


city. There is more office space between Tyson’sCorner, Virginia, and Dulles Airport than there isin downtown Denver. It is a huge city, and it’sway away from the core city of Washington, D.C.You can live another 20 or 30 miles outside DullesAirport and still have a relatively short commuteand get a whole lot of house for your money.

Now, there’s lots of talk about growth and nogrowth. And the no-growth people have becomesmarter, and they now call themselves smartgrowth advocates.

I believe that the battle is already over. All youhave to do is drive outside Dulles Airport andyou know the battle is over. I mean, sprawl con-tinues for 50 or 60 miles outside Washington, be-cause market forces are stronger than the forcesof trying to cause development to contract.

Do I like this? Not necessarily, but I think weneed to talk about and think about the future asit’s really going to be. Now, if you factor in thelast force that I was going to talk about, which istechnology, I think that the forces pulling devel-opment away from the city become even morepowerful.

All of your offices are already wired. E-commerceis beginning to take hold in this country. Soon,and I mean very soon, there is not going to bevery much need to be close to your office, or closeto shopping. You can work from home. You canshop on the computer. And I think more andmore people will work at home, they’ll shop fromhome, and more and more homes will be built atgreat distances from city centers as a result ofthis. That is where homeowners, as I said before,will be able to get the most house for the money.

They’ll leave behind them all the hassles of thecity. Now, I live in Georgetown, so I like the city,but lots of people consider the city a hassle. Andthose people will leave. Education, schools weretalked about. I think that people are going to beeducated at home. You’re going to be able to sityour kids down in front of a computer, andthey’re going to be able to get a higher qualityeducation than they do in the trailers that mykids are going to school in. Fairfax County hasmore than a $1 billion school budget, and they

have kids going to school in un-air-conditionedtrailers.

The force of technology is a very, very powerfulforce. And again, the housing industry has re-sponded to this as well. This [slide] is a house webuilt two years ago called—of all things—thehouse of the future. And it was based, in part, onthat research that we did about home ownership.One of the things we found in that study is thatpeople always refer to their home as their castle.So when we gave this design problem to the ar-chitect who worked on it, Barry Burkas devel-oped these turrets just to have some fun. So thehouse is a castle. And there it is in daylight.

I’m also showing you this, because I think a lot ofthe houses that are going to be built are stillgoing to be big, expensive, single-family houses.There is still enormous demand for those kinds ofhouses. This is the courtyard of that house. Thisis one of those turrets up front. You can pourboiling oil on guests that you don’t like.

This is the living room. Now, I know that a lot ofpeople in here are involved with housing the dis-advantaged, and I don’t mean to insult you byshowing you this kind of a project, but the main-stream of the housing industry is going to build alot of these houses. This house has dividers.Those dividers will move, so that the house canbe completely reconfigured by the people in thehouse—as their household changes, as the kidsmove out, or as kids move back in, or if theywant to have a small dinner party versus a largedinner party. I think you’ll see a lot of that in thehouses of the future.

You’ll also see built-in AV systems, installed asstandard features by builders, just as they installair conditioning today. The kitchen will still be avery important part of the house. Will the kitchenbe able to do what the speaker (Mr. Coates) saidat lunch? I think he’s absolutely, positively cor-rect. I think you will be able to walk into yourkitchen and tell it to cook you dinner, and it willdo so.

People want to live well, and those who can af-ford to will. So there will be exotic spaces likethis. There will be bathrooms like this. This is in


one of those turrets, and there is a skylight ontop of the turret that makes people very, very,very sexy; makes people happy.

This is their back yard. Lots of people are goingto live like this. But the real thing I want to talkto you about is the way this house was wired. Thishouse is completely wired for the future. You canwalk into this house and say, “Hello, house, I’mhome,” and depending on the time of the day, itknows which lights to turn off and on, it knows toeither turn up or turn down the air conditioningor the heating system. It will do that on verbalcommand.

It also has a lot of wiring. If you want to get intoa business with a future, I’d say that whoevermakes wire is going to get rich in the next 25years.

I only have one more slide. This house also hasbuilt-in computer ports, so that someone is set upto work at home, learn at home, shop at home, beeducated at home. Every room in the house has acomputer terminal in it. I think that you’re goingto see technology influence the house that way.

Just to repeat myself very briefly, think aboutthe three forces driving the industry over thefirst 25 or maybe even 50 years of the next cen-tury. People want to own a home; they’re gettingolder and richer and can afford to own a home;and technology is going to make living so muchbetter that people will want to live in new homesversus old homes. And these forces combined, forthe most part, are going to push developmentaway from the city, out toward exurbia. And thisis what is likely to continue, whether you like itor not.

R e s p o n s eSuzanne CameronPrincipalCameron & CompanyWashington, D.C.

Frank, I want to thank you for all your hardwork and wonderful comments. I will probablychallenge you on a few of the points. As many ofyou know, I come to this point not as a technolo-

gist, but as a veteran of community development,or destination development, for about 30 years.So my comments today are based on my experi-ence and my study into the why and the whereand the what of why people buy homes.

I will just to touch on a few issues, and then I’dlike to come back to some of the comments. Tech-nology and new housing, as they move forward,are always going to continue to surprise us. Newmaterials will provide greater building and livingefficiencies. The lower cost of housing manufac-ture will be able to provide more affordable hous-ing and designs that accommodate our variousand sundry life stages.

Lower cost of occupancy through energy efficien-cies. As we know, fiber to the curb is becoming astandard, not an abnormality. Energy is becom-ing more affordable through many of the energycompanies, and through the cable and the othersuppliers.

Lower cost of ownership. Today, buyers are shop-ping through the Internet. They’re clicking on toshop for mortgages, and they’re proceeding in away that, historically, we haven’t been able toprovide before.

All of the new technologies will be remarkable,but they will not be the drivers of market de-mand. They will not be the generators of giantprofit, and they won’t be the boosters of the mar-gins that we need to see in creating communitydevelopments and community places.

We talked a little bit about the smart home, andsmart home technology. I can remember whenthe first smart home was rolled out back in 1984.Dallas, I think, was the NAHB convention thatyear. It was absolutely outstanding. Everybodywas going to be jumping on the smart home tech-nology. We were going to have smart home stan-dards. We were going to be entering a decadethat the builders in the housing industry, and thedevelopers, would be providing those features tomeet the housing demand.

Well, it’s been thirteen years. There’s been good,there’s been bad, and there’s been indifferent. Asyou may know, IBM tried to roll out the Aptivathat would work with the smart house, and it


would be able to provide the homebuyer, or theconsumer, with wonderful security, safety. Thehomebuyer would be able to walk home and beable to do everything with his computer.

That wasn’t such a hot ticket. That had to be re-energy efficiency was another example. It’s beena wonderful idea, but is it the driving feature ofwhat folks are looking for when they buy ahouse?

All of these wonderful features, and I’ve onlygiven you a couple of them, are additives. Theywill not be the be-all, end-all for the home buyer.They will be a feature palette, if you will, of whatbuyers will be looking for when they purchasetheir most expensive product, what they typi-cally would buy in their family purchase options.

Let me tell you a little bit about a metaphor thatI used with Mobil when we began to look at bet-ter ways to create communities and listen towhat consumers were saying. I started talking toa lot of research companies and researchers, andwe began to look at different industries.

One of the best models that I came up with wasthe car manufacturer. And if you look at the waypeople buy cars, whether it’s today or yesterday,or tomorrow, the car stickers are on the car, andthey are feature based. When the buyer comesinto the car showroom, it lists all of the featuresand the product price and so on and so forth.

Is it the final driver of the purchase of the auto-mobile? No. Does it take the buyer to the nextstep? Sometimes, but not always. What does thesticker do? It reinforces to the purchaser whatthe positioning strategy of that manufacturer hasbeen, and the value set that it creates.

I could go on with additional metaphors, but Iuse that as a segue-way into the consumer re-search that I mentioned earlier. Starting in theearly 1990s, we began to try to understand anddefine what the consumer buying behavior was inhousing.

We used demographics, supply and demand mod-els that relate back to a lot of what Frank wassaying. Who’s buying what, where are they buy-ing, how much are they spending?

Psychographics. We didn’t spend much time talk-ing about psychographics. What drives people todo what they do? And why are emotional pur-chases so incredibly important on most of ourproducts today?

Anthropology. A lot of the anthropological pro-files looked at cultures and social sets as driversof why people are buying housing, and wherethey’re going to buy housing.

After more than 10 years of looking at hundredsof thousands of interviews and focus groups, andalso talking with folks that have bought homesand have looked for homes, the consensus is thatthe place where the home is located is going to bemore of a driver than just the shelter. The homeis very important, it may be the castle to thehomebuyer, but where is it? Where does thehome sit?

Let’s come back to the iron triangle mentionedearlier. Yes, developers can buy land farther andfarther out. It provides a base of the product thatis going to be more affordable. So we’re drawingpeople out because of affordability and for shel-ter. But the lack of community is a huge, hugeissue in today’s consumer buying public.

What does community mean? It’s a major arbiterof how people select and buy homes. Is it land de-sign? Is it the design of the streets? Is it the de-sign of the home? Is it social? Is it cultural? Is itthe home? Is it the education? Is it the religiouscomponent?

All of that goes together so that you create afabric for where the home sits—whether it is a$200,000 home, a $1 million home, a $500,000home, single family, detached, attached, or all thevarious and sundry types of houses that we pro-vide as an industry. What is the package thatmoves the house through to the consumer?

The other issue that I found, as a developer, to beincredibly important is that you are the creatorof the place. You provide the package for thebuilders. You provide the place for the rooftops.You provide the stability. You are the provider ofthe product. There’s been a lot of discussion abouthow builders create the trustmark, if you will,that provides the stability for the buyer. The


developer has been the creator of this packagefor many, many years and will continue to be. Asthe buyer looks at the place, what is the level oftrust that is going to provide the sustainabilitythrough the next century?

In community, and going back to some of the re-search, why are consumers today backing off alittle bit from golf courses? The National GolfFoundation has dropped back their demand fore-casts for hiking trails, parks, common areas, openspace. Why are village centers more desirablethan strip malls? Why are neighborhoods moredesirable to the consumer than subdivisions?Why is education so far up the ladder on desir-ability in places where people live?

This is the challenge today—and I would nowcome back to Frank—as we present the housingindustry and as suburban sprawl continues togrow. How are we going to enhance, revisit, pro-vide the model so that we can address the needsof the consumer? I would question the supply anddemand model. I would question the consumer’sbuying behavior. And I would then stand backand question our ability to provide all of that tothe consuming, buying public.

R e s p o n s eDavid EngelU.S. Department of Housing and Urban DevelopmentWashington, D.C.

I was to critique Frank’s paper, but I don’t havemuch criticism. Again, I wish it was different. Ilive in the city, too, and I wish more people livedwhere I live, but it’s just not going to happen.

Some surveys recently asked people, “Do youthink sprawl and traffic congestion are very im-portant?” Seventy-five percent of the people said,“Yes.” The next question was, “Would you agreeto have greater restrictions on your propertyrights?” Eighty percent said, “No.”

You can’t have your cake and eat it. It would re-quire public intervention of a level that I don’tthink this country is willing to accept.

But I’m going to get off the sprawl discussionwhich everybody’s had, and talk a little bit aboutinnovation. People say the housing industry has-n’t changed, in terms of construction. Well, it haschanged dramatically. If anyone goes and sees atypical housing development now, more and moreof the units have precut pieces, components puttogether off site, and that’s going to continue. In-novation in the housing industry is not driven bythe consumer and never will be. And that’s one ofthe reasons why innovation is slow to be ac-cepted.

In fact, the average consumer is terrified of inno-vation in his home. He’s putting his entire lifesavings into this big house. He doesn’t want it tofail, or look different from his neighbor’s house.He wants it to look no different and to give himthe greatest assurance that he could resell it inthe future. Therefore, he is not a player in theworld of innovation.

Yet, I do think we’re going to see greater innova-tion in the next 10 or 15 years. And that has noth-ing to do with the consumer. It has to do withwhat’s going to make the builder’s life easier.

The shortage of labor supply is probably going tobe the biggest driver for innovation in the home-building industry. The construction workforce isaging. And it’s not being replaced. If it wasn’t forimmigrants from Latin America, this countrywould not be building houses right now at thelevel it is.

Therefore, we’re going to have to see develop-ment of technologies that are idiot proof, thatcould be done by less-skilled labor, that could bedone off site. And that is going to be a key driverin the homebuilding industry.

Manufactured housing has been mentioned. Wejust completed a study—you can contact HUD toget a copy—which compared for the first time,systematically, modular housing, manufacturedhousing, and site-built housing. We normalizedfor things like land costs, infrastructure costs,and house size. In fact, the study showed thatmanufactured housing—by which I mean HUDcode housing or what used to be called wobbly


boxes or mobile homes—is 30 percent cheaper ona square foot basis than stick built.

And I think we’re going to see HUD code hous-ing, manufactured housing, becoming an increas-ingly large percentage of the affordable housingsupply in this country, particularly as the indus-try aggressively fights zoning and land use areasthat have kept it out.

I’ve been in a couple of meetings with the presi-dents of Champion Homes and FleetwoodHomes, the two largest manufacturers of HUDcode housing in this country. And they feel con-vinced that in the next 15 years, they will basi-cally take over the affordable housing part of thehousing market.

Why are the costs so low? Labor costs in a HUDcode house are 8 percent of the total labor cost,compared with what, 30, 40 percent.

A revolution is going to happen in the homebuild-ing industry. Other changes are occurring dra-matically as we run out of certain supplies, par-ticularly quality construction-grade lumber. Steelframing, for example, is now 75,000 units of hous-ing this year. It would be far greater if you hadn’thad the crash of the economy in Asia, which wasbringing in tons of wood. So wood prices haveleveled off. As soon as wood prices go up again,steel framing is going to be a major part of thehousing industry.

The basic problem that has always deterred inno-vation in the homebuilding industry is the wholequestion of liability to the homebuilder. If theconsumer doesn’t care about innovation—in fact,he’s afraid of it—what reason does the home-builder have to be willing at all to try innovation?The slightest failure of innovation could result inincredible cost to the builder.

If you ask a homebuilder if he’s willing to tryanything new, he’ll say three things to you, and ithappens every case: fire retardant plywood, plas-tic pipe, and eaves exterior stucco systems.These are three innovative systems that failedand have left the homebuilders with hundreds ofmillions of dollars worth of liability.

The homebuilding industry is different thanother industries, because one small failure couldlead to an enormous cost, and there is no driveron the part of the user to try innovation. Untilwe’re able to address that issue, innovation isgoing to be slow.

I’m going to wrap up with one final thing. That’sthe PATH program, which Dean mentionedbriefly. In May 1998 the president announced anew program called PATH, a partnership for ad-vancing technologies in housing, to get at thiswhole question of slow innovation in the home-building industry.

These are the president’s goals by the year 2010:we’re going to have housing that’s 50 percentmore energy efficient, 50 percent more durable,50 percent more resistant to disasters, 50 percentmore resource efficient, and with lower monthlyhousing costs.

We’ve set up that program. Right now there’sspecifically $10 million appropriated to work withindustry to try to mobilize other federal re-sources, because the private housing industryspends only 1 percent of its resources on R & D.And that’s going to continue unless we addresssome of the institutional barriers such as liability.

So that’s the PATH program. I left a little bro-chure in the back, there, for any of you who areinterested. We have a website called pathnet.com.There are 140 different interesting technologiesthat are on there for you to look at. We’re puttingup examples of best practices. And Dean was themoving force in putting that together, and it’s be-ginning to generate increased interest.

Yes, there’s going to be change in the housing in-dustry, but it won’t come from the consumer.

R e s p o n s eMark TiptonCEOSMART HOUSE, Inc. Raleigh, North Carolina

In 1984, a group of homebuilders saw that therewas a tremendous need to wire houses properly.It just didn’t exist. Houses were going to be func-


tionally obsolete. And this group got togetherand created what is known as Smart House, andthat’s what Susan was talking about.

In 1986, Smart House became a private company.NAHB spinned it off to a group of homebuilderswho put up the original capital and kept it going.And today, in 1999, we’re still going, and we’restill waiting for the consumers to drive that mar-ket. And Susan’s absolutely correct in that re-gard.

But ladies and gentlemen, the scary part is thatnine out of ten houses are not wired properly toaccess the services of today, let alone the servicesof tomorrow. Basically what we’re saying is thatnine out of ten houses that are built today arefunctionally obsolete.

That number is changing rapidly as builders arebecoming more and more aware. There are threepoints of contention for a builder: first, gettingthe fiber (or whatever carrier it might be) intothe main center of the street; The second, gettingit from the back of the curbing to the house, andthird, getting it inside the perimeter of thehouse.

Those three points of contention still exist, andwe’re doing everything possible to try to educatebuilders. But as David said, builders are very re-luctant to put any kind of innovative product inthere. They will wire, though, so the consumer isgoing to have to start asking for the wire.

Our lives have changed, and I think Dr. Frey putit very well today. The dual-income couples andthe delayed-child-rearing couples are substantialcultural trends, and we agree with Frank on thattremendously.

The home is going to be an epicenter, ladies andgentlemen, for communications and entertain-ment. The superinformation highway, and surfingthe Internet, and kinds of good things. Now we’retalking about firing up that home theater with aDVD or VCR, or satellite dish, and your largescreen TV, and that’s what we’re talking abouttoday in a lot of houses.

As a matter of fact, there are multiple computersin houses now. The children are working on their

homework. The wife might be helping with thehomework, and the husband is surfing the Inter-net, and they’re all wanting to do it together. Soyou have to have multiple lines and the capabilityto do that. And if you don’t have the home wiredproperly, you’re going to have a lot of problemsgetting that put together.

The proliferation of home offices and home the-aters is a great example of the abundance ofchoices in virtually all of communications, and Ithink that’s the key word—”choice.” It’s what-ever choice that you make. If you have the wir-ing infrastructure in there, you can make thosechoices when you want them, how you wantthem, and when you need them, and you don’thave to do them all up front like we did when wewere professing this back in the early 1990s.

We said, “Put in a Smart House system.” Well,we had 27,000 builders that were willing to pay$5,000 for a Smart House system. And guesswhat? We couldn’t deliver any of them, becausethe minimum cost at that time was about $55,000.So things have come a long way. You can actuallyget your house wired with a Smart House pack-age today for about $1,500 to $1,600 and get itprewired. And then you can upgrade it as youwant.

We’ve learned how to make it happen at very little cost and, as David related, at very littlerisk to the builder. So now, they’re acceptingthat a lot.

That technology will bring a tremendous amountof services and capabilities for the home if youhave the basic wiring, and that’s what I’m sayingto you today. You will have a functional house. Itwill not be obsolete.

If you have a choice and you’re going to buy ahouse, which one are you going to buy? Are yougoing to buy one that’s wired improperly, or areyou going to buy one that’s wired properly? That’swhat is going to drive the builder, whether of sin-gle-family or multifamily housing.

We’re doing a tremendous amount of packagedservicing all over the country for buyers of multi-family-homes. They pay one price. They get allthese services—from high-speed Internet to


cable to satellite dish. And it saves them money.The developer, the multifamily developer, makesmoney on it, so everybody’s happy, and the profitword is not bad. So I do agree that everything isgoing to be smart. I hope it is, and Smart Houseis going to be around another 15 to 20 years, andwe can capture all that.

Response John Torti, AIATorti Gallas and Partners + CHK, Inc.Silver Spring, Maryland

I think there is a good reason I’m on this end ofthe podium, and Frank’s on the other end of thepodium. In an effort to shorten my presentationthis afternoon, I’d like to concede on SmartHouse and technology. I agree. Susan, I alsoagree with you in terms of community and neigh-borhood, and that’s essentially what I’m going tobe talking about. And Frank, I think your viewson home ownership, on the different stages, theold boomers, the young boomers, and the entry-level people, in terms of identifying them as is-sues, are correct.

I think the technology issue is correct, but I justcan’t agree with Frank on the outcome. I reallydo not think that sprawl is a viable alternativefor the future, especially the next century.

Think about 100 years ago when the automobilewas just being invented, and think about the tre-mendous changes this technological invention hashad on development patterns, especially in theUnited States—not all good, but it has been astrong economic generator, and a big force forchange, clearly.

When we project ourselves into the next genera-tion and try to understand how the Net and thecomputer are going to change our settlement pat-terns, we’re only scratching the surface. And I’mhoping that sprawl has not become one of theoutcomes of this great new advance.

The primary reason for this is the fact that weare using up our land at an alarming rate. This[slide] is a satellite photo. The areas in red arethe urbanized areas of the Baltimore/Washington

region. Prior to 50 years ago, the densities thatwe had developed at were three times denserthan the densities we have developed in the last50 years in this region. And the Baltimore/Wash-ington region is one that is relatively dense. Inmany metropolitan areas we are reducing densityin our new development by a factor of ten. So theamount of land that we are using is absolutelytremendous.

I’d like to put forth a three-part vision of the fu-ture. New towns out in the country are a reality.In fact, our technology is making it easier andeasier to go somewhere far away from the center,and live and work electronically. It’s starting; it’shere to stay. We’re going to see it. So I think thatthat’s a reality.

So what is happening? Let me judge from myown practice, which is 46 years old and was basi-cally suburban in nature until the last decade,when it became urban. Many of the first-ring andsecond-ring suburbs are now being redeveloped.We have development out in the green fields. Wehave redevelopment, a tremendous set of oppor-tunities, in the older suburbs. Thanks to the fed-eral government, one more time, there is tremen-dous leadership in redeveloping the inner cities.It is going to evolve to private-market-rate de-velopment as HUD phases out of this.

So I’m proposing a three-level piece, a piece thatthe inner city gets redeveloped, the suburbs getredeveloped, and both are going to be denser de-velopment. And then the exurbs, or the far sub-urbs, will develop as new towns.

I do not see this disconnected sprawl in any way.The ability to develop places, whether they be inthe country, in the suburbs, or in the city, thatare true communities, that connect people in-stead of separate people, that create a strongpublic realm so that people can symbolically andphysically be proud of where they live and oper-ate as a community of diverse uses and diversetypes, is a good thing.

Somewhere along the line, people are going tohave to continue to touch people to make lifewonderful. And it’s just that simple in my mind.


Okay, quick run through some pictures. Newtowns. New towns are being developed acrossthe country with the same kinds of principlesthat the older, 19th-century towns have used.They are, in everybody’s mind’s eye, the kinds ofprinciples that make wonderful places, likeAlexandria and Georgetown, and Chevy Chase,to mention a few in this area. The idea of a publicrealm, strong connections, and a mix of uses.

New towns can be big, many thousands of units.New towns and new villages in the ‘burbs or inthe country can live in harmony with nature, canprovide the kinds of cells where people can gettogether, e-mail their work in, or connect them-selves to work on the Internet, and still have thatkind of social, physical interaction and be a beau-tiful place to be. This is not McMansions. This isnot sprawl.

Redoing the existing cities and suburbs presentstremendous opportunities today. This [slide] hap-pens to be the Orlando Naval Training Base,which is going to become a new subcity withinOrlando. The idea of creating these kinds ofplaces to emulate the beautiful neighborhoods ofthe past is what Orlando has chosen to do. Notonly the land developer, but the building develop-ers within this place have chosen a series of verydiverse building types (or product types, as theprofession likes to call them) to create a diverse,connected, mixed-use city with a strong set ofpublic places.

Closer to home, Avalon Bay has bought an oldprewar garden apartment development in Ar-lington. It plans to demolish it, doubling its den-sity, yet still make it a pedestrian-scale place ofmixed-use, mixed-income, mixed-type with all ofthe qualities of neighborhood that have beenproven for hundreds of years. That will continue,I hope, with Smart Houses, with better and moreefficient technology in building these places.

And HUD, in its wisdom, finally has come to aplace where it has realized the mistake of publichousing. It has created a Hope VI program thatis essentially trying to correct those errors. It istrying to de-densify the poor, and reduce andeliminate these kinds of projects, so that the re-placement neighborhoods are not only mixed-in-

come, but also invisible to the outside. They looklike the other neighborhoods in the city thatthey’re in.

These are all very good examples of inner city,suburban re-do, and exurban types of new devel-opment. None of these is sprawl.

To do this, especially the inner city pieces, I thinkinvention of type is an important ingredient. Theinvention of type essentially calls for making thearchitecture compatible with the neighborhoodthat it is in. Yes, that’s an important piece—in-creasing the density, and providing within the lotlines, or within the walls, the type of amenitythat builders, by and large, need to sell their cus-tomers. So we design from the kitchen sink outand from the curb in.

This [slide] is a simple rowhouse development, 30units to the acre, instead of 8 units to the acre.Again, one block from downtown Bethesda, avery similar type that has parlayed into a 40 per-cent density increase on the next parcel.

Types that look like single-family types, live likesingle-family types but, in fact, are for multiplefamilies. Each family has a sense of pride and asense of connection as an individual family, butstill is part of the city.

Old people like me, 55 years old, trying to find ahouse to live a dignified life in and grow old in—this life stages business. It’s a very strong part ofa neighborhood in Chicago that is essentiallygeared for mixed-income, mixed-age, and mixed-use.

Diversifying type is a very big piece of our prac-tice. When we do communities like this one in Or-lando for Celebration, we invent type that lookslike older homes. In fact, they fit into the citycontext and become a good and economic choicefor several price points within the same neigh-borhood. This is a very important piece of theway that we work.

We invent types for seniors. This [slide shows] avery dense, single-family detached house—mas-ter bedroom down, two-car garage down, aroundthe courtyard, about nine units to the acre, withall of the charm of the old city.


Out in the distant places like South Riding,starter housing designed for $150,000 a house.It’s very popular. The same kind of principle, onlyslightly more dense within a context of a commu-nity and a neighborhood that has the same char-acteristics and design features of the older worldneighborhoods.

In closing, the American dream that we all talkabout, that we all think about—this image ofgoing out to the country, to the fringe, to live in aplace like this. Unfortunately, it is delivered likethis, and we have to suffer through this to getthere.

Question and Answer SessionAudience Member: How do you propose to do theSmart House concept with existing homes? Yousaid it could be done for approximately $15 fornew construction. How does the retrofitting com-pare?

Tipton: It’s very difficult. There’s some technol-ogy now that is reliable. That has been one of thebiggest problems. A 3,000 square foot housewe’re doing the prewiring for is about $1,399.Retrofit, you could get a pretty good product forabout that same amount of money.

Audience Member: I think that Mr. Torti touchedon my question of the need for greater inventionof type. I would put the question to Mr. FrankAnton: “When will the building industry, andwhen will our policy makers and our regulators,begin to recognize that, as we go through life, weneed different kinds of housing?”

Anton: Let me take a crack at that. I find itamazing that people who are willing to acceptthat this economy works as a competitive, capi-talistic economy refuse to accept the fact thatbuilders are part of that process and respond tothe marketplace. And they’ll build whatever willmake that money.

The only difference is, in this case, local regula-tions may restrict the ability of the homebuilderto supply different types of housing to the mar-ketplace.

T h a t ’s not the builder’s problem. He’ll build what-ever will sell. And if the market is open, regula-tions permit it, and he builds one group of hous-ing and sees it sells, there will be a lot of otherbuilders who will do the same thing. So that’s notthe problem.

Audience Member: Well, the profit margin isquite a bit higher on a 5,000 square foot house insuburbia than it is on an 800 square foot studioapartment in the city. I don’t agree with you. Ithink builders are choosing the more profitableoptions in the market.

Anton: There are some that will do that, but ifthere’s money to be made, people will make it.

Torti: I think there’s a tremendous set of lessonsthat can be learned from the suburban sprawl de-velopers and development process. Think aboutgetting 2,000 units, 6,000 units, zoned, ready togo, and then the building developers, the housingdevelopers, the retail developers, and the officedevelopers can come in already entitled. Theirwarm-up time is next to nothing. Try doing thatin the city. It’s very difficult. Try putting sixdoors together on a city street that work as theensemble of a suburban mall, or even a strip mall.It’s very difficult. Lessons from the suburbs mustbe learned in redoing the cities and in redoingolder suburbs to make the processing part easier.The demand is there, but it’s what it takes to pro-duce that kind of housing in the city.

Anton: Well, it’s both. I honestly believe there’sless demand than you think, number one, and thedemand that there is, is basically being met. It’sjust easier to build out in the suburbs, and like itor not, for 50 years, people have voted by gettingin their cars and driving out to the suburbs.That’s where they want to live.

Audience Member: This is focused, perhaps, moreon Frank, although John may have some thoughtson it as well. Your comment about the marketforces that encourage sprawl dealt in part withthe economics of being able to deliver ((at leastwhat appears to be) more house for the money inthe suburb or the exurb than closer in. And thequestion is: What is the nature of the subcityprocess that makes that true? Because certainly,


extending infrastructure is—or should be—moreexpensive. Are there some economics that makeit artificially cheaper to develop things fartherout than closer in?

Anton: I heard Tom Downs, who’s the new execu-tive director of NAHB, speak at the HarvardJoint Center for Housing Studies. What he said isthat they’re finding that the infrastructure costin inner-city development is higher than infra-structure costs in the suburbs.

Now, I can’t prove that that’s the case, but thefirst thing you have to do is remove lots of exist-ing infrastructure, which is like remodeling. I’veremodeled my house. It costs $100 a square footto remodel. You can build new for $50 or $60.And I think there’s some of that same problemoccurring.

Cameron: A huge component that we’re missingis the cost of land. And if you look at the supply,demand, the margins, and so on, you can buy apiece of dirt 60 miles out for X dollars a squarefoot, versus being either in the first or second orthird tier of the growth dynamics. Just do themath. And unfortunately, it’s what’s been happen-ing.

Tipton: Land costs and regulatory barriers. TheKemp Commission that David served on tried topoint some of these things out. It tried to removethe barriers to affordable housing, but the citieswould never ever implement any of it.


S u m m a r yWhere will we live, and how can public policyand changing technologies encourage and sup-port healthy, sustainable communities? This ses-sion examines the contribution of housing andpolicy to the creation of sustainable, healthy,and productive places to live and work, and hownew ways of thinking holistically about housing,communities, and the built environment areleading to innovative techniques and approachesto land development and community revitaliza-t i o n .

Dr. Blakely’s presentation demonstrates thepower of place as he sets forth smart rules forsmart growth. Many of these rules echo themesof markets, products, and policy addressed byother panels. In exploring alternatives to sprawl,Dr. Blakely seeks land use planning that respectsexisting communities as well as regulatory and fi-nancial incentives to support the use of devel-oped land more efficiently and to facilitate“thoughtful choices about where future develop-ment should go.”

Each century’s end brings new technology andgrowth, but today’s sprawl is not a natural con-sequence of market forces alone. It is also theunintentional consequence of inadequate plan-ning and misguided development, described pre-viously as the “price of progress.” Instead ofrigid urban boundaries, growth should be man-aged by more flexible public subsidies and nego-tiated approvals of infrastructure and develop-ment rights. More proactive efforts should alsobe directed to supporting existing communitiesin such areas as brownfields reclamation, ruraland conservation easements, and tax incentivesfor job creation and the purchase of homes nearplaces of employment.

Trend Topic IV: Housing and SustainableC o m m u n i t i e s

The power of place is a significant factor in mak-ing development successful at every scale. Pan-elists recognize that America’s best places aremore than nostalgic celebrations of small-townliving. They are vibrant places where commerceand residence are finely attuned to their contem-porary social, economic, and natural environs.This is true in Century Housing’s work with thePartnership for Advancing Technology in Hous-ing (PATH) to create Village Green—an afford-able 20-acre, 186-unit single-family housing de-velopment in Los Angeles. And it is true inrevitalizing inner-city schools in Philadelphia andhousing in Richmond, Philadelphia, and Balti-m o r e .

Communities have an ecology that must be sup-ported by the social and economic structures thatallow them to grow and thrive. Defining the bondbetween place and ecology is what bolsters acommunity’s identity and sustains its purpose,new and old. If done without proper planning andcommunication, this exercise often leads to signif-icant tensions that set diverse interests againsteach other. Finding the will to plan and executeregional growth strategies that represent the in-terests of affordable housing and lower-incomecommunities more equitably will require a newlevel of cooperation found in only a few communi-ties today.

While a national movement may be growing forslow growth and no growth, smart growth advo-cates urge a new politics of local and regionalplanning and cooperation, with support and guid-ance from the national level. Groups like the Na-tional Association of Home Builders are also urg-ing a broader definition of smart growth thatsatisfies exurban housing demand while buildingmore infill housing, revitalizing urban areas, andproviding more housing choices.


I n t r o d u c t i o nChristine M.J. OliverPresident & CEOChicago Dwellings AssociationChicago, Illinois

I feel particularly lucky to be moderating thispanel this morning. First of all, I’m honored to behere, and I’m also honored to have the opportu-nity to work with my distinguished colleagues, allof whom are going to provide us with really use-ful and maybe controversial input this morning tostimulate conversation.

We talked about demographics, policy, and trendsand design yesterday. This morning’s panel maybe a culmination of those conversations. I thinkwe’re going to merge and sort of meld all of theideas and information that we heard with somegood luck and, I hope, not too much bloodshed.By the end of our session, we will have ventedsome issues and feelings, and had a good conver-sation about how we’re going to approach theissue of sprawl versus affordability and place-based solutions versus regional solutions.

But I would urge you, as we have this conversa-tion, to keep in mind that whatever ideas wecome up with, we should keep our focus on aproduct, on a solution, as we go about this, be-cause our next panel is on financing. And ofcourse, whenever you go to a financier, you wantto know what it is you’re asking for, so that hecan loan you the money. And so we want to beready for the next panel.

A few personal comments. As a houser and anadvocate, I have seen the housing debate evolveover the last two decades from a discussion aboutbricks and mortar to one that is often dominatedby conversations about jobs, education, safety,transportation, and economic mix. Progressively,the housing debate has focused on issues thatcenter around people and community, and notbricks and mortar. These issues are also at thecore of sustainability.

Many argue, and we’ve heard this, that our cur-rent patterns of development are not sustainable.Cities, and increasingly older-ring suburbs, arelosing residents and businesses. That shrinks our

tax base and decreases the quality of services forthe predominantly poor, minority residents leftbehind.

By contrast, numerous suburbs are adding subdi-visions and shopping centers, large tract housingdevelopments, and, as we saw yesterday, McMan-sions—literally, mansions—expanding andspreading population farther out at a rapid pace.This creates heavy traffic congestion, over-crowded schools, and significant new infrastruc-ture costs for local governments, while chewingup farm land and spitting out what many wouldcall environmental chaos.

s I looked over my notes from yesterday, I saw arecurring theme, which seems to be the searchfor a comprehensive approach. This would sug-gest metropolitan planning and at least regionalcooperation, if not planning, on the metropolitanand regional levels.

Partnerships are not only important, but ab-solutely strategic and necessary—partnershipsbetween local governing bodies, partnerships be-tween government, business, and communities,and partnerships between nonprofits and for-profits.

Long-term planning is critical. If there’s anythingwe should walk away with, it’s planning, plan-ning, planning. Long-term planning is the key tosmart growth, and it’s smart planning.

Innovative cost-saving products are important.We don’t have to reinvent the wheel or, in thiscase, the house. People know what they want.And as people’s needs change, and technologygrows, the design of housing will change in re-sponse.

Change is inevitable. Not all of us may have beenpleased with this theme, but it seemed to emergeas something we couldn’t deny. It is clear thatsome aspects of today’s settlement patterns, dri -ven by technology and communications, will be areality that we must live with as work patternschange, and people no longer have to commute tothe office.

There were also challenges that were presentedto us. The one that, I think, emerged from Jim


Carr’s panel is: How do we use what we havelearned about what works and what doesn’t workto create opportunity for the poor and the inner-city communities, and to create wealth that canbe reinvested in those communities?

There’s a new conventional wisdom out therethat after 50 years of decline, American citieshave been reborn as safe and exciting places tovisit, if not to live. Urban crime and unemploy-ment rates are at their lowest since the early1970s. City budgets, once on the brink of collapse,are routinely balanced. Downtowns that were leftfor dead now sport new stadiums, conventioncenters, entertainment centers, and new upscaledevelopments.

The landscape of urban neighborhoods is chang-ing, as high-rise public housing is coming down oris planned to come down. Entrepreneurs discov-ered that there are neglected marketplaces in theinner city. And the decade-old restorative workercommunity development corporations and localchurches are now starting to come to fruition.

There is much to celebrate in cities across thecountry, and I think we all recognize that and seethat. But there is also a notion that much of ourcelebration is somewhat premature, that there’s alot of work to be done.

Housing has been at the center of our discussionsabout creating sustainable communities. Manybelieve housing forms the infrastructure of com-munity. But what is housing without people? Peo-ple really drive the housing. It would seem that ifhousing is key to sustainability, then the peopleliving in the housing are the heart and soul ofsustainable communities.

Between 1970 and 1990, the number of people liv-ing in high-poverty neighborhoods doubled.Today, 8 million people live in neighborhoodswhere the proportion of poor people is over 40percent. An overwhelming proportion of thesepeople are African-American or Hispanic. Nearlyone-third of them are children.

Today, one out of every five children lives inpoverty. And I find that a shocking statistic.Where will they live in 2020? I think that’s ourchallenge. Will they be stuck in inner-city

poverty, uneducated and unemployable? Or willthey live in diverse communities of their choos-ing, in the city or suburbs, commuting on a re-gional transportation system, or working at homeand sending their children to quality neighbor-hood schools?

We have to take all of these issues into considera-tion as we think about sustainability.

Smart Rules for Smart Growth:Housing as if Tomorrow MattersEd Blakely, PhDProfessorSchool of Urban Planning and DevelopmentUniversity of Southern CaliforniaLos Angeles, California

At the end of every century, some new technologycomes into being that shapes housing and housingpatterns. Think back to the time of Columbus. Atthe end of a century, Columbus arrives here, andthe first suburban sprawl begins. At the end ofanother century, we spread across this continent,because of the invention of a plow that allowed usto go to Pittsburgh, of all places, and plow thesoil and open up the plains.

And then at the end of another century, industri-alization starts, and we have housing around ourfirms and industries. And as we come to the closeof this century, the airplane, Internet, and otherthings are having remarkable impacts on howand where we house, and for whom housing canbe developed.

So technology has played a very large role inhousing in general. But now we’re at the end ofmany kinds of technology. What was talked aboutyesterday was social technology, and how we’rebecoming a nation divided, not a nation that’s di-verse.

Where We AreThe nation is engaging in its greatest internal de-bate since the civil rights movement in the 1960s.Like the civil rights movement, this debate willshape the fundamental course of the nation. It isthe debate over how we shall grow, not whetherwe can grow. The nation has reached a curious


point in its growth cycle. Since the days of thepilgrims populating this large nation has been acentral concern. At the close of the 20th century,the question is not how to populate but who pop-ulates and where. In many respects, like most ofthe developed world, the United States hasreached zero population growth.

Though population growth is slowing among na-tive-born Americans, the nation continues togrow. Growth now is via immigration. Thereinlies the rub. When the nation was growing with arelatively Caucasian base, the issue of growthmanagement was not as important as it is now.But the nation is no longer a fundamentally whitecountry. By some estimates by the middle of thenext century, so-called minority groups will bethe new majority. What will this mean? No one iscertain. However, what is certain is that the ex-isting base population is already manifesting aninternal exit strategy. That is, millions of Ameri-cans are opting to leave the central cities andabandon them to the rising tide of foreign bornnon-Caucasian and native-born blacks. This sep-arate geography is manifest in over 9 millionAmericans opting to live in secluded gate-guardedcommunities. White flight to the suburbs and be-yond has reached astounding proportions. Thecurrent situation is a danger to the national eco-nomic, social, and environmental structures.

In the last decade, American cities scarcely grewin population, but the ecological footprint of ourcities increased dramatically. City regions likeChicago increased in population by 2 percent inthe last two decades but gobbled up 50 percentmore land than in the previous decade. For ex-ample, while metropolitan population in Seattlegrew an astounding 38 percent, the city regionalhousing area grew by a whopping 87 percentfrom 1970 to 1990. In old cities like New Yorkand Chicago, with modest growth of under 10percent, even with immigration, the land areasincreased by 65 and 50 percent, respectively. Inessence, we are covering more land with fewerpeople. Clearly, this cannot last. At its root, it isenvironmentally flawed and socially irresponsi-ble. We are growing as a nation apart and not to-gether. As a result, the current dynamics of eco-

nomic and land use development must be exam-ined and changed for the good of the nation.

Where We Must GoAs the nation grows, we are choking ourselveswith smog and leading increasingly poorer life-styles. We are more absent from our homes as wemotor longer distances to work. We are less en-gaged in our communities as we place more ofour quality time in raising money to sustain ourunaffordable housing stock that houses fewerpeople and is used less and less for communicat-ing with our family and friends. We have to faceseveral important truths, or we will not able todeal with this dilemma, effectively or at all. Eachof us is waiting for someone else to make the sac-rifice to save the future and secure the present.

We must build our way out of this problem as wehave built our way into it. We have to start byrecognizing that the house is the key to our sal-vation. We have to develop a smarter and betterstrategy for housing and organizing our commu-nities, or we simply will not be able to recoverfrom the social and environmental disaster thatthreatens future generations.

Houses—that is, homes—have been the fuel forthe remarkable expansion of the nation’s econ-omy. Probably no single tax measure in Americanhistory has had the same profound impact as theinterest deduction for home purchase. This mech-anism has helped to secure the largest middleclass in the world. As a result, the future courseof the nation is found in how we house and wherewe house our people.

Our course to the future is a retreat to our past.We must find new ways to house our populationin safe, clean, sanitary housing. This is the key tothe future. We have to develop a set of plans andprinciples to house the next generation that re-verses the outward movement of our population.We have to do this for several reasons. The firstis that if we are to be internationally competitive,we have to develop a racially and ethnically inte-grated workforce housed in close proximity to itswork. Second, we need to build the future on theold infrastructure. We do not have the money tocontinue to extend our water, sewer, and powersystems. We have to maintain what we have and


not build more housing for the few and none forthe many. Finally, we are destroying millions ofacres of farmland and animal habitat annually.None of this is recoverable.

Simply, the way to the future is through the past.We have to build homes again and not justhouses. We have to build homes and neighbor-hoods and not a large group of houses detachedfrom commercial centers. We have to build com-munities that contain jobs and act as the platformfor new job creation. In essence, the communityhas to house both people and work, and not con-tinue to separate them. We have to design andbuild communities based on diversity and not ex-clusiveness. Communities that cannot house theirown police, teachers and firefighters, clerics andbusboys, are not complete, and they transfer theburden of housing these individuals to other com-munities. In essence, they burden the entire re-gion and reap the benefits of an enormous hiddensubsidy to support their privilege.

What We Must DoOur commitment to housing the nation mustreach well beyond the fragmented sets of juris-dictions that control land use in this country. Wemust find new ways to house both current andfuture generations. As the nation ages, the op-tions for housing the population will be remark-ably transformed. Our young population will becomposed of minorities with little real educationin predominantly low-skilled, poor-paying jobs.They will not be able to afford the housing weare building on one-half to full acre lots in distantsuburbs. What will happen? More than likely, in-stitutional uses will take over some of this largesuburban housing for senior centers or similar ac-tivities. But the vast majority of it will be verydifficult to use because it is too far from jobs andbasic infrastructure. We have to think of how torebuild many of our suburbs now so they will beusable in the future.

Our first steps to dealing with the problem mustbe based on an understanding of what it is thatwe have to cure. First, we must take steps toeliminate the following practices. 1

• Large-lot, single-family zoning. Cities are in-creasing lot size as a mechanism to reduce the

potential for development of any affordableunits in the community.

• Minimum house size requirements. Some com-munities have imposed, via covenants andplanned unit development requirements, qual-ity standards that set the number of rooms,floor area sizes, and construction material stan-dards.

• Prohibitions against multifamily developments.Multifamily units are restricted or totally out-lawed in some communities to reduce afford-ability options.

• Mobile or manufactured housing restrictions.So-called trailer parks are prohibited by somecommunities to keep out low-income groups inthe guise of maintaining high quality stan-dards.

• High subdivision impact fees and require-ments. Fees are imposed by cities and countiesas an exaction as well as a means of discourag-ing all but the most expensive housing devel-opments.

• City codes that prevent retrofitting. In manymajor cities, existing commercial and single-family residential space cannot be converted tonew uses for multidwellings.

• Administrative burdens. City governments canand do thwart development through many de-vices that limit the form of housing and its lo-cations.

• Community associations and gated communi-ties. They are a new device that transfers thebuilding codes and permitting to privatizedcommunity associations. Via covenants andother tools, they restrict the form of housingwithin their precincts. In some cities in Califor-nia almost the entire city is governed by thisform of private development system.

These methods have created a land use paranoiathat is sweeping the nation. Every communitythinks it will be the dumping ground for the un-wanted populations or housing types. As a result,only housing for the upper income end of the eco-nomic spectrum is being developed. We have to


attack all of the above issues—not one commu-nity at a time, but through a regional strategythat allocates resources and taxes land uses andpromotes the development of all forms of housingand commercial/industrial activity on a fair andrational basis.

Rules for the GameIn response to the crisis we face, we have to de-vise a new intellectual and social paradigm toguide the development practices of the nation.While it is wise and even noble to talk of sustain-able development and even smart growth, wemust have a set of principles upon which we de-velop our future course of action. And we have tothink in sustainable terms. Will what we do todaybe here seven generations from now? Will it beuseful to those generations? Can it be passed onand do no damage to the present or the future?It’s hard to say that about the single- familyhome, and particularly about the one-acre lot,and the six, seven, or eight bedrooms that almostno one is going to be able to use.

Here are ten principles that I offer to stimulatethe discussion on how we might work our way toa better future—one house at a time.

1. Grow from the inside out: correct problems ofinner cities to regrow on the existing housing andcommunity infrastructure.

Almost all of the national attention is on newsuburban building and its form. But this is notwhere the action is, or ought to be. We must findnew ways to grow the city itself. Making high-quality cities will be less costly and more signifi-cant in both the short and long run than buildingbetter suburbs. Millions of acres of inner-cityland are idle because of contaminants and othersocial problems. Our first order of business has tobe to develop new solutions for city ills before in-vesting more in suburban development. Moremoney is spent annually on upgrading the subur-ban highway systems to accommodate more carsthan on inner-city cleanup and redevelopment.

The problems of the inner cities are difficult butnot impossible to deal with effectively. The mostimportant problem of all cities is building afford-able, high-quality housing in safe areas or creat-

ing safe areas with housing. Private developersin Chicago, New York, and San Francisco areshowing this can be done. It is a matter of civicwill and state and national government support.To facilitate new inner, high-quality housing de-velopment, we need to expand the tax credits forinner-city housing and remove restrictions onforms so that more ownership and fixed-incomehousing can be constructed. This housing mustincorporate full-scale community developmentplans that will provide for community-wide im-provements in community amenities at the sametime that new housing is developed.

2. Provide good schools in the city as a first man -agement principle or smart growth.

Schools are a key to so much of what ails the na-tion. Inner-city schools are the key to success forthe nation. A clear signal of national attention oninner-city schools is long overdue. More moneyfor the schools to improve their physical condi-tions is fundamental. But beyond improving ap-pearance, more money must be devoted to im-proving the teachers, the books, the equipment,and the expectations for every city school. Thereare success models in Chicago, Newark, and else-where. The key is smaller schools and not justsmaller classes. To this end, the federal govern-ment should provide matching funds for inner-city schools to begin reuse of existing space forsmaller schools through environmental cleanupand incorporation of schools into housing and res-idential or commercial developments. Further,state school codes need to be examined so thatmore private sector school construction and edu-cational delivery can take place.

3. Conduct regional planning for all forms of in -frastructure and economic activity as the back -bone for all forms of growth.

Regional planning is not regional government.The current crazy quilt of jurisdictions that gov-ern the delivery of urban services is too frag-mented to make a coherent approach to housingor economic development. A new, fresh approachto regional land use planning must be designed tocreate a clear template for the developmentprocess. Regional planning would include the al-location of spaces for commercial and residential


development with complete environmental analy-sis so that building can be promoted where it isneeded and not merely created where it is easiestto build.

4. Require a smart regional tax structure thatrecognizes land for its use to reduce incentivesfor fiscal zoning.

Taxes steer development. Current tax structuresbased on sales taxes and user fees promote formsof development that meet fiscal, not community,planning requirements. Housing and many formsof business are discouraged by the current taxstructures. Moreover, existing land taxes makeland use transfer for the highest and best use dif-ficult or impossible in many places. For example,it is cheaper for a landlord to leave a building va-cant than to rent it to anyone lower than his ask-ing price for rent. Law and taxes create this situ-ation. Land must be taxed on its potential useand not its current nonuse or poor use. Thiswould prompt more rational uses of land forhousing or other purposes based on the zoning.

Sales and related taxes have to be reallocated bythe states on the basis of population or jobgrowth, not on point-of-sales tax mechanisms. Ifthis simple change were made, communitieswould make rational decisions based on commu-nity needs for jobs and housing.

5. Make smart development of housing the basefor all community development, instead of plan -ning approvals based on single projects.

Few communities have developed models forhousing based on the creation of community.Most city planning departments wait to react to adeveloper’s proposals. As a result, the housingpattern is not linked. The commercial areas arenot designed to serve nearby communities withpedestrian ways, etc., because suburban areasage poorly with their uniform housing types andauto-oriented, almost temporary, design features.

6. Make open space planning smart by requiringmore open space within cities, neighborhoods,and suburbs.

We must open up all of our communities to makethem more walkable and usable. Cities, with few

exceptions like San Francisco, lack well-designed,open-space areas. London has been a success as acity for so many centuries due in large measureto its conscious hierarchy of parks and openspace linked throughout the city. American citieslack comprehensive approaches to the provisionsof open space.

We have to go back into our cities and developopen space. We do not need to convert everypiece of vacant ground into commercial develop-ment. In addition, cities should require develop-ers to fill open-space needs. Both cities and sub-urbs are in drastic need of new breathing spacesthat are accessible and usable.

7. Recreate smarter grid rail systems. Neighbor-hood housing bases should support regional pat -terns that can support mass transit and pedes -trian transit systems.

The magic of the grid system is its accessibilityfor urban mass transportation. As we havegrown away from it, we have undermined masstransit in almost all forms including walking.Subdivisions with cul-de-sacs and no sidewalksdiscourage all forms of foot or bike traffic. Wehave to reintroduce the grid where possible. Weshould not be slavish to the old grid system inthis regard. A new grid might incorporate fea-tures like bike paths, multitiered separations ofroad users, and the like. We need smaller streetson the new grid that are made to stimulate inter-action and not merely to move fire trucks.

8. Insist on intergenerational smart design prin -ciples for homes and commercial structures.

Good-looking buildings last for centuries. Everycommunity should stimulate good building form.Communities have styles and preferences, andthese need to be manifest in the environment.Every community needs clear design guidelinesthat are simple and stimulate creativity.

9. Promote environmental and economic equitythrough active economic development programs.This is a smart social development strategy tomake the nation competitive.

Building good jobs is as important as saving theenvironment. As a community creates well- pay-


ing opportunities for all its citizens, crime andother social pathologies will be reduced.

10. Develop a smart regional planning system,with multicity approvals, that addresses naturaland economic ecologies and promotes develop-ment where it is needed and wanted.

The environment should not be a battle ground.Regional environmental plans need to be devel-oped that tell where and what can be developedand what is encouraged within the developmentprocess. These regional approaches have to bedesigned by the major jurisdictions, city andcounty, and serve as the basis for all of their landuse actions. As the region plans together, jobsand housing will be allocated reasonably, becauseit is in everyone’s best interest.

ConclusionHousing is the key to all forms of growth—smartor otherwise. If we do not learn how to develophousing that reflects the hopes and aspirations ofall Americans, we will not find a way out of asprawling, unequal, and divided nation. We haveto develop a new set of rules to guide the nationat the local and regional levels so that we canhouse our future and restore our communities.

R e s p o n s eDonald CarterManaging PrincipalUrban Design AssociatesPittsburgh, Pennsylvania

Thanks, Ed, for a terrific overview of the issuesthat we’re asked to address this morning. Thereobviously has to be this long-term view, this com-prehensive view, and we need to remind our-selves about what we’re doing, and for whomwe’re doing it. So I think you properly framedthat question, and that’s the way we should con-tinue to think about things like this.

I would like to address two of your ten rules inmy short response time. The first one I’m goingto talk about is regional planning and regional so-lutions, and the second is the idea of growingfrom the inside.

Now, on regional solutions, luckily, things arehappening. We can start to see what records areout there. Unigov in Marion County, in Indi-anapolis, is an example. None of these examplesis perfect. They have lots of flaws in them. Thetwin cities metropolitan area has tax-based shar-ing. We know Portland has a growth boundarythat is often penetrated, but it’s a try. In my owncity of Pittsburgh, Allegheny County has 132 mu-nicipalities, and yet we were able to pass some-thing we call the regional asset district tax,which has put a percent sales tax on the wholecounty to support the city zoo, county parks, thelibrary system. So in a sense, these little thingsare starting to happen, and I think that’s goodnews.

Ed already talked about Myron Orfield’s bookMetropolis. You might want to note that. Alsothe Brookings Institution published The NewMetropolitan Agenda in the fall of 1998. Thereare some terrific articles in there by some of thegreat thinkers, including a good friend of mine,David Rusk. You may know his book, Cities with -out Suburbs. He’s just sent me this new bookcalled Inside Game, Outside Game.

Since he published his book six years ago, CitiesWithout Suburbs, he has studied 90 different met-ropolitan areas on the basis of just their statis-tics. His conclusions are very similar to what Edtalked about. Saving cities by focusing programsonly on the inner city is playing the inside game.This was 1960s, 1970s, 1980s, 1990s policy—allthe HUD programs, the War on Poverty, rede-velopment law. To focus only on those issueswithout also looking at the regional issues isplaying the inside game, when we should be play-ing the inside game and the outside game.

His three things—to boil down his book—thatthere should be regional growth management, aregional fair-share affordable housing initiative(of course, Montgomery County in Maryland andadjacent Fairfax County, Virginia, are two exam-ples of affordable housing share), and tax-basedsharing.

Now, the second thing is the infill housing, what Icall rebuilding traditional mixed income neigh-borhoods. That’s what our firm Urban Design As-


sociates does; we’re principally urban designersand architects. We do downtown planning andriverfront planning, but where we really get ourpassion is working and rebuilding cities, neigh-borhoods in cities.

I want to push a little book that ULI is sellingcalled Developing Infill Housing in Inner-CityNeighborhoods. It’s a terrific publication; it hasput together some of the successful projects ofrebuilding these inner-city neighborhoods.

What this is about is old urbanism, not new ur-banism. We’ve often been thrown into the pile ofnew urbanists, when in actual fact what we’redoing, as Ed has pointed out, is rediscovering ourgreat neighborhoods. I have a brief slide show I’dlike to go through and talk about what we havedeveloped—principles of infill housing, how weactually can rebuild these neighborhoods withthe techniques that we’ve developed. A lot of ourneighborhoods in our cities were built in the late19th century and early 20th century. Some of thestrongest neighborhoods in any city are those ofthe first-ring suburbs. These are the principlesthat we use in our practice: involve the existingresident, study the context (the street is the fo-cus), provide linkages, combine infill with resto-ration, provide housing variety, develop a patternbook, construct or enhance amenities.

The first one is involve the existing residents. Wewill not work on a project that does not have pub-lic participation and starts with very, very basicquestions about a neighborhood. We involve theresidents in any way we possibly can, from focusgroups to public meetings, to actually meeting onthe porch, if we have to. They are the experts ontheir neighborhood. We start with what theyknow and what they want.

Study the context. That context could be historichousing. It could be a vacant lot, like here in Pitts-burgh. This is all vacant. The street is the focus.That’s where our community happens. That’s ourgift to the city. That’s where democracy happens,on the streets. Gated communities are not that.Houses with their backs to the street are not. Soa front porch, a sidewalk, a street—that’s wherewe focus our design.

This is a new project in Richmond, Vi r g i n i a .Porches, parking on the street, sidewalks, trees,and yards provide linkages. Many of the publichousing communities we work in are isolated,specifically to isolate and separate the poor fromthe rest of the community. What we try to do isto discover how to link these communities to eachother.

This is a project in Pittsburgh that was an emptysite, not linked to the neighborhood it is in, Nowyou can barely tell the difference between wherethe existing community is and the new commu-nity.

Combine infill with restoration. This is a projectready to be torn down in Richmond, where we’redoing new housing, but we also restored IdlewoodTownhouses. Those are great resources. They’realso our history.

Provide housing variety. This includes town-houses, or single-family houses, or apartmentbuildings. Provide diversity in age, in tenure. Wewant rental. We want for sale. We want afford-able. We want elders. We want singles. We wanteveryone to live in one community.

Develop a pattern book. Design guidelines arevery important. Many of the neighborhoods thatwe’re so proud of were built with pattern booksand traditional ideas of design. And that’s thekind of neighborhood we end up with. This hap-pens to be a southern neighborhood.

What is happening in the suburbs is this. Okay, amansionette, we might call this one, Ed. A lot ofpretension, but mostly garages facing the street,and very little public amenity.

This is a typical Habitat for Humanity house;here are some ideas we gave them in terms ofdesign guidelines to create a house that hassome amenity, has some scale, has some traditionto it. And there’s the house actually being con-structed in Cleveland. And here’s a pattern bookfor houses in Richmond, Virginia. These are af-fordable houses. But they should have the samequality of design as anybody else.

Constructor-enhanced amenities. Again, Ed men-tioned that. It means neighborhood parks. Yes, it


also means shopping and services that are withinwalking distance of your house. There’s thatneighborhood in Pittsburgh that was cleared.Here it is now built out, connected to the rest ofthe neighborhood, connected to the downtown.And that’s what we’re talking about. It is rebuild-ing traditional mixed-income neighborhoods.

R e s p o n s eF. Barton Harvey, IIIChairman & CEOThe Enterprise Foundation Columbia, Maryland

I thought Ed’s speech was terrific. It went over alot of the principles that we would like to have inplace. That makes a great deal of sense, if you lis-ten to Bruce Katz, if you listen to others aboutregionalism, regional planning, government poli-cies.

All of these make sense. In Maryland, we’reworking on this regional issue, and I served on acommittee of the greater Baltimore Committee,which is an organization of all the CEOs of themajor corporations in Baltimore and in the met-ropolitan area. And they came out with an extra-ordinary piece, which was one vision for thewhole community. And then we got into the seri-ous work, bringing in political and other leadersfrom the surrounding counties. And after layingout this vision and this plan, the only thingeveryone could agree on was that the countieshad problems with the city, and the city hadproblems with the county.

Now, that was a step forward, because at leastthere was an exchange and an openness as towhat we are dealing with, and what the issuesare. A lot of bridges need to be built before re-gionalism, regional planning of any sort, is reallygoing to be here, and that hard work needs tostart.

Montgomery County is a wonderful example. It’scounty-wide planning that really is inclusive. Itchanged the nature of Montgomery County. It di-versified it; it opened it up to different mixes ofincomes, and it ought to be studied. The same de-velopers who absolutely opposed it in the begin-

ning will go out and sell that plan to you today,because the plan was designed so that the afford-able part of every subdivision over 25 units insize contains a zoning bonus that really makes upfor the cost of putting in the affordable housing.There was also a tie-in with the Housing Oppor-tunities Council of Montgomery County, whichcould purchase units to get it even farther downto lower-income people.

The other issue of regionalism is this: who is thismovement for? The Enterprise Foundationworks with low-income people, community devel-opers in lower-income urban areas typically. Andthere are questions as to whether regionalism isreally a sharing of the power base that was hardwon in cities, or if it’s a middle-class movementand a sharing of limited subsidies, i.e., those sub-sidies going upstream to more middle-class peo-ple.

So there are a lot of issues that need to beworked out with community development, withpoliticians, with others from urban areas whohave a disproportionate amount of poor and mi-norities. And there is a lot of suspicion aroundthese planning principles and whether they reallyare another attempt to take something awayfrom the cities.

I don’t believe that. I’m just saying that if youwent to a conference not far from here by theLow Income Housing Coalition and others, you’dhear this issue being debated in very differentterms than it’s being debated here. I just bringthat as a bridge.

Whatever happens, whatever movement we havetoward regional planning—which I’m all for—doesn’t solve some of the fundamentally difficultplace-based work that needs to go on in everyurban area in this country today. The urban areas,the major urban areas, have population loss,crime, and problems with mix of race and class,as well as services in schools. The hard work re-mains to target those neighborhoods where mostof the crime, the drug dealing, the social dysfunc-tion, is still occurring. The Enterprise Founda-tion and others, in partnership with the cities andprivate actors, are working hard to make life in


those neighborhoods, which are not neighbor-hoods of choice, better.

And we really are trying to make them neighbor-hoods of opportunity. That hard, difficult workhas to continue, has to be accelerated, if oururban areas are going to be places of choice forthe middle class, or even for higher-income peo-ple over time. And there’s a lot that is positivethat we can say from our experience in the neigh-borhoods where we’ve been working in a holisticway.

It is not about housing. It is about community. Itis about more than just the person in a house. It’show they connect back into the mainstream, andwhat those linkages and connections are. I could-n’t be more positive concerning the experience ofthe Enterprise Foundation in numerous citiesacross the country. Again, it’s just that it’s toosmall in proportion to the need in those cities.

Finally, a number of measures that are criticallyimportant for cities to look at in making wholecommunities are really the issues of demolition,land assembly, getting buildable sites for devel-opers, whether they’re nonprofit or for-profit.That sounds easy, but it is very difficult to do. Anumber of our major areas are overhoused, andyet getting to parts of whole blocks that are va-cant is very difficult to do.

Interestingly, the Hope VI program in publichousing has a lot of those principles of recreatingcommunity. In fact, Don is a part of a group thatis putting good design principles to work inrecreating those large public housing sites thathave been demolished.

And so design is critically important. One morecomment on the New Urbanism. I’ve heard thatthis is a solution, just as regionalism is a solution.These are not solutions in and of themselves.They all are smart thinking about directions weneed to take. In reconnecting neighborhoods,good design function makes a great deal of sense,but it is just part of the even harder work, whichis to get low-income neighborhoods back into areasonable framework so that their schools work,their institutions work, and there is real opportu-nity there. And let me end on that note.

R e s p o n s eG. Allan KingstonPresident & CEOCentury Housing CorporationLos Angeles, California

I’d like to posit some concepts, or trends, build-ing on Ed’s rules, which I think reflect some ofwhat the next century holds for housing. First,housing does not stand by itself. Housing and em-ployment, housing and jobs, particularly, are in-tertwined in what’s going to happen to housing inthe future. Second, the forces that drive afford-able housing, and the housing industry generally,are changing. Housing for working people, andhow it’s provided, is changing, particularly inthese inner-city communities that Ed and Barthave talked about.

Nonprofits will continue to be major players in avery big way in what happens in the future. Wedidn’t talk a lot yesterday about the role of non-profits, but certainly the work that Bart doeswith the Enterprise Foundation, that many peo-ple do throughout the United States, is based onnonprofits’ providing the impetus to developmore affordable housing, and we’re going to seemore of that. There will be recognition of whatwe like to call “intellectual amenities,” as opposedto the physical amenities of developments. Theprivate for-profit sector will become a biggerplayer as well.

And finally, as Ed said, the house itself is goingto be a bigger issue. We heard yesterday aboutmaking sure that we had smart housing every-where. I think that that particular trend will con-tinue, and that in sustainable communities,sooner or later, there will be entirely smarthouses, and that we’ll have much more energy ef-ficiency than we have now.

Speaking of the physical product, we see as anexample our involvement with the Partnershipfor Advancing Technology in Housing, or PATH.PATH was introduced by President Clinton lastyear at the ground breaking for a 200-unit afford-able, single-family development in the San Fer-nando Valley, which we are financing, along withthe Fannie Mae American Communities Fund.


And Village Green is combining not just thephysical amenity, if you will, of a more energy ef-ficient community, but also some of those thingsthat we began to talk about as intellectual ameni-ties. And that means that there is already on sitea transit-tots day care center, which is up andrunning, and which is also adjacent to a metro-link light rail transit station, and to a communitypark.

These neighborhood amenities allow the resi-dents to reduce their nonhousing costs, especiallytheir commuting expenses, when you have a de-velopment like this that is targeted to youngfamilies. The PATH approach to construction willsave the homeowners, based on the latest esti-mates that we have, at least 40 percent in theirenergy costs. Think of that as disposable incometo them on a monthly basis. Yes, there’s a cost in-volved, but that cost is picked up over a 30-yearmortgage.

The difference between what we call an intellec-tual amenity and a physical amenity is that in-stead of providing a bigger swimming pool at anapartment development or having larger club-houses or other rooms for people to use, you lookat what people really want in our society, and arelooking for—something that brings them agreater opportunity to succeed and for their chil-dren to succeed.

When you start talking about a tutoring pro-gram, for instance, in an apartment development,you find that people will go out of their way toensure that they can be part of that activity, andwe have several examples of that. Ed talkedabout the need for good schools, and he’s right.It’s a part of the urban scene. What we reallyneed, though, are not good schools, in my opinion.What we need are great schools, in an enrichedsetting for learning, and as near to the home aspossible.

One of the activities that we have gotten into atCentury is an after-school, college prep programthat gives K-12 students targeted assistancefrom trained tutors. These facilities are located atapartment developments in a safe and monitoredsetting. And upon completion, students are eligi-ble—if they have the grades and the test

scores—for a four-year, tuition-free scholarshipfrom Ed’s present employer, the University ofSouthern California. It’s a big deal.

Certainly, the achievements in that programshow that intellectual amenity is very importantin trying to assist people to find greater job op-portunities for themselves. We have established aprogram where we sponsor something called theCarpenter’s Educational and Training Institute.It provides preapprenticeship training for peoplewho have no ability to go to an apprenticeshipprogram or another trades program to find bet-ter employment. More than 6,000 people havegone through the program over a 10-year periodand prepared themselves to become, not only car-penters, but apprentices in several differentunion operations.

Those kinds of activities, we think, make the dif-ference. They are now heading us in a differentdirection, of providing affordable housing in away that people will feel totally fulfilled, in and ofthemselves.

R e s p o n s eSusan A. MaxmanPresidentSusan Maxman & Partners ArchitectsPhiladelphia, Pennsylvania

I’m going to pattern some of my remarks afterDon’s, because first I’m going to start out withwhat I always say when I talk about land use inAmerica and settlement patterns. I always thinkabout the Native American adage, “We do not in-herit our land from our ancestors, but we borrowit from future generations.” That has influencedmy work and the way I think about my responsi-bility as an architect to think about future gener-ations and how we can begin to stop the sprawlthat has continued.

I’m from Philadelphia. Philadelphia has lost morepopulation than any other city in the last decade,and, on top of that, our suburbs have grown tre-mendously. Every time I drive through the sub-urbs or out in the farmlands and see another farmthat’s eaten up by development and by theseminicastles that sit there scattered along these


farm lands, I wonder how we can change thesekinds of patterns. The area around Philadelphia—Bucks County, Chester County—has the mostfertile farmland of any place, I think, in theworld. It doesn’t need irrigation, et cetera, andyet it is being eaten daily by development.

So first of all, why Philadelphia? Why the exo-dus? Obviously, the school system has a tremen-dous amount to do with it. We’re building a newschool now in the inner city of Philadelphia, andit has been a tremendously earth-shaking experi-ence for me. It is for children who come from thevery, very highest poverty levels. It’s called theBadlands in Philadelphia.

And when we presented this school design to thefaculty of this school, the teachers were only in-terested in how many spaces for parking in theparking lot, and where their bathrooms were, andthat kind of says what’s happening in Philadel-phia. Our teachers are probably the worst, be-cause they’re paid less, and these children needthe most from a teacher of any place. And so asour minorities grow in Philadelphia, and theschools cannot educate them properly, we arefaced with a dilemma that’s going to last for yearsunless we can change these school situations.

There’s a lot of vacant land in Philadelphia. Manyhouses have been torn down because they justgot into rot and ruin. I don’t know if any of youhave seen it; it looks like bombed out Beirut. Buta couple of interesting incentives are happening.One is the Philadelphia Green. The PennsylvaniaHorticultural Society has taken these openspaces and made truck farms and gardens out ofthem, which has really been a tremendousamenity for these neighborhoods.

We were involved in a project with a manufac-tured housing institute. It was called the UrbanDesign Project, and it happened in six citiesacross the country. Manufactured housing pre-sents a great future for scattered-site develop-ment throughout the inner cities, where you haveone lot here and one lot there. You really can’tget a traditional developer or builder to buildthose houses, because of the vandalism situationand control of those sites.

We did it talking about what Don talks about—focus groups, involving the public, looking at thecontext of the neighborhood. These were thethings that we did to make the project successful.We worked very closely with focus groups. Inevery city that we went to, we took our cuesfrom the context of the neighborhood, and it hasbeen a very successful project. Those kinds ofthings are very good in terms of creating a col-laborative kind of neighborhood that really seemsto work.

Until this country starts to spend less money onroads and more money on building in the innercities, I don’t think we have much hope for theinner cities. Those are the kind of things thathave to happen, and there are a few really goodinitiatives going on. These kinds of initiativesgive me faith that there is a future.

Question and Answer SessionAudience Member: My question goes to Ed, butprobably to all of you. In thinking about the goalof regionalism and comprehensive planning, Ithink you mentioned comprehensive planning,but not regional governance. Where I come fromin the Seattle area, we have got a growth man-agement act statewide. We have got urbangrowth boundaries, we have got regional plan-ning policies. We have a county government. Andwe have got suburban cities. We’ve got unincor-porated areas, and we’ve got the city of Seattle,but we don’t have truly comprehensive planningthat is working. And I don’t see how we can getit without some form of regional governance.How do you solve it?

Blakeley: I still would like to see regional gover-nance; that is, all the cities and counties comingtogether and agreeing that any change in a planby one means that all the others have to changetoo. So if I want to change my zoning, then everyother piece of that puzzle has to change, too. Andif they don’t, I can’t.

Audience Member: With respect to regionalism,and particularly the taxation issue, D.C. has beentrying to pass a commuter tax for some time, andit’s more complicated here because we have twostates and a district. How do you convince the


suburbs in this instance to give up either theirability to plan or make zoning decisions, or moreimportantly, what they perceive as their share ofregional benefits. How do you do that?

Harvey: How do you get the suburbs to give upsomething to get something else? This is a toughissue. I mean, Maryland tried to share its taxbase and got shot down, and it’s going to stayshot down for a long period of time. There wasn’tadequate involvement of all the parties to get thetypical tradeoffs that you need. Somehow, youhave to get the parties together—and by the par-ties I mean the political people, as well as thebusiness people and the civic activists—and say,“What are you gaining for giving up somethingelse?” And then, “What is the campaign that youare willing to wage?”

Interestingly, in Maryland, on regionalism, we’repaying a lot of money to learn the code words toavoid. We are doing surveys of the counties andothers to determine what they really care aboutthat the city has to offer, and then building off ofthe positive things in people’s minds. There are alot of negative things in their minds, and the mo-ment you say “regionalism” you’re in trouble. Soit takes a lot of building, it takes a lot of politicaltrading, to see more than the short term gain andloss. It’s a real risk for politicians, and then youhave to have the right leadership and the rightpublic relations program and the right victoriesfor the right people in it. And all I can say is thatit takes that kind of campaign if you’re evergoing to get from here to there, and it’s not goingto be overnight.

Audience Member: Throughout the conference,we’ve been skirting around this issue of the roleof the federal government. We haven’t reallytalked about the resources that we have builtover the past 30 years, and how to refashionthem or recycle them to meet what we see as theneeds of the future. Now, I feel very strongly inBoston—and I get the same vibrations through-out the country—that the federal government isretreating from the idea of taking what it hascreated and making it into viable communities.They are unwilling to spend the money. I thinkthat we’re all losing sight of the fact that we havea great potential to revitalize these developments

that have occurred over the years and makethem into viable communities by adding ameni-ties to them. They’re a tremendous resource, andwe need to talk that up with the federal govern-ment, which is ignoring the great possibility thatthey have.

We have a joint venture program with the Har-vard Graduate School of Education on tutoringand mentoring in our housing. Based on some ofthe principles we’ve heard here, that seems to besomething we want to do in the future. The fed-eral government should be required to partici-pate in that kind of program, and we haven’ttalked about any of these things in affordablehousing for the future. We have the resources inplace. We have to mix the incomes, we have tomix the uses, but we have a tremendous poten-tial, and we’re ignoring that potential.

Carter: Well, the Hope VI program of the De-partment of HUD is a good example. Somebodyhas mentioned this already. It’s very new. Only acouple are actually completed. There are many,many more that are funded and are in planningstages now, so the record isn’t there to look at.But over all, it’s doing just what you’re talkingabout. What they’re trying to do is to dismantlethe model of public housing we have now, whichis to isolate and concentrate poverty in one place.They want to create diversity of income, of for-sale housing and rental housing. And one of theprograms is a community of learners, which isvery similar to what Allan is talking about. Peo-ple are actually given job training; they’rehooked up to the Internet. It’s tied into a wholeseries of programs, but it’s so new that it’s hardto tell if that’s the right direction to go.

I would say Techwood Homes in Atlanta, whichis fairly well along and completed, is a good ex-ample. Murphy Homes is a project in Baltimorethat Enterprise is involved in, as we are, so awhole series of things like that are possible.

Harvey: It is a drop in the bucket. This is aboutpolitical will as well. If you want to do thesethings, if you want to take the old housing stockand put money back into it, to rehab it and rein-tegrate it into neighborhoods, you need money.And right now, in our wealthiest period in this


nation’s history, there is a domestic spending capand the pressure is to take the HUD budget andother budgets down from where we are now andgive a tax break back. There isn’t the will there.We’ve somehow got to work to increase this bud-get that is going down. Otherwise, the federalgovernment is becoming a lesser and lesserplayer. It’s a player at maintaining and takingscarce resources and spreading them around. Soyou’re right. There is a real issue here. There arelots of answers that we know. It takes federalfunding. It can be funded through states and lo-calities, but we’re not there. We’re going thewrong way right now in this budget.

Audience Member: Just real quickly, back on thisregionalism issue. Two thoughts that I’d like thepanel to think about. If you take a look at whathas worked, for example, in the Washington met-ropolitan area, you see an interstate compact formetro, for example. Both states and the city havejoined to build the metro system. One thing youmight think about is using the interstate compactidea to create a forum that would require juris-dictions to arbitrate their disputes, either medi-ate them or arbitrate them. It’s at least a step inthe right direction. One other thing you mightthink about is in the area of zoning and land useregulations —- uniform symbols and uniformzones. Not ask them to change individually whatthey do in a jurisdiction. Just ask them to use thesame symbols in the same zoning categories, sothat there’s a universal language. That would bea real step in the right direction.

Blakely: On that last point, quite a number of ju-risdictions in California are going that way in acounty or multicounty area. They are using thesame planning codes and systems so that devel-opers know what’s expected, and I think that’simportant. Developers don’t want to develop anyplace that’s a surprise. And if you take the sur-prise out, you can get the development you want.

Lastly, many inner cities are being redesigned assuburbs. Los Angeles is a very good example ofthat. Every developer wants to develop a shop-ping mall that looks like a suburban shoppingmall on Vermont Avenue. If we could have thosesame developers learn how to redevelop thestrips that are there, we could make places really

livable. You don’t need much to do that, but that’sa role for ULI to train developers to develop thatexisting fabric and make money at it, becauseyou can.

Notes

1 This list was adapted from Thomas Vietorisz,William Goldsmith and Joseph Greng, AirQuality, Urban Form [?] and CoordinatedUrban Policies , Working Papers in Planning,Cornell University, Department of City andRegional Planning, July 1998, no. 176.


S u m m a r yHow will we pay for housing? In this session, par-ticipants examine how residential real estate cap-ital will flow into and beyond the millennium, andhow the current housing finance system willevolve to meet the future dictates of residentialdevelopment and borrowers.

Georgia Murray’s presentation examines theemergence of global markets and their impactupon local lenders. New sources of real estate fi-nancing, from social asset funds and communitydevelopment financial institutions to REITs andcapital markets, are creating new and diversifiedopportunities for prudent single-family and mul-tifamily lending and investment. As technologytransforms the financial services marketplace,the very concept of real estate lending is beingredefined.

Along with capital and technology, newfound re-lationships will emerge from the present wave ofconsolidations and diversification within the finan-cial services industry. Current battles for custo-mers and their assets and investments will createa resurgence of interest in unifying residentiallending that will likely benefit community banksas well as the megabanks.

Single-family lending will benefit increasinglyfrom automated systems like credit scoring thatare making today’s affordable loan productsavailable to a more diverse population of borrow-ers. Building relationships will become especiallyimportant as nontraditional means of obtaining fi-nancing become commonplace. Establishing per-sonal relationships and educating new consumerswill be a critical element of implementing thesetechno-lending initiatives.

On the multifamily side, we are nearing the endof asset-specific collateralized borrowing as thisreal estate is integrated into capital markets.

Trend Topic V: Global Markets and Local Lenders

More capital will be available for multifamily de-velopment, but it will become more volatile. Inthis environment, “information efficiency” will bea key to creating uniformity in credit enhance-ment systems and new methods of lending andinvestment.

In both singlefamily and multifamily housing, co-operative efforts are needed to create new finan-cial instruments and “one-stop-shops” for financ-ing assistance. It will be increasingly necessaryto develop new means of financing rehabilitationand reinvesting in existing housing as the pre-sent stock grows older.

As real estate investments and asset manage-ment converge, credit crunches will become athing of the past. Interconnectivity of public andprivate resources will support diversification ofthe financial industry and increased access to agrowing universe of available funds.

I n t r o d u c t i o nAnn SchnareSenior Vice President of Corporate RelationsFreddie MacMcLean, Virginia

One of the issues, particularly as it relates to af-fordable lending, is how to arm consumers withthe tools and the information they need to get aproduct that really benefits them. Again, if youlook at some of the issues in minority and lower-income communities, there is a lot of focus oncredit, on credit problems.

Credit is going to get more transparent, and themortgage underwriting decision—it has alwaysbeen part of that process—is going to becomemore visible. And I think what this does is oblig-ate the industry to be more innovative in termsof borrower education; not just education that oc-curs when the person is ready to close, or a week


before closing, but going back to basic consumereducation about the importance of managingcredit. So that is my brief take on trends on thesingle-family side.

In single-family housing there are financial prob-lems, but in multifamily housing a very large partof the population has a big gap between what ittakes to operate an apartment and they are ableto pay. So there is a whole series of issues relatedto creating incentives to build and support thisproperty, there are issues related to financing.What kinds of improvements are likely to occurover the next couple of years, and how will theyaffect the availability and the cost of multifamilymortgage credit.

We have three discussants who are going to dis-cuss, not only Georgia’s paper, but also theirthoughts on the relevant issues in finance.

Local Markets and Global LendersP r e s e n t a t i o nGeorgia MurraySenior Vice PresidentBoston FinancialBoston, Massachusetts

“Global markets and local lenders” is the topic,and I thought about that for a while and said,“Okay, real estate is a hard asset. Securitizationis going on, obviously all over the world, in anynumber of capital markets, so why is it globalmarkets and local lenders?” So in true 1960s style,I said, “Okay, what we really are talking abouthere is local markets and global lenders.” So I’veswitched the topic. All real estate is by its verynature is local, and markets we have found arebecoming increasingly global.

We’ve spent a lot of time in this symposium talk-ing about single-family homes, and the single-family home market is truly motherhood andapple pie. It would be ridiculous for me to get uphere and say that it isn’t the American dream tohave a single-family home. But the fact is that athird of our population lives in multifamily hous-ing. And so a significant part of our ability tohouse America is to get back to that 1949 Hous-ing Act goal of having good, decent housing in a

suitable environment. And multifamily needs toplay a real role. Multifamily has lagged. It hasnot had the kind of information and the focus inthe country that single-family has.

We’re really talking about a very simple ques-tion: how can the capital market —-the financing—- become as good and as knowledgeable and asquick on multifamily as it is on single-family? Thequestion is quite simple. The answer is not.

As I heard the demographic analysis of peopletalking yesterday, I thought isn’t it nice to justsay, “I know in 20 years there will be x amount of45 to 55 year olds.” You can say that because sta-tistically it is proven. What we can’t say is, “Iknow in 20 years that there will be x amount ofmultifamily units. They will be located here, andthat will be something that we can all predict.”And what we need to do is get to something thatallows us to do that and allows us to work on it.

I’m going to spend two or three minutes on back-ground, because I think what we all want to do istake a look at Blue Sky and see where we’re go-ing from here. In the 1940s and 1950s—reallyfrom 1940 to 1945—we had the first great Ameri-can migration. We talk about the Gold Rush andother things, but between 1940 and 1945, 15 mil-lion Americans moved to different counties andstates for the war effort, and 12 million peoplemoved out of the country into the armed ser-vices. They represented 20 percent of the entirepopulation. And it really did make a huge differ-ence in how we think about housing. How wethink about not necessarily growing up in thehouse next door to our father’s or whatever.

That is the context for the 1949 Housing Act andfor the emphasis on single-family homes in thelate 1940s and 1950s with the GIs coming home.When we get to the 1960s and 1970s, we’ve gottrouble in our cities and we’ve got trouble in ourhousing. And so it’s the first great private equityinvestment in affordable housing; the first realmarriage of partnership between the governmentand private industry. And we had the D-3 pro-gram, the 236 program, where we were able, fortax benefits, to get individuals to invest in multi-family housing.


We then had the 1970s and 1980s. The state hous-ing finance agencies really came into power andtook the federal money. Forty percent of the fed-eral money that was insured from mortgages andgiven out with 236 subsidies went to the statehousing-finance agencies. The 1970s and 1980swere the beginning of the New Deal. The GreatSociety was waning in terms of the federal lookat what was happening, and the emphasis startedshifting to the states. We had the Section 8 pro-gram, which the states definitely participated inas well as the federal government. This emphasison new construction and on the Section 8 pro-gram was being used to shore up the programs ofthe 1960s and 1970s.

Finally, we had the low-income housing tax creditprogram, which, coming from Boston Financial, isnear and dear to my heart. It is a program thathas been very successful in getting affordablehousing, and in marrying the private/public part-nership in a way that has proven successful. Forthe first time, we’ve really had a program thathas lasted 13 years.

The tax credit program has been remarkably re-silient, and part of the reason is because it hasworked. And it has worked in this private/publicpartnership. So what has happened with the mul-tifamily market in terms of how much it has re-ally produced? I think one of the things that willget you going forward is how much the overallcapital markets play a role in the multifamilymarket. [slides] It starts in 1988; it goes to 1997.The green is conventional apartments; the blue istax-credit; the orange is condos, co-ops, and oth-ers; and the yellow is federally subsidized, mean-ing non-tax-credit federally subsidized. And whatyou see is from 1988 to 1997, we have gonethrough a period of conventional markets. So in1988, there were 400,000 units created. In 1994,there were fewer than 200,000 created.

As the conventional market slipped, as the realestate markets reeled in the beginning of 1990,1991, 1992, and the capital markets really tubedon us, the tax credit area became much more apart of what was being created in the country,with subsidized and with condos and co-ops nothaving that much of a difference. That’s going to

be interesting background later, so hold thatthought.

What does this mean to our real estate stock?We’ve talked a lot about it in the last couple ofdays in terms of how old our housing stock is, andwhat it’s going to mean in the future to the innercity, as well as to the suburbs and exurbs. Sowhen you think about our multifamily housingstock, you have to think about the age of thestock.

Now let’s go back to the demographics we talkedabout and see how it relates to the future interms of who is going to need multifamily hous-ing, both in the older generation and in the up-coming generation. So that’s the background andwhy I want to talk about two major issues: fed-eral policy and housing finance.

With federal policy, we have two things going on:the federal-to-state policy shift and tax policy—-both important items. Federal to state, we’vetalked about a little bit. We’ve gone from theNew Deal and the Great Society to states’ rightsand privatization. The tax-credit is part of that.

During the Q and A a little while ago, we talkedabout what HUD is doing with the older housingstock. The fact is that what HUD is doing now isworrying about its past programs. To some ex-tent, Hope VI is worrying about its past publichousing programs, the mark to market is worry-ing about its past Section 8 program, and the as-piring youth is worrying about its past 236 andD-3 programs. That is a big part of that multi-family housing stock, particularly in the 1970s,but also in the 1980s.

The future is going to look like HUD working onthose issues, HUD setting some policy, maybethrough federal implementation and federalguidelines put out by the IRS, in the tax-creditprogram, or possibly just guidelines and no activefederal involvement, because that’s what has hap-pened in the last ten years or so—really since1970. So I really do think that we’re switchingfrom the federal policy to state policy, and thatwill continue.

On the tax policy front, it’s been key to multifam-ily housing. The 1981 Tax Act created the boom.


The 1986 Tax Act created the bust. And whatwe’re in now is a policy that says, “Are we at anequilibrium?”

What could upset the equilibrium? Many things.Flat tax could certainly upset the equilibrium. Ithink that from a single-family point of view, thatis against motherhood and apple pie. How wouldit relate to multifamily, and how would it relateto the tax credit? I doubt that it will happen.

I think that housing is at such a core with taxpolicy. I had a former partner, and he used to say,“You can have a tax policy that’s fair or simple,but you can’t have both.” That is probably goingto mean that housing will continue to have favor-able tax treatment.

If you go back to the chart of how old the housingstock is, you can see we’ve got to do some workwith rehab, and I think we’ve got to have tax pol-icy to do it. I’m not talking historic rehab. I don’tthink anybody would say our 200 units with com-posite roofs in the suburbs are historic or any kindof architecture that anybody necessarily wants topreserve. I do think, though, that they’re a goodhousing stock and that in order to be able to makeit into the housing stock that can survive for thenext 20 or 30 years, federal policies and new in-centives are needed.

You’ve heard a lot about what the cost of the in-ner city is. In ten years it’s not just going to bethe cost of redoing housing or building infill hous-ing in the inner city, but also in the near suburbs.The suburbs are going to be having the sameproblems because their housing stock is going tohave aged just like the inner cities’ has. And Ithink that we would do good things by having atax policy sooner rather than later. This wouldallow them to be rehabbed where it’s minimalrehab versus gut rehab that will be needed if weabandon them now.

Finally, I’d just like to speculate that we mightneed a tax policy that says there are parts of thiscountry where there are great expanses andwhere it’s hard to believe there’s a populationproblem or a housing problem. Take Gateway.Gateway Computers developed a company thathas become a major company in the middle of

nowhere. It takes great pride in putting thecowhide patches on its boxes. You could have atax policy that encouraged that. You could have atax policy that encouraged it in the Great Plains,or you could have a tax policy that encouraged itin the city. It’s something like the empowermentzones, but a little less complicated—-a little morelike a company town having a policy that said,okay, you can bring workers in and you can cre-ate good housing. (Blue Skies–probably crazy, butsomething to think about.)

We also need to look housing finance. So we’vegot the policy end, we’ve got the housing financeend, and we have the risk-reward tradeoff. Wedon’t know what the risk rewards are on multi-family housing in the quantified way that we didon the single-family side, and that now is expand-ing the single-family capital market. We need todo that.

We tend to treat an ad hoc crisis. Think back tothe asbestos crisis—1983, 1984. All of a suddenthe asbestos was the nightmare. Run, do notwalk, from any building with asbestos. Now we’vegot a more reasoned approach. There is encapsu-lation. There are other ways to deal with it. Thosekinds of environmental risks are one aspect. Theother is financial risks.

And we need to be able to quantify that if we’regoing to make any progress. I think we’re goingto do it partly through data. I’ll put a real plugin—no shame—for the Multi-family Housing In-stitute, of which I am the chair. It’s affiliated withULI. It is a group of owners and lenders whohave gotten together and said, “Look, we’ve gota lot of data. We have data on 100,000 units.” Butwhat we want to do is to be able to comparedata—-to be able to make it less of a black boxwhen we look at a property to finance. We’rereinventing the wheel now.

We need benchmarks. We need benchmarks thatsay, okay, here’s what a 1975 operating propertywould look like. Here’s what it would look like inthis locale. Real data. Just like it has driven thesingle-family market to open up those marketsand to bring down the cost of capital. We need todo that in multifamily. And if you have any inter-est in doing that and you’re in multifamily and


haven’t heard of the Multi-family Housing Insti-tute, talk to me after.

The other thing that we need in terms of thisrisk-reward tradeoff is good management. Westarted that when the REIT came into theirgolden months—as opposed to golden years as itturned out—in 1996 and 1997 with a focus on thesame kind of thing that we have in other indus-tries. The same store sales concept. The conceptof operating properties is what drives the riskdown, not just being able to buy another prop-erty or develop another property to put those bighigh gains in, but to really get operating proper-ties to be a real management business. Soundpolicies. Sound management.

We may have taken a hiatus from that in 1988and into 1999, but we will come back to that. Asthe industry grows and it’s no longer just a groupof people getting together and thinking up a newdeal, sound management practices become evenmore important.

Last but not least, I think we’re going to have areal evolution of collateral. We are going to beginto look at real estate as a true business ratherthan bricks and mortar. What’s that going tomean? I think it’s going to mean that we’re goingto be looking at return on investment.

Sounds reasonable? But think about how we runa multifamily real estate project. We think a re-ally solidly capitalized real estate project of mul-tifamilies at 200 units is one that has a healthyreplacement reserve. Okay? Any lender wants areplacement reserve. Wants it to be 250, 350 aunit. Wants it to build up for five years. Twoyears replacement reserve at any time. And ithas made sense because we’ve said that everyentity stands on its own.

But what lenders are going to begin to under-stand is that that is not their only collateral.They tend to look at it as if their collateral is thecash, and then there’s the asset over here andthat had better be okay. But I want to see thecold, hard cash. This is particularly true in the se-curitization that has come through.

They need to understand that real estate is abusiness. We need to be able to invest that capi-

tal, invest that replacement reserve, year afteryear after year. The only way we’re going to beable to understand whether or not we’ve donethat investment well — that we’re getting the re-turn, that it is an asset that’s worth more afterwhat we’ve done—is if we have good hard data.

And I think that the industry is going to need tocome to that. It’s going to need to share [three]sources to get there. And when we get there wewill have much better properties, because wewon’t be saying that the only way we can identifyit is by having cash reserves. We’re going to beable to quantify an investment—what the returnis really going to be—and the lender is going tounderstand that depreciation is strictly a tax con-cept, that real estate won’t depreciate, that mul-tifamily housing won’t really depreciate. It willappreciate, not because inflation is coming back,but because we will always be investing in it.

So what does the term sheet of 2019 look like?Okay, we’re all used to looking at term sheets.We’ve got duration, amortization, loan-to-value,all those concepts. Real estate will become muchmore of a business, and that’s the thrust of thiswhole thing. It won’t be just the one hard asset.A 30-year loan is already, in conventional worlds,going away. It’s only still around to a large extentif HUD is involved in some way, shape, or form.So that will come down to five years.

I think amortization will be a concept of the past.I think that we will get picture lines of credits onreal estate because you won’t need to amortize.The concept of amortization was that the prop-erty was deteriorating, so you had better be pay-ing off the mortgage because it’s worth less andless. It will be just a constant financed asset, andit will go to interest only. I think, therefore, loan-to-value concepts won’t be an issue. I think debtservice coverage will be an issue, but only in thesense that you’re looking at a business. It won’tbe a separate concept for real estate.

I think interest rates will be totally floating. Ap-praisals will be in a totally new form. I can’t evenspeculate what it will be, but the idea that we’regoing to have an individual go out and kick bricksand do his own separate study will be an anach-ronism when we get to 2019.


The borrower will no longer be the single-purposeentity. I realize we’ve gone away from this withthe embargo on the 1998 markets, but the bor-rower will be the company. It will be large com-panies that have multifamily real estate. Thatwill be how we will build more and more of it.And I think that recourse will be negotiable, justlike when you’re going in for your company fi-nancing now. It’s negotiable with the bank interms of how many of your principals are on it.

So I think that that’s where we are. We’ve gotglobal lenders, local markets. They’re all going tobe mushed around. The government will have tobe involved. It will have to be involved on the af-fordability end. Just as high tech now drives thestock market, so technology will drive real es-tate.

I think it will drive the capital markets. I think itwill expand the capital markets in one sense, butit will also bring to us the knowledge that in realestate finance, there won’t be banks that are spe-cifically devoted to it. There will be the FreddieMacs and Fannie Maes. They will play a role, butwe will need to compete in that capital with otherassets. And in order to do that, real estate mustbe seen as an asset class that’s worth the risk andthat has great rewards. But I do think that theinevitability of real estate into the capital mar-kets is here.

R e s p o n s eShekar NarasimhanPresident/CEOThe WMF GroupVienna, Virginia

Let me pick up from where Georgia left off. It’simportant to understand that what she was out-lining was effectively a new era in real estate fi-nance. We didn’t realize it, but this era actuallyarrived about three years ago. Usually we realizethese things in retrospect. So I agree with Geor-gia and her conclusion that real estate marketsare local and that financial and capital marketsare global. And if you’d just look at two periods,you can see why that happened.

In the early 1990s, following the overbuilding ofthe mid-1980s to the late-1980s, we had a real-es-tate-based crash in real estate values on the com-mercial side, in particular, and on the residentialside to an extent in different geographic markets.But that was a real-estate-based collapse. It wasbased on permits, developments, leading tohigher vacancies, leading to over lending and avery complicated risk-return equation that mostlenders didn’t analyze. They were not pricing 75percent risk versus 50 percent risk. They had noadequacy of data. That credit crunch, or the pe-riod of time when there were negative inflows ofcapital into real estate, lasted approximately 30months.

What happened in 1998 is an interesting compa-rable because it was the next major real estateevent for capital finance. During the second,third, and fourth quarters of 1998, capital in theforms it was being delivered for a three-year pe-riod deserted the markets. And I think everyoneis aware of the fact that Russia turned the rubleinto rubble. Take that and combine it with otherworld circumstances, and you have the dramaticspread increases in just about every kind of in-surance.

So CMBS mortgage-backed bank securities onthe single-family side, et cetera, dramatically in-creased spreads. What happened, however, wasthat between the second and third quarter, therewas an increase in the net inflows of funds to realestate finance. In the third quarter to the fourthquarter of last year, there was only a differenceof $1 billion, because the capital sources thatwere providing the capital in the second quarterwere completely replaced by new sources withina period of 40 days.

Something has changed. We are no longer in thesituation where we can have 34 months of creditwithdrawals. We now have 40-day, 15-day, 30-day,but pricing, because it’s coming from differentsources, is for risk. So now we have the best of allworlds. We are caught between two volatile mar-kets: real estate and capital. Something to justthink of cognitively if you are planning to be pub-lic, by the way.


But let me just touch on trends and then giveyou one sense of how I think this paradigm haschanged. First of all there’s clearly a trend topublic ownership, which in my opinion has notwithdrawn. That has led to a concentration ofownership and the cooperatization of ownership.So I agree with Georgia’s conclusions about a lotof the financing that will occur in the new era.But we have still not lost the notion, at least inthe United States, that democracy and homeownership opportunities are interlinked, which iswhy there continues to be a broad sustainableconsensus around what is needed in tax policy insupport of home ownership and opportunities.And clearly 70 percent home ownership is attain-able.

The difference is that the importance of housingin wealth creation has diminished dramatically inthe United States. Fewer than one out of sixhomes in this country owned stocks and bondsten years ago. Roughly 40 percent of householdsin the United States own stock and bonds today.Roughly 25 percent of the wealth creation forhouseholds in the 1970s was due to housing ap-preciation. Less than 3 percent is due to that inthe 1990s. This is a pretty fundamental change.People are not buying housing, or for that matter,owning apartments and renting them long-term,with the notion that this is a fundamental sourceof wealth creation. They have to create thewealth intrinsically through the ownership ofmultiple capital instruments, particularly in thepublic markets and stocks and bonds.

Now that is not true in the rest of the world. Infact, the opposite is true. The experience of pub-lic ownership in most of the world, includingmany parts of Europe that are caught in a verysluggish growth cycle, is that housing continuesto be extraordinarily important. In fact, thegreatest opportunities for our industry areabroad and not here anymore for this fundamen-tal reason.

Continuing with trends, I think data availabilityhas led to better risk-reward decision making. InJuly of 1998, the commercial mortgage-backed se-curity market overtook the life insurance com-pany portfolio as the holder of multifamily andcommercial marketers. Second, the real estate

and the business cycle are now more closely insync. That’s again good news and bad news, be-cause if we’re going to be caught between boththe real estate cycle and the financial marketcycle, the fact is that we are more in tune withthe business cycle.

Yes, there will be more activity on the Net.There will be originations, both on the multifam-ily side and clearly on the single-family side—asproduct innovation cycles become shorter, as col-lateral becomes less of an issue in terms of fungi-bility. To the extent that transactions becomecorporate versus transactional, they can certainlybe more closely aligned to the interest of some-one able to shop multiple lenders globally at amoment’s notice through the Net.

But I think the issue will continue to be incomeversus value. The issue is whether people havethe income to support the debt service. It is notwhether there will be housing appreciation orwhether apartments will grow at an appreciated8 to 10 percent per year. Here’s the challenge: thebottom line is that the financing that is reallyneeded in this marketplace is not being delivered.The financing needed for home mortgage financeis the one that’s not being delivered. There is nointernational Freddie Mac or international Fan-nie Mae. There is no ADR trading and housingstocks on the U.S. stock exchanges. So financingis not readily available in any form comparable tothat in this country in the rest of the world. Thatmust change for the rest of the world to achievewhat we have, which is making housing less valu-able for wealth creation and more valuable forownership and the sustenance of democracy.

One product I will leave you with that is desper-ately needed in the marketplace is a comprehen-sive rehab financing product, mainly because ithas got some interesting components that differ-entiate it from existing housing that does not re-quire repositioning.

First of all, in rehab, we don’t necessarily alwaysknow what the demand will be and at what pricethat demand will occur. Second, we normallyhaven’t focused on sustainability of the housingforced rehab. So all the innovations with regardto smart housing, all the innovations with regard


to technology, somehow are not translating tolower dollar costs to rehab yet.

So we need better materials. We need lowerm a i ntenance long term, and we have to figure outwhat they are underwriting. So rehab financingtoday in our books as a debt lender involves ac-quisition money, rehab money, subsidies, equity,operating deficits, and permanent financing.There are today six different sources for this,none of which is particularly fungible.

He or she who creates the model for the rehab fi-nancing in the capital markets, using the evolu-tion of risk-based capital returns and better data,will accomplish something that is important andneeded. As Georgia’s statistic points out, 41 per-cent of our housing is pre-1970, which means inthe year 2000, not less than 30 years old.

So I leave you with one thought, which ArnoldGlasgow said. He said, “Timing is everything.”And what we therefore have is less than 24months to innovate a set of products, not justaround corporate finance, but around the revital-ization, if you will, of a 30-year-old housing stock.We need to build it with better materials and alsofigure out how to internationalize our housingmarket system.

R e s p o n s eMichael LappinPresident & CEOThe Community Preservation CorporationNew York, New York

here are several themes in Georgia’s paper whichI would like to address. First, I think she cor-rectly anticipates that our challenge for the fu-ture is the creation of a system to reinvest in ouraging multifamily housing stock. As aging physi-cal systems break down, and as our aging popula-tion grows, reinvestment is needed in both thephysical and service components of housing.Georgia suggested using the tax code, both na-tionally and locally, to provide investment incen-tives (through federal tax credits and local realestate tax abatements). Given the direction offederalism, she notes the increasing importanceof state and local governments in administering

such subsidies, and the decreasing importance ofthe federal role.

Next, Georgia discussed how to finance these in-vestments. Better data will allow us to better un-derstand and underwrite the risks of such hous-ing. She advanced the possibility that, as a resultof a better understanding of this upgraded hous-ing, such collateral will evolve. Real estate com-pany security might replace single-asset collat-eral, with equity increasingly raised in the publicmarkets as opposed to individual private place-ments. She raises the question whether the debtside will similarly evolve, whereby a security canreplace single-asset financing, supplanting theonerous due diligence that exists today.

Let us examine this more closely, focusing firston a system to reinvest in our aging multifamilystock. In New York City, where I have the mostexperience, about 60 percent of the multifamilyhousing (about 1.4 million units, excluding publichousing) was built before World War II. About 1million of these units are in low-and moderate-in-come neighborhoods, with about 75 percentowned privately and not involved in any majorpublic program. I suspect this mirrors most olderurban areas, with the possible exception thatNew York has been more aggressive in takingadvantage of public programs. Most of theseproperties particularly in the poorer neighbor-hoods need some kind of upgrading, such as re-plumbing, rewiring, new boilers, etc. or, mostlikely, some combination.

How do we reach these owners? The usual pro-cess to attract investment for rehabilitation oflow-and moderate-income housing is that publicprograms are created and await takers. In pres-ervation efforts there is a major difference: theowners are in place and incentives must be cre-ated to get them to reinvest upgrading in theirproperty. This may be difficult. Many of the own-ers are inexperienced with renovation and havelimited financial resources. Many, in a city likeNew York, are immigrants and have little experi-ence with either institutional lenders or publicprograms.

Opposite such inexperience are the public pro-grams used to upgrade. This is not simply one


program, but often multiple programs—tax cred-its, real estate tax abatements, rental subsidies,grants, etc.—each with their own requirementsand often each administered by different agen-cies. Add to this the difficulty of getting both aconstruction and a long-term lender to incorpo-rate the benefits of the public programs intotheir underwriting, and then the difficulty of hav-ing both lenders coordinate with each other. Ad-ditional complications are inherent in the renova-tion process, particularly if it is done whiletenants remain in-occupancy.

It is not surprising that only specialists, whosemain skill seems to be gaining access and navi-gating among the varied programs, engage insuch efforts. It is also not surprising that this isdone at a substantial premium in cost over com-parable private efforts, since many of the bene-fits of subsidy are diluted by such a process.

As a result, the high cost of subsidies reduces thenumbers of properties that can be restored, andthe impact of public programs on communities isdissipated. The relatively low volume makes thesecuritization of their private debt less interest-ing, although this is certainly not out of the ques-tion for the future.

Is there a way to change this? A possible modelmight be the efforts to prevent the deteriorationand abandonment of apartment houses in NewYork City that took place in the late seventiesand early eighties. This was done at a time ofcrises in the city, when neighborhoods were be-ing abandoned at an alarming rate. Here govern-ment worked with private lenders to help orga-nize the various governmental programs to meshsmoothly with private financing. Added to thiswas a dose of technical assistance to help privateowners through the renovation process. In effect,this very complicated process was organized intoa “one-stop-shop” in a way that was accessible tothe inexperienced owners in the target neighbor-hoods. The results were astonishing! In a periodof seven to eight years, tens of thousands ofapartments were physically and financially over-hauled in vulnerable neighborhoods. The restoredunits provided sound, stable housing for anothergeneration of use. In addition to the extraordi-nary volume of housing restored, almost none of

the owners had any prior experience with themajor governmental housing programs, and therestorations were done at roughly half the cost ofcomparable programs.

Can this be replicated? These efforts, and similarefforts, are limited by time and place. The degreeof cooperation and certain delegation of authorityrequired to organize the process became undoneas the perception of crises in the neighborhoodsabated. Bureaucratic prerogatives reemerged asthe crises receded, and the cooperative effortseroded. Nonetheless, the potential of private/public partnerships to organize the rebuildingprocess remains, and it has not been fully ex-ploited. If and when this takes place, the promiseof meaningful volumes, including more fully lev-eraged subsidies, may become more of a reality.

Georgia talked about the evolution of collateral inwhich company security replaces individual secu-rity, with equity raised in the public markets asinvestors underwrite company strength as op-posed to single-asset economics. She foresaw in-creased values as tax incentives encourage rein-vestment in both rehabilitation and services.While the evolution of equity raising throughREITs is largely untested for the markets of in-experienced owners, other factors on the incomeand expense side of this housing could affect thisscenario.

On the income side, several questions must beexamined. Will changes in the social safety net,such as welfare reform, affect the income of indi-vidual properties housing low-and moderate-income households? What will happen to rentsand collections as the full impact of these changesare realized in three years?

New technologies might offer new opportunitiesto strengthen rental housing income. Energy de-regulation might offer unforeseen savings. Newcommunication technologies might generate newincome as competition for phone, cable, and In-ternet services could offer income sharing in re-turn for building-wide access.

On the expense side, there are several issues thatmight erode a building’s cash flow. As many com-munities pay for services from user fees as op-


posed to income taxes or property taxes, the fi-nancial burdens disproportionately fall upon low-income housing. For example, in New York for-mulas which base water and sewer charges onusage are being examined even though the fixedexpenses of the water system, such as debt ser-vice and payroll, account for more than 80 per-cent of the cost of the system. Plagued withplumbing problems and overoccupancy, low-in-come properties would bear the brunt of userfees.

Similarly regressive effects might follow a vari-ety of regulatory mandates. Among those of con-cern are the costliness of lead paint remediationstandards. A new concern for New York City isthe soon-to-be-enacted sprinkler requirements.

Whether these issues can be resolved in a waythat can encourage reinvestment is uncertain.The private owners of nonsubsidized low-andmoderate-income housing have a weak voice insetting housing policies, and their interests arerarely integrated effectively into the broad rangeof housing issues. Policy leaders seeking to en-gage these owners for the task of broad-scale re-investment must be more sensitive to the needsand limitations of this type of housing.

Finally, can debt evolve to the same point as thesingle-family finance market? While I concur thatthe advent of better data and sound managementpractices can take much of the mystery out ofthis area of housing, I do not believe it will openup a sufficiently broad market to meet our mostpressing needs.

The farther we move on the continuum to lower-income housing, the historical understanding ofproperties may point to more difficulties, which,if priced accurately, can work against their fi-nancing. Furthermore, the variety of such financ-ing—a myriad of types of second mortgages, in-come restrictions, et cetera.—will be counter tothe uniformity needs in the marketplace. To re-move these obstacles, I would suggest using pub-lic mortgage insurance to perform two functions:first, to realistically offset the social risk of low-income multifamilies; and second, to overcomethe lack of uniformity in individual transactions

by creating uniformity in a credit enhancementsystem.

The latter might be achieved if local governmentsestablished local credit enhancement vehiclesthat were relevant to multifamily needs. Suchlocal credit enhancement requirements can be in-corporated into the above-mentioned “one-stop-shop.” In turn, nationally rated organizations,such as Fannie, Freddie, the Home Loan Bankcan provide reinsurance if local programs arestructured in accordance with market-prescribedstandards. These standards would include propertop loss coverage, adequate financing of loss re-serves, proper claim-paying mechanisms. Hence,local insurers, insuring their unique multifamilyhousing, could obtain investment grade rating.This would enable the securitizing of these prop-erties, and their sale in the international mar-kets. (FHA probably could not play such a role,since its rules regarding lead paint, wage re-quirements, and income certification are too re-strictive.)

In sum, if the future of multifamily housing is inthe reinvestment of the older stock, we must cre-ate a system to organize a process that is accessi-ble to the owners of such buildings. This meansunprecedented cooperation between the publicand private sectors for the creation of “one-stop-shops.” In this way, rebuilding of the older stockcan be done in large volumes, and subsidies canbe more effectively used, and not wasted to payfor a complicated process only accessible to a fewspecialists.

If such housing is to be viable and attract privateinvestment, greater attention must be paid to theregulatory pressures that affect its economic via-bility.

Finally, a system of local credit enhancement thatunderstands local needs and is properly struc-tured can be reinsured by nationally rated com-panies. This will give these investments access tothe international credit markets.


Response Stephanie SmithBank of America San Francisco, California

I was asked to talk about the single-family impli-cations of the next 10 to 20 years. It’s a littledaunting to talk about changes in the next mil-lennium. It’s frightening enough to talk aboutwhat will happen next year, but let me give it atry.

I think there are five key trends. I was heart-ened to hear Ann essentially touch on nearly allof them. The first is consolidation. When we lookat banking in a mortgage industry, the impact ofconsolidation has been happening in the lastdecade, and it will continue as we go forward.

Right now, the top 25 lenders service about 54percent of the outstanding mortgages. The top 25lenders originated about 50 percent of the newmortgages last year. If you compare that to 1990,the top 25 lenders originated only 28 percent ofmortgages in that year. So we think consolidationwill continue in origination servicing, during thenext decade or two decades.

What we also think will happen is that the barri-ers to entry will change, because technology ismaking it easier for players to come into the mar-ketplace that we’ve never thought about before:Microsoft, Intuit, Home Shark, E-loan.

Last year an estimated $4 billion was originatedon-line, both by multisite lenders who are multi-sites on-line, as well as lenders with fully com-plete application ability. The estimate by DeutscheBank is that next year, $60 billion will be origi-nated on-line—obviously a small share of themarket, but an exponentially growing channelthat we really hadn’t thought about a coupleyears ago.

The second major trend will be the continuing in-fluence of technology, as Ann mentioned. In hersix years at Freddie Mac, the advent of auto-mated underwriting has taken the industry bystorm.

In the mortgage industry—which considering itssize was a singularly unautomated and less tech-nologically sophisticated part of the world—tech-nology has had a disproportionate impact in thelast couple of years.

We’ve been bringing in automated underwriting,credit scoring, laptops at the point of sale withour loan officers, and that’s just in the last coupleof years. The changes will continue as we go for-ward.

One of the questions we all need to ask is, whatare we automating? It’s not appropriate to auto-mate the current process of getting a mortgage,which is labor-and paper-intensive for the bor-rower. The question really is, how do we reengi-neer the processes so that this is an easier func-tion for the consumer?

The third major trend will be mass-customizationfrom a product perspective. If you look at howconsumers are handling debt, more and moredebt is being converted into mortgage debt be-cause of the home ownership tax deduction. Whatwe saw in 1998 was, in effect, $4.3 trillion inmortgage debt outstanding. By the end of 1999,there will be an estimated $4, almost $5 trillion ofmortgage debt outstanding. That’s just in firstmortgages. It doesn’t include home equities orsecond loans. By way of comparison, the nationaldebt today is about $5.6 trillion.

And as long as we have the mortgage interestdeduction, consumers will continue to converttheir debt into mortgage debt, and refinancetheir homes, and use that debt to pay for thekids’ college education, to buy a car, to refinancetheir credit card debt. Shekar mentioned that 40percent of households are now in the stock mar-ket or have assets in the stock market. So as con-sumers get more sophisticated financially, they’regoing to demand that the mortgage industrycatch up.

In terms of being able to provide the consumerwith products that are customized as opposed tous calling the consumer, you can have, as HenryFord used to say, every color, as long as it’s black.We also will see that the distinctions in credit willbe erased—what an A-borrower is, an A-minus


borrower, B and C borrowers. Those distinctionsare going to get erased as large lenders get moreand more sophisticated about how they under-write service and price risk for borrowers acrossthe spectrum. We think the agencies will also getmore sophisticated about how they handle that.Essentially, you’ll have mortgage products acrossthe spectrum of credit risk, and pricing will follow.

These very knowledgeable observers talk aboutthe multifamily industry moving away from a fo-cus on the collateral. We see the same thing hap-pening in the single-family industry. The ap-praisal industry is going through a sea changeright now as lenders rely more and more on au-tomated data, on house price appreciation data,on resell data, massive amounts of it. We’re notgoing to be relying as much on the traditionala p p r a i s a l .

Again, as Ann mentioned, as we get better andbetter at defining credit risk, a borrower’s indi-vidually proven and statistically probable will-ingness to repay his or her debt will becomemore important than just collateral. The notionthat you can create a mortgage or an instrumentthat is separate from the property and separatefrom the house—that people will have portabledebt that they move from house purchase tohouse purchase—will become increasingly morea t t r a c t i v e .

F r a n k l y, as we all fight to keep loans on ourbooks as quickly as they stream off in the re-financing waves, it will also help smooth out someof the cycles for lenders, and certainly for the in-dustry going through refinancings. Probablyeveryone in this room, if you have a house, hasrefinanced at least three times in the last twelvemonths.

In addition, I think we will see a better integra-tion of products and channels and technology inorder to enhance the customer experience. Thefinancial services industry is getting more sophis-ticated about how they meet customers wherethey want to be met. The mortgage industryneeds to catch up.

What we think we’ll see is that lenders will notbe relying on any one channel to reach con-

sumers, but they’ll be using brick and mortarbranches with account officers, with loan offi-cers. They’ll have networks of wholesale bro-kers. They’ll have telephone call centers. They’llhave Web sites with fully functioning applicationa b i l i t y.

Mortgage lenders linked to banks will be able totake applications in branches for customers. Thegoal will be to give them the kinds of productsthey want with the turn times they want, wher-ever and whenever they want to do business.Currently, as we all know, this is not the state ofthe mortgage industry.

The fifth trend is one that is close to my heart:the ability of the industry to broaden the base ofhome ownership in the future incrementalgrowth in market share. It will come in part bybroadening the base to reach out to more minor-ity households and low-income households.

As we’ve said many times during this symposiumand this discussion, the current home ownershiprate is about 67, 68 percent, and when you breakthat down and you look at it by race, AfricanAmerican and Hispanic households have a 45 per-cent home ownership rate.

That gap is a business opportunity. It’s not onlythe right thing for the industry to do to close thatgap. It’s also a tremendous opportunity for us togain incremental market share. As Nick and hiscenter have reported, about 40 percent of that in-crease was driven by minorities. They are goingto continue to be a key driver in home ownershipgrowth in the next few decades.

For example, Hispanic households are going tomake up about 20 percent of new homeownersbetween now and the year 2010. So expandingthe base for home ownership in the next decade,more than the other trends I mentioned, is goingto take the active involvement of more than justlenders.

It will obviously take Fannie Mae and FreddieMac. It will take nonprofits, faith-based organiza-tions, local and state governments, and FHA—Ican’t forget FHA—to meet the promise of thatexpanded home ownership opportunity.


We have all learned a lot in the last few yearsabout how to create more home ownership oppor-tunities for lower-income families and for minori -ties, but I think we need to accelerate the imple-mentation of those lessons in order to takeadvantage of this opportunity in the market.

So in closing, what we’ll see on the single-familyside is the really tremendous impact of technol-ogy in making it easier for customers to get theproducts they want when they want them. Therewill be more mega-lenders, but the niches willcontinue, in part because mega-lenders simplymean that certain market segments and productscan’t be delivered as efficiently.

And we’ll also see the housing finance system be-coming more inclusive, with more opportunitiesfor minorities and lower-income families.

Question and Answer SessionAudience Member: Any of the scenarios are de-pendent and predicated on stable interest rateenvironments, which we’ve been experiencing inthe last five years.But what would happen if wewere to have a repeat of the interest rate envi-ronment that we had in the late 1970s, early1980s, when you had escalating interest rates.Particularly as we go into what we call portabledebt, how might that affect low-income people?

Murray: Let me take a stab, and then I’ll turn itover to Shekar. On the multifamily side, assumethat it’s going to be a floating rate, and that it isgoing to have an effect when interest rates go up.So I think it’s just a question of not financingthings so closely that you can’t allow for that,just like you wouldn’t in a company. You’ve got toget back to thinking of real estate as an operat-ing business, as opposed to an asset of bricks andmortars.

Narasimhan: There is a very strong consensusthat we have a secular trend toward stable tolower interest rates. There’s a lot of evidence ofthat, and I think there’s a rather strong beliefthat that will be the case. But we are also in avolatile interest rate environment, where ratescan move 30 to 40 basis points every day.

If that were to happen, how would it affect fi-nancing and affordability? I think what haschanged over the last two years is our ability toanalyze the different levels of risks that get cre-ated between, for example, a 90 percent loan toan 85 to an 80 to 75 to 70. And I think we notonly have better risk management tools, but wehave better data.

So given that this has already happened, at leastin the last three years, I think part of the answeris, we just will find different slices of financing.Money will be available, but it will be more ex-pensive.

Therefore, it will affect affordability immediately,and it will just happen much quicker than it hasever happened before, because a mezzanine isgoing to cost more than strictly conventionallyleveraged debt.

But the second thing is that the market may un-derstand some day that apartment ownership isgetting a bond-like return. Rents tend to go uponly a certain amount, and expenses tend to goup, too. The big component of expense is debtand property taxes, not operations, and capitalimprovements affect competitive advantage.

These are very basic things that probably every-body in the room understands. So that if you had,theoretically, rents indexed not to inflation, whichmay or may not be significant in the future, butto the actual cost of the property or the propertyoperations of a company, what really will result isa bond-like return on equity.

If everyone was satisfied with that in the multi-family sector, rather than what I call multiplesand stock price, then, frankly, the apartment in-dustry would be fine, and I don’t see how itwould be dramatically affected, with one excep-tion, which is that we have very tight elasticity ofaffordability in apartments today.

As the incomes of those who live in apartmentshas declined, that elasticity has changed. So Iwould go back to arguing that we need funda-mentally different structures for property con-struction, ownership, maintenance, because thoseare the variable costs that we’ll have to control inthe future.


Audience Member: You discuss the technologyand the credit scoring, and you talk about therise in African-American’s home ownership in thelast few years. This is a fairly new thing that’sbeen going on in the past 18 months to two years.You discuss grading A, B, C, credit and loans forall those people.

Unfortunately, so many of those B and C peoplewho are going to pay higher rates are the minor-ity families that we’re trying to house. The creditrating is the biggest obstacle that we find inputting families in homes. So I see somewhat of aconflict in what you’re saying. I wonder what ef-fect this is going to have on what we’re talkingabout, the gains that we have made in African-American home ownership in the last eight to tenyears.

Smith: Obviously, technology, and the impact ofit, needs to be managed carefully to make surethat we don’t lose the gains we have made on theaffordability side. When we look at the B and Cmarket, and we think about who is paying morefor debt—they may not need to be paying that. Itmay be a market they are sent to because theydon’t believe they can get a conventional loan, orthey may get steered there. But when we look atwho is qualifying for B and C paper, we find, infact, they could qualify for A paper and pay lessinterest, if we could reach them. So that’s one ofthe things we think about, and I know FreddieMac and Fannie Mae think about.

The second point is that there will be borrowerswho are not well served by automation and bytechnology. For example, at Bank of America,we’ve been working on designing a productwhich doesn’t depend on credit scoring, thatlooks at borrowers who currently don’t have acredit history or have an impaired credit history,to make sure that we extend our capacity toserve those borrowers, independent of automa-tion.

So I think it’s going to be a dual-state world thatwe need to work in. What we know is that in-come doesn’t necessarily correlate with credithistory or with score. For those borrowers whoare low-income and who are disproportionatelyAfrican-American and Hispanic, we want to

make sure that we can work with them in thissort of dual-state world, and we think we can.

Audience Member: As an affordability tool, doyou see any prospects in location-efficient mort-gages in the future, mortgages that recognizethat it’s less costly to live closer to work, andtherefore you have higher disposable income?Are you familiar with that?

Murray: Well, Shekar talked a little bit abouthaving various pieces of a mortgage in the multi-family. It all goes to a risk-reward kind of thing.If that’s true, then you should be able to supportthat income that you can get more in rent be-cause people will pay more in rent to be closer. Ithink that’s the only place of value that it wouldcreate in multifamily finance, if you could actuallyshow that you’re able to get higher rents, whichis what you have in the close-in suburbs, usually,and in the good part of the inner city.

You are close to work. You’re close to the finan-cial district. Manhattan is more expensive than,you know, Hoboken. That’s what happens, so Ithink that’s already built into the equation. Ican’t imagine how you could get something thatwould make it more so, from a lender or an eq-uity provider’s perspective.

Audience Member: This is a three-part questionfor Mike Lappin. Mike, CPC has been very suc-cessful in New York City over the last 25 years,but in recent years, you’ve expanded in lendingin upstate New York and recently into New Jer-sey. I was wondering if the model that you hadfor New York City could be replicated to upstateNew York and to New Jersey? If so, could thatbe then a national model? Number one.

Number two, can you comment on the underwrit-ing standards that the conduits have brought tothe neighborhoods, and how does that affect thesustainability?

Number three, Georgia had predicted maybe afive-year term with no amortization on loans.How might that affect their sustainability?

Lappin: Let me talk to your second question,first. When a lot of capital is chasing a few prod-ucts there is the likelihood of overfinancing in


lower-income properties. We certainly saw thatin the late 1980s and early 1990s, and with someof the GSEs, and I think we’re seeing it now also.

There is a tendency to underestimate the ex-penses and underestimate some of the factorsthat I mentioned—the impact of changing utilitystandards, the impact of changing lead standards,and so on. When interest rates do go up, or ifthey go up, they will have a disproportionate ef-fect, because these properties already, I believe,are written with very thin coverages, and I thinkthere will be a substantial fallout in these proper-ties, very reminiscent of what happened in thelate 1980s. So that’s your second question.

As far as what we do as a national model, thecore of what we do is the recognition that oflower-income housing has inexperienced owner-ship, by and large. Whether they can organizethemselves within a REIT has not been effec-tively tried yet. Whether it could happen in thefuture is unknown.

To make that match, the principal thing thatmust be done, which is almost never done, is toorganize that very complicated process to makeit accessible to the very inexperienced owner. Wehave been able to do this only when the govern-ment perceived a great crisis, and felt it had noother choice. When the crisis abates, the processflitters off to everyone’s own individual concerns.

The third question: The ability of lower-incomeproperties to absorb changes in interest rates isquestionable. The key is to try to get them intosome institutions that can go longer term. Again,if we don’t look at the real social forces that areaffecting these lower-income properties, we’ll seesome bad results, which will mean that the mar-ket gets messed up for many years until peoplerefigure how to get back into it.

What I suggested was some kind of dual systemof mortgage insurance, where local governmentcan craft the proper kind of insurance for itsneeds, reinsured by the federal government—not risk-sharing, (risk-sharing, frankly, is allscrewed up, with all due respect), but some-thing. I think there’s a real potential for that to

work, and that will possibly get you to thoselong-term investors.


I n t r o d u c t i o nNicolas RetsinasSymposium Cochair DirectorJoint Center for Housing Studies Cambridge, Massachusetts

Before I introduce our distinguished luncheonspeaker, let me just say a few words on the clos-ing of this journey we’ve been on for the last dayand a half. Most importantly, on behalf of RonTerwilliger, the cochair of this symposium, andmyself, thank you. It’s been an interesting dayand a half. While, of course, we’ve reached noconclusion per se—one never does because it’songoing—I think we crystallized some of the is-sues, and I think that’s important. Certainly, aspecial thank you is owed to the Urban LandInstitute, and the Center of Housing Policy, andto all the wonderful sponsors of this forum, and Iwant to ask all of you to join me in thanking thestaff and all the people who’ve worked on it, fortheir wonderful work in the last day and a half.As I advertised this morning, we’re in for a treatas we bring this to a close. It’s a real privilege,but a rare opportunity that one gets to introducea neighbor—that one gets to introduce his ownmayor. And that’s my opportunity, my privilege,and my honor this afternoon. For the last twodays, we have been wrestling with a whole seriesof policy issues and choices. And it has been stim-ulating and energizing to do so. Mayors don’t getthat luxury. They have to make choices literallyevery day, and sometimes every hour of everyday. This mayor has made those choices, and hisgood work is proof positive of how right thosechoices have been. Mayors do make a difference,as we all know. This mayor has made a differ-ence. Today, Providence is the subject of a hit TVshow that makes it look like it is always fall andalways sunny in Providence, Rhode Island. It ismost of the time—but in part, that is because of

the tenure of this remarkable individual. ComeDecember he will have been the longest-servingmayor in the history of the city of Providence—a r g u a b l y, one of the most political cities in thisc o u n t r y. Last fall, he was reelected without op-position. So I’m not the only one who sings hispraises. It’s my pleasure to introduce you tosomeone who has breathed life once again into agreat American city, my friend, my mayor, MayorVincent A. Cianci.

Flexible Approaches to HousingD e l i v e r yThe Honorable Vincent A. Cianci, Jr.Mayor Providence, Rhode Island

Thank you, Nick. I don’t know why you stopped.You were just getting in stride there. But thankyou, and what a wonderful way to be introducedby someone whom I respect and admire, andsomeone who’s helped us in the city of Provi-dence achieve tremendous success. Nick Retsinascertainly has no equal when it comes to housing.

I also see in the audience Tom Anton, fromBrown University, who’s the chairman of ourhousing authority in the city, and I want you toknow that he took that housing authority andmade that Housing Authority a model housingauthority. Before, it was just a pithole of terribleexperiences for me; but now, it is a real exampleof great leadership and great housing opportu-nity. Nick had something to do with that, too.

It is a pleasure to be here to bring greetings fromall the people of the city of Providence, or at leastthe 98 percent who voted for me last election.

Before you’re going to get people who want tolive in cities and before you get people who wantto invest in cities, you have to have somethingcalled self-esteem, and one of the things that the

Closing Address: Flexible Approaches to Housing Delivery


city of Providence lacked, and I think Nick men-tioned it in his introduction, was self-esteem. Youknow the story of the city: After World War IIeverybody came home. Their lifestyles changed.People had every incentive in the world to moveout of the city, didn’t they? The federal govern-ment picked up every kind of mortgage. You gotevery kind of deduction on your income tax forpaying the interest on your mortgage, and every-body wanted that American dream. They wantedto go to the suburbs. That’s where you’re sup-posed to go.

And we found ourselves on a treadmill of tryingto keep up and to change the housing stock allthe time. Old housing stock. So we fix it, andthat’s fine, and they had programs for that. Thenin this neighborhood, you had a situation whereyou tear it down and build brand new, and thenyou had to go find the programs to get it done tokeep people in the city. Crime rates were up andpeople had lost confidence.

In 1974, when I was first elected mayor of thecity of Providence, we took stock of our housing.We said what do we really have here? Well, wehave great historic housing and great architec-ture. And that was the one thing that we couldbuild upon, so we made a very serious public pol-icy decision in those days not to tear downhouses. And you could build self-esteem in neigh-borhoods by telling people and showing peoplewhere they really lived. It was historic. It hadsome meaning to it. It had some purpose.

And then, of course, we’ve looked to preserve onour down city. Looked to preserve anchors. Welooked to preserve those old buildings that werelong forgotten and thought to be wasted. Thingslike old theaters that we turned into performingarts centers. Things like beautiful old departmentstores that we refused to tear down until wefound new uses. And lo and behold, we were ableto do a lot of that work up until 1986 when theTax Act was passed. It called every single pro-gram almost to an end as far as developers wereconcerned because of the lack of accelerated taxcredits and all the rest of the things that go on.

Now since that time there’s been a return to thecities. And we have sustainable cities. And how

do we sustain cities? Well, you have to makethem attractive. And you know someone said asense of place and that’s what we tried to do inthe city of Providence: to give people esteem tostay there, to want to live there. And like theEuropean cities. What are they about? They’reabout entertainment. Go to Florence—that’s oursister city, or go to Paris or go to any one of thosecities. You won’t see a shopping mall plopped inthe middle of a city or plopped in the middle of asuburb.

So in the city of Providence, we decided that wewere going to try to make our city a place thatpeople wanted to come to because it was a desti-nation in itself, and that destination was impor-tant because people could come there, they couldfeel safe.

And let’s get into the empowerment issue. Citiescan’t be revitalized unless, number one: they feelsafe; people feel safe in them. That’s number one.

Number two: individuals who come to a city mustfeel like the people who deal with them arefriendly. We have a little course for the people wenow hire. We call it Positively Providence. Thesep e o p l e — i t ’s like they went to Miss Manners’school. They wear the little white hat. “Excuseme, you might be illegally parked. But here—don’t do it again—here’s a little card that givesyou the listing of the parking garages and the fa-mous restaurants we have in this city you mightlike to visit.” See, that’s the way we do it nowand it becomes more user friendly. That’s numberone and two: safety and friendliness.

Number three: for people to visit a city and wantto live in a city is the fact that they can be enter-tained. So we support the arts. You send in theartist. Send the artist in, and then people aresaying, “These people are thinkers. This must beworth something.” See? And the next thing youknow it’s funky, and it’s a place to live.

So to make it a place where people want to go,we fixed some buildings, we did some theaters -support of the arts. We said, “Let’s go all out.Let’s empower this housing group. Let’s em-power the artists.” So what are you talkingabout? They don’t pay taxes anyway most of


them. Say it’s a tax free zone for artists. And wepassed the legislation. Honest to God. We passedthe legislation that said if you’re an artist, youcan live here. You don’t pay any income taxes,you pay no royalties, and you pay absolutely nosales taxes on everything you sell. For perform-ing artists, visual artists, everybody.

So we empowered the artists, and we also tookthe real estate and said, “hey, why can’t you con-vert those buildings which were commercial intoresidential and give them tax stabilization plans,too?” Now we’re doing about 600 units in theCity of Providence. And now we’ve had a returnto downtown living. Now guess who’s coming?Artists? Yes, artists, but I’ve got the doctorscoming now. I’ve got doctors who sell theirhouses in the suburbs. They come in, they startliving in the city. The dentists start living in thecity. And you know why? Because they can walkfrom their apartment—nice, and by the waycheap—800 bucks a month, 900 bucks a month,700 bucks a month. These massive spaces thatused to be department stores, that used to bemanufacturing facilities. That’s where they’re liv-ing. You put old beautiful decorative lighting outthere. You make sure the place is safe. They walkoutside and what do they find? Lo and behold, anice skating rink right in front of their place. Freealmost. Three bucks to skate. Two-and-a-halftimes bigger than Rockefeller Center. You can al-most pretend you’re in New York, for those whowant to be there, you see. The music and theskating and the snow, everything.

And then you can walk a few blocks this way orthat way, you can see a Tony award-winningrepertory theater and see a play there written byan in-residence Pulitzer Prize winner, or youththat the city supports with grants. Or you can goacross the street and you can go two streetsdown and go to a performing arts center and seeany musical you can name. Or you can go to newmovie theaters in the new mall with the largestscreen north of New York City. You can shop at165 different stores and major department storeslike Nordstrom and Filene’s. That’s what we builtin the city.

But in order to do that we had to have faith inourselves to create the self-esteem that we could

do it and that we were destination. And we had aproblem because we had railroad tracks thatwent right through the city, and they separatedus. Then we started to move the railroad tracks,we put them in a subway underground and cre-ated the land and we decided to move the rivers.We moved three rivers.

See, here’s another mistake cities have made. Inthe 18th century, they polluted their rivers. Inthe 19th century, they covered them up, at leastwhere I live. In the 20th century, what we wantto do is relocate them and connect them back tothe sea and connect them to one another so thatyou can have that wonderful sense of place andthat sense of belonging. We even light our riversby fire. Would you believe that? It’s called waterfire. An artist came to me, one of those people,with a bid. He came into the office and said, “Iwant to light the rivers with fire.” Now you’vegot to be a pretty big risk-taking mayor to dothat. But see what that did: it brought peopledown city.

So that’s the central center, and that’s wonderful.And all the yuppies live there. They come intocentral center; it has all the jobs, doesn’t it?That’s where the banks are, even though they’recutting down now because of computers andmergers and all that. The manufacturing indus-try: they’re gone. They’re a thing of the past.We’re in the fire industries now. But do you knowwhat our new economy is? The non-profits: thedoctors, the lawyers, and the teachers and pro-fessors. And we’ve got a university community,which has a lot of sophistication.

Now that’s the story of one city. That’s the storyyou see on Providence. That’s the story you seeon television. That’s the story that I tell you if Iwant you to vote for me. But there’s anotherside of the city of Providence. That’s the problemof education. If you don’t fix educational systemsthroughout this country, you can forget about fix-ing neighborhoods, because the minute that theyoung guy meets the young girl and they have akid, they’re out of there. They’re not looking forany place to go to school except in the suburbs.

And why is that? Because we have all these won-derful things in these cities that we’re trying to


sustain. We have the great hospitals, don’t we?We have the great institutions of learning, don’twe? But they take up, in my city, 50 percent ofthe tax base, which means I only have $40,000 ofreal estate value supporting a student in my city.Whereas in suburbia or in a coastal community,there’s $160,000 of property value supporting astudent. That is a problem.

What you’re going to find out is that when youngfamilies, new arrivals, come from other placesand they locate in your city, they increase thecost of living for everyone because of the educa-tional situation. Eighty percent of our school sys-tem in Providence, Rhode Island is multicultural.One out of every three of those kids was not inthe United States of America three years ago.

And, by the way, I’m not telling you a story that’sdifferent from most American cities in the North-east. The Hartfords of the world, the Springfieldsof the world. I could go on and on. And the costof education is soaring and not very kind to taxrates.

Now are people returning to the cities? Yes. Arewe trying to improve our school systems? Yes.And we are doing housing programs in citiesagain, but basically, I don’t know if we’re doingenough.

I love the programs when they come through. Wejust got a nice lead paint removal program. Abeautiful program, thanks to HUD. I can tell youthat that’s a problem that needs to be faced incities in the Northeast, because we’re older citiesand that problem goes beyond any economic line.It breaks all of those barriers because you canlive in poor neighborhoods or rich neighborhoodsand that problem is still there, and it’s debilitat-ing to a kid’s advancement.

So we’ve got to fix problems like that. And we’vealso got to sustain wealth, not create poverty. Ifyou don’t create jobs you’re not going to createhousing, and you’re not going to have people whocan afford to live in cities or live anywhere.

Now there are so many different housing pro-grams that you’ve forgotten about and you knowabout, but our cities are not going to be sustainedand our cities are not going to be viable unless

and until we understand that we’ve got to curethe problem of poverty in my city, and in allcities. Fifty-four percent of the people are func-tionally illiterate, and so we’ve got to create liter-acy programs. We’ve got to create programs thatpeople can truly take advantage of. Welfare toWork is a start, but unless we cure those prob-lems, we’re not ever going to solve the problemsof the cities. If you don’t have good schools thenyou don’t have people who can live in thosehouses and pay the mortgages or pay their ownway.

Now I know that there’s other people who arenot ever going to pay their own way, and that’salso a problem of cities and it’s a problem of thefederal government. We do those programs, andeveryone participates in them and wants themand supports them. That’s why we have publichousing and affordable housing programs, andI’m a strong supporter of them.

But one of the big issues is residency. How doyou support housing? Residence. There’s a bigdebate going on in my city now. Should schoolteachers live in the city? Should school teachersbe required to live in the city? Police and fire-fighters? The people in the city of Providencevoted for that years ago—eight years. They said,yes, we want cops to live with us and firefightersto live with us. We want school teachers to livewith us. Well now, they’ve come up with this ex-cuse that they can’t get enough school teachers.Well, that’s just not true, you see. That’s not trueat all, and people should want to live in the city.

So we’ve taken the position that if a personwants to work in a city, they should have noqualms about living in the city, especially if theywant to teach in a city and be part of it. I thinkthat most political people will tell you that.Maybe not reformers, but most political peoplewill tell you that.

So in closing, let me just say that our city is onethat I’m very proud of. It’s one that has made atremendous effort in recharging its image andself-esteem, making sure that we bring poor fam-ilies up to bankable standards instead of using allkinds of clever contrivances to lower those stan-dards—making sure that the cities’ poor, who are


the new generation of immigrants from LatinAmerica, Southeast Asia, West Africa, EasternEurope, benefit from the next wave of urban in-vestment. This is a strategy that’s working in thecity of Providence. I think it can work in anyother city that has raised its level of self-esteemand has also invested in itself.

Providence is a great example of what can hap-pen if an urban coalition is put together with pri-vate sector investment, banks who will listen,and neighborhood groups who are willing to stayin cities and work and be on that frontier. Andwe’ve done it. We haven’t been totally successfulat it, but we have a great example to praise.

You’ve got to talk positively about opportunitiesin cities because it’s where that great mixture is,the eclecticism. Cities are definitely sustainable,and if they are not sustainable, people are goingto just move out and make cities worse than whatthey were back in the 1960s and 1970s. And thering cities and suburbs are going to be like thecities were in the 1960s and 1970s, and you’regoing to eat up all the land in the suburbs.

Don’t give up on cities, and come to Providenceand see us. We’ll probably get you a part in amovie.

Retsinas: The mayor just has a couple of minutesbefore his next engagement, so let’s open it up toa couple of questions.

Audience Member: You talked about relation-ships between the suburbs and the city. Do youhave examples of any kind of regional coopera-tion for planning?

Cianci: Oh yes. We had one of the dirtiest sewerplants in America back in 1975, and now our Bayis a national treasure; it’s a national resource.When I became mayor, I realized that that wasan undertaking we could not afford at the then-current rates of participation. And so we madethat a regional facility. I’m proud to say that twoyears ago we got an award for having the bestsewage treatment plants in the country. So thatwas a regional activity.

Another regional activity is our convention andvisitors’ bureau, which attracts people from all

over. Another regional activity is our airport,which is one of the landmark new projects in thestate. Another regional activity is our water sup-ply board, which we’re looking to sell. There’s noreason why the city of Providence should controlwater that goes to 94 percent of the state. So allthose things are regional enterprises, as is ourtransportation system. All those things are re-gional in nature and scope and in governance.

Audience Member: Do you have any areas thatyou had to go in where there was a sense of com-munity?

Cianci: Oh, absolutely. One of the neighborhoodswas Federal Hill. Another one we’re doing now iscalled Main Street. We’ve had tremendous suc-cess redoing neighborhoods in the city ofProvidence.

We are participating now in the Main Street pro-gram on Broad Street. We’re going to revive thatone based on the ethnicity of African-Americansand American Indians who live in that neighbor-hood—with housing and also restoring safety. It’sthe beauty of living in a city to be able to walkfrom a house that’s in a safe neighborhood. Youcan walk your kid to school—not to a bus stop—put him in a school that you can feel good about,and then walk another block on a main drag, amain strip. You can go see Tony the Tailor, youcan see Joy the Hairdresser, and you can go to asupermarket, or you can go to some sort of res-taurant and enjoy yourself and have that sense ofcommunity and have a church next door. And youcan have the little white picket fence in the city,and you can have the grill outside, and you cansend your kid to a good school. That’s what citiesare about, and that’s what we ought to be work-ing to achieve.


Two roundtable sessions were held at thesymposium, one during the afternoon of thefirst day and the second at the conclusion ofthe second day’s panel discussions. The first

day’s roundtables dealt with the first three sym-posium topics, and the second session dealt withthe remaining two. The second session also pro-vided an opportunity for participants to discussand synthesize their views regarding all of thepanel topics.

Scribes recorded the conversations of eachroundtable as participants discussed the follow-ing questions relating to each of the panel topics,respectively:

Who will we be housing in the next twodecades?

How will housing be provided in the comingdecades, and how can housing policy affect theway housing needs are met?

What will we be building in the next millen -nium, and how can new materials and tech -niques increase the affordability of rehabilita -tion and reconstruction in oldercommunities?

Where will we live, and how can public policyand changing technologies encourage andsupport healthy, sustainable communities?

How will we pay for housing?

In describing the purpose of the symposium’sroundtables cochair Nicholas Retsinas stated,“The roundtables are to reflect on what you’veheard, to give you an opportunity to agree or dis-agree, and to think about what it all means.” Herequested participants to reflect upon the recordof each panel and to answer the following ques-tions:

What are the conditions, trends, and issueso c c u rring over the past twenty 20 that have in-fluenced the circumstances and events dis -cussed by each panel?

What are the key conditions and trends thatwill most influence us in the next 20 years?

Where will we be 20 years from now, and whoand how will we be housed?

The following outline presents broad generaliza-tions of the consensus and diversity among theroundtable participants in answering the threequestions offered by Mr. Retsinas.

Trend Topic I: Demographics, Markets, and Lifestyles What are the conditions, trends, and issues oc -curring over the past 20 years that have influ -enced the circumstances and events discussed?

• Demographics

Aging population

Growth of immigrant and migrant popula-tions

Rustbelt-Sunbelt population shifts

• Markets

Polarization by race, class, and geographicl o c a t i o n

Immigration settlement patterns concen-trated in gateway communities

Out-migration to suburbs and rural areas

Inner-city decline and nascent renaissance

• Lifestyles

Suburban cultures

Roundtable Summaries


Youth cultures

Elderly and retirement communities

Non-traditional and extended households

What are the key conditions and trends that willmost influence us in the next 20 years?

Growth of technology and knowledge industry

Labor shortages and movement of jobs to andfrom urban centers

Social divisions and economic isolation

• Issues of...

affordability

quality of life

schools

safety

aging housing stock and population

• Need for...

rehabilitation or both owner-occupied andrental housing

life-cycle housing that is age and lifestyleappropriate


America becomes an older, knowledge-basedsociety.

The home becomes more of a focus for work,play, and living.

Homeownership grows for singles and nontra-ditional households.

Aging in place—services come to the home.

Buying space, not design, which will change tomeet the changing needs of residents.

Differentiated markets based upon economicclass and social distinctions; more segmentedmarkets but more opportunities to experiencealternative lifestyles.

Trend Topic II: Housing Policies, Pro-duction, and AffordabilityWhat are the conditions, trends, and issues oc -curring over the past 20 years that have influ -enced the circumstances and events discussed?

Decline in Federal involvement in affordablehousing; increase in state and local participa-tion

Growth in nonprofit involvement, GSEs, andCRA lending

Political will to provide affordable housingweakened by NIMBYism and suburbangrowth special needs and fair housing

Retooling of federal housing programs to un-dertake preservation and reclamation of theexisting housing stock


Continuing decline of federal assistance forhousing subsidies; increased emphasis uponpublic-private/partnerships

Increased jurisdictional differences; local pol-icy issues

Recognized need for holistic approach to revi-talization, homeownership, and development

Integration of housing assistance with welfarereform, job creation, and business develop-ment strategies

Focus on mixed-income and mixed-use hous-ing development integrated with planning andland use regulation

Strengthened ability of the private market tocreate mixed-income/mixed-use housing

Manufactured housing steps in as affordablealternative to stick-built construction

Housing rehabilitation becomes critical

Increased availability of financial resourcesand developer expertise to undertake infill de-velopment


Growing emphasis on homebuyer educationand training

Where will we be 20 years from now; who andhow will we be housed?

Housing policy linked to transportation andother policies to provide metropolitan and re-gional solutions to growth and redevelopment

Affordability tied to creation of equity for res-idents and profitability for private sector andthe community as a whole

Residential development process focused uponthe value of place, sustainability, and thehuman dimensions of settlement patterns

Trend Topic III: Products, Te c h n o l o g y,and DesignWhat are the conditions, trends, and issues oc -curring over the past 20 years that have influ -enced the circumstances and events discussed?

Efforts to design new building materials andtechniques centered around affordability is-sues, and rising influence and public accep-tance of energy conservation and energy effi-cient construction

Land costs significant determinant in growthpatterns—price gradients favor raw land re-moved from the urban core


Perception that cities are coming back, butlots of work to be done

Sprawl not inevitable, but pressures for out-ward growth continue

Market demand expands for rebuilding thecity and inner suburbs

Siting of new housing wild card—may appearin the inner city if land is made available andserious issues of crime and education ad-dressed

Technology more accessible and affordable, asmarket demand grows and prices drop

Smart houses become more adaptive and in-teractive with their internal and external en-vironments

Technological innovation in housing designand construction occurs as a result of regula-tion and broad change in such industries asenergy, telecommunications, and health careand in the increased availability of labor andmaterials

Functional obsolescence declines

Manufactured housing becomes more promi-nent—cheaper cost of material and labor


Single-family home looking much like it doestoday but with different functions, remainsthe American dream

Public continues demand for larger homeswith more amenities; demand for higher-den-sity developments in competition with Mc-Mansions

Homes smarter, more flexible, and intercon-nected

More efficient production technology andproduct availability overcome shortages inlabor and materials

Affordability based upon design and loca-tion—physical isolation balanced by social con-nections, such as ethnic clustering and growthof virtual communities

Trend Topic IV: Housing and Sustain-able CommunitiesWhat are the conditions, trends, and issues oc -curring over the past 20 years that have influ -enced the circumstances and events discussed?

Evolution of state, local, and regional influ-ence

Growing influence of community and home-owner associations

Holistic view on housing and communities


Emergence of sustainable development andsmart growth movements

Sprawl driven by economic and social forces,policy, and budgetary decisions


Equity issues of who should pay for cost of in-frastructure, sustainable development

Spatial mismatch between jobs and workforceImprovement of schools and public safety

Retrofitting and reuse of dwellings and neigh-borhoods Regional planning and smart growth


Consumer driven product design and function;more options and individual choice

Multigenerational use of dwellings based uponage, ethnicity, and regional differences

Delivery of retail amenities and services re-configured because or work and learning athome and in home offices

co-existence of suburbia, exurbia, and urbancenters; celebration of diversity and growingsense of community that reduces physical iso-lation

Regional planning adapted to cover all naturaland human resources

State and local government increase lendingauthority; federal government acts as creditenhancer for local programs

Incentives for recycling and extending lifecy-cle of housing and communities

Building communities rather than homes;building for generations to come

Trend Topic V: Global Markets andLocal LendersWhat are the conditions, trends, and issues oc -curring over the past 20 years that have influ -enced the circumstances and events discussed?

Branch banks leave urban areas; credit unionsand nonbanks step in.

New technology supports knowledge transferand training; technology leaves some borrow-ers behind.

Consolidation of servicers and originators,evolution of banks and lending institutions.

Demise of federal housing programs andemergence of GSEs, CRA, and CDFIs


Customization of lending

Technology provides financing to a more di-verse population both through education andthrough better assessment of risk (automatedunderwriting, credit scoring, precision lend-ing)

Tax policy addresses rehab of existing housingstock

Risk management based upon better statisticsand treatment of rental housing as a businessasset rather than as depreciating collateral


Adaptation and extension of technology, datacollection, and information systems

Portable debt

Multifamily securitization and integration ofcapital markets

Increased availability and use of non-assistedfinancing; new financial intermediaries to ad-dress issues of affordability.

Housing in the 21st Century 105

Frank Anton Washington, DC

Frank Anton is president of Hanley-Wood, Inc., aWashington, DC-based publishing company with25 trade and consumer magazines serving thehousing and remodeling industries and the con-crete construction market. Anton was previouslyeditor and publisher of Builder, the housing in-dustry’s leading magazine and the nation’s larg-est monthly business-to-business magazine. He isa graduate of Dartmouth College and holds amaster’s degree in journalism from Northwest-ern University’s Medill School of Journalism.

The Honorable Susan J.M. BaumanMadison, Wisconsin

The Honorable Susan J.M. Bauman was electedmayor of Madison, Wisconsin, on April 1, 1997.She served for 12 years as a member of the Madi-son Common Council and acted on the Board ofEstimates, Public Health Commission, Equal Op-portunities Commission, Affirmative ActionCommission, Joint Health Commission, Neigh-borhood Centers, and the Monona Terrace Com-m u n i t y. She also served on the Board of Direc-tors of the Community Action Coalition for SouthCentral Wisconsin, Inc. Bauman, has several ad-vanced degrees, among them a law degree fromthe University of Wisconsin-Madison.

Edward J. Blakely, Los Angeles, California

Edward J. Blakely, PhD is dean and Lusk Profes-sor of Planning and Development for the Schoolof Urban Planning and Development at the Uni-versity of Southern California. Previously, he wasprofessor and chair of the Department of Cityand Regional Planning at the University of Cali-

fornia at Berkeley. A leading scholar in the fieldsof planning, infrastructure, transportation, andlocal economic development, he has forged newrelationships among the university, public andprivate sectors in the region while holding senioradministrative responsibilities. He was recentlyappointed by President Clinton as vice chair ofthe Presidio Trust. Blakely is the author of fourbooks and more than 100 scholarly articles. Hispublications include Fortress America; SeparateSocieties: Poverty and Inequality in U.S. Cities;Planning Local Economic Development Theoryand Practice ; and Rural Communities in Ad -vanced Industrial Society .

Suzanne Hayden Cameron Washington, DC

Suzanne Hayden Cameron is principal of Wash-ington, DC-based Cameron & Company, which fo-cuses on strategic asset planning, foundationaldevelopment systemization and marketing man-agement. She developed the foundational plan-ning and launch strategy for the recently formedWestbrook Partners REIT, now Terrabrook Com-munities, the repositioned St. Joe Company andmost recently, a start-up international resort/res-idential company. She has taught real estate com-munity development, strategic planning and inte-grated brand marketing at the University ofCalifornia, Berkeley, and the Urban Land Insti-tute, of which she is a member of the RecreationResort Development Council.

Michael Carliner Washington, DC

Michael Carliner is the staff vice president foreconomics at the National Association of HomeBuilders. He is responsible for economic analysisand forecasting, survey research, and analysis ofgovernment policies affecting the housing indus-

Participant Biographies


try. He has done extensive research and analysisof national and regional housing markets and ofrelated subjects such as demographic trends,nonresidential construction, housing finance, andfederal housing and tax policies. Prior to joiningNAHB in 1984, Carliner was director of regionalreal estate and construction economics at ChaseEconometrics. He has also served as vice presi-dent of Regional Data Associates and as senioreconomist at Dynamics Associates. He studiedeconomics and finance at the University of Penn-sylvania, where he was a research fellow.

James H. Carr Washington, DC

James H. Carr is senior vice president for inno-vation, research and technology at the FannieMae Foundation. He is responsible for the foun-dation’s housing finance and neighborhood strate-gies consulting unit, the nationally and interna-tionally recognized Office of Housing Research,and product and program development. He alsomanages the foundation’s technology infrastruc-ture and the integration of technology with prod-uct and program development. Prior to his ap-pointment to the foundation, he served as vicepresident for housing research at Fannie Mae, asassistant director for tax policy with the U.S.Senate Budget Committee, and research associ-ate at the Center for Urban Policy at Rutgers.He is editor of Housing Policy Debate ; the Jour -nal of Housing Research , and Housing Facts &Findings , his books include Crisis and Con -straint in Municipal Finance and the New Real -ity of Municipal Finance . He has degrees in ar-chitecture and urban planning.

Donald K. CarterPittsburgh, Pennsylvania

Donald K. Carter, FAIA, is the managing princi-pal of Urban Design Associates in Pittsburgh,Pennsylvania. Carter has been with Urban De-sign Associates since 1973. A 1967 architecturegraduate of Carnegie Mellon University in Pitts-burgh, he did postgraduate work in urban designand regional planning at the University of Edin-burgh, Scotland. He is a member of the Urban

Land Institute, serving on the ULI AffordableHousing Forum and as vice chair of the ULI En-tertainment Development Council. Previously, hewas vice chair of the ULI Residential Develop-ment Council. Carter and Urban Design Associ-ates are also active in the Congress for the NewUrbanism. He has published and lectured inter-nationally on urban design and architecture.

The Honorable Vincent A. Cianci, Jr.Providence, Rhode Island

The Honorable Vincent A. Cianci, Jr., was firstelected mayor of Providence, Rhode Island, in1974. Since that time he has been heralded as anoutspoken champion of inner-city revitalizationand, in 1996, was voted “America’s Most Innova-tive Mayor” by the American Association of Gov-ernment Officials. Cianci has also received wide-spread recognition for his development of TheProvidence Plan, a mission statement that an-swers the city’s public safety, educational, hous-ing, and employment needs. Through the Provi-dence Plan Housing Corporations’ new programs,thousands of city residents have received grantsfor home painting and home repairs and assis-tance in the purchase of newly constructed or re-habilitated homes. Cianci is a graduate of Fair-field University and Villanova University, with adoctorate in jurisprudence from Marquette Uni-versity School of Law.

Joseph Coates Washington, DC

Joseph Coates is president of Coates & Jarratt,Inc., a research organization committed exclu-sively to the study of the future. He is coauthorof 2003: Scenarios of U.S. and Global Society Re -shaped by Science and Technology; Futurework;What Futurists Believe; and How You Can Plan,Organize and Manage for the Future . Coates wasan adjunct professor at the George WashingtonUniversity and holds degrees from BrooklynPolytechnic Institute, Penn State, and the Uni-versity of Pennsylvania.


David Engel Washington, DC

David Engel is director, Division of AffordableHousing Research, Office of Policy Developmentand Research, U.S. Department of Housing andUrban Development (HUD). He is responsiblefor all HUD research on building technology,building code and zoning reform to make housingmore affordable, and environmental issues affect-ing housing and community development. Beforecoming to HUD, Engel was the senior policy staffmember of the Advisory Commission on Regu-latory Barriers to Affordable Housing (the KempCommission). He has worked for the federal gov-ernment for over 30 years and is trained as alawyer.

Deane EvansArlington, Virginia

Deane Evans, FAIA, is a registered architect inprivate practice in Arlington, Virginia. He servedas founding director of the Partnership for Ad-vancing Technology in Housing (PATH). PATH isa newly created public/private partnership whosemission is to accelerate the development andwidespread use of advanced technologies in orderto radically improve the quality, durability, envi-ronmental efficiency, and affordability of housingin the United States. He was also the vice presi-dent for research for the American Institute ofArchitects and senior principal at Steven WinterAssociates, Inc. He is a graduate of Yale and Co-lumbia universities.

William H. FreyAlbany, New York

William H. Frey, Ph.D., is a demographer and so-ciologist specializing in U.S. demographics. Hecurrently holds the positions: Senior Fellow ofDemographic Studies at the Milken Institute inSanta Monica, California and Professor of Centerfor Social and Demographic Analysis at SUNY-Albany. From 1981 to 1998, he served on the fac-ulty of the Population Studies Center at the Uni-versity of Michigan. Frey has written widely on

issues relating to migration, population redistrib-ution, and the demography of metropolitan areas.He is the author (with Alden Speare, Jr.) of Re-gional and Metropolitan Growth and Decline inthe United States and Metropolitan America: Be-yond the Transition. He served as consultant tothe US Department of Housing and Urban De-velopment on the President’s National UrbanPolicy Report in 1995. He is currently directingstudies on elderly migration and on immigrationand internal migration effects on demographic di-versity for states and metropolitan areas.

Nina J. Gruen San Francisco, California

Nina J. Gruen has been the executive vice presi-dent and principal sociologist in charge of marketresearch and analysis at Gruen Gruen + Associates(GG+A) which she co-founded in 1970. GG+A is aboutique economics and real estate development,policy research, and consulting firm, headquar-tered in San Francisco, with another office inChicago, Illinois. The firm is dedicated to helpingclients make the best possible use of real prop-ert y, land, and other urban resources. In 1982,G r u e n became the first woman elected to theUrban Land Institute’s Board of Trustees. In1997, Gruen was designated an honorary memberof ULI. For five years, she was cochair of ULI’sLow and Moderate Income Housing Task Force.In addition to influencing national and local pol-icy, the task force sponsored research on the ef-fects of growth management and organized com-munity panels to help resolve local housing,economic development, and neighborhood revital-ization issues. Gruen received a B.A. with honorsat the University of Cincinnati. She also earnedan M.A. degree, awarded jointly by the depart-ments of psychology and sociology at the Univer-sity of Cincinnati.

F. Barton Harvey, III Columbia, Maryland

F. Barton Harvey, III is chair and chief executiveofficer of The Enterprise Foundation in Colum-bia, MD. The Foundation works with nonprofitneighborhood groups to see that all low-income


families in America have the opportunity to livein fit and affordable housing and to work them-selves up and out of poverty. He also serves onthe Board of Directors of The Enterprise Devel-opment Company and The Enterprise Social In-vestment Corporation. He assisted James Rouseon the work of the National Housing Task Forceand was appointed to the Mitchell-Danforth TaskForce on the Low-Income Housing Tax Credit.He is a member of the Board of Directors of theFederal Home Loan Bank of Atlanta and the Na-tional Housing Trust. He has an M.B.A. and B.A.from Harvard University.

William Kargman Boston, Massachusetts

William Kargman is president and CEO of FirstRealty Management Corporation, an accreditedmanagement organization, that handles a portfo-lio of over 4,000 residential units in 16 rental de-velopments and 8 condominium associations. Heis president of the Rental Housing Association ofthe Greater Boston Real Estate Board and a di-rector of the Greater Boston Real Estate Board.Kargman was a member of the National HousingPreservation Task Force and earned a J.D. fromBoston College Law School and an MBA fromColumbia.

Charles R. KendrickBoston, Massachusetts

Charles R. Kendrick, Jr. is a real estate invest-ment banker, redevelopment expert, and thefounder of Clarion Ventures, LLC, which he es-tablished to attract debt and equity capital tourban communities. He has acted as an adviser tothe New York City Housing Development Corpo-ration and to NationsBank [NOTE NationsBanknow Bank of America ]. He also has been a rede-velopment adviser to the St. Louis DevelopmentCorporation and to Neighborhood Progress inCleveland, Ohio. Currently, Clarion Ventures ismarketing a closed-end fund designed to create asecondary market for Community ReinvestmentAct Loans. It also is providing strategic advice tothe Local Initiatives Support Corporation and re-development advice to HUD. In addition to his

extensive experience in the private sector, Ken-drick has worked for HUD as deputy director ofUDAG investments. He is a trustee of the UrbanLand Institute. He received a B.A. in architec-ture from Princeton University and an M.B.A.from the George Washington University.

G. Allan Kingston Los Angeles, California

G. Allan Kingston is president and CEO of theCentury Housing Corporation (Century). AsCentury’s president/CEO and executive directorof its predecessor, he has directed financing pro-grams that have added more than 6,000 units ofaffordable housing to 110 developments in 28communities throughout the Los Angeles metro-politan area. Century offers after-school tutor-ing/college prep programs; academic counseling;transitional housing for homeless veterans; childcare; energy efficient homes; pre-apprenticeshiptraining; HIV and substance abuse counseling;training programs for women in nontraditionaljobs; and other socially responsive programs.Kingston has been an executive in affordablehousing lending, real estate development and pri-vate and public sector management. He has ad-ministered affordable housing finance programs,large-scale urban redevelopment, New Town de-velopments, and individual commercial, residen-tial and resort projects

Michael Lappin New York, New York

Michael Lappin is president and chief executiveofficer of the Community Preservation Corpo-ration (CPC), a consortium of 94 banks, thriftsand major New York insurance companies. CPCis New York State’s leading financier of afford-able housing units representing public and pri-vate investments of over $1.9 billion of the build-ing and redevelopment of over 65,000 homes.Lappin serves as director of the National Hous-ing Conference and the Citizens’ Housing andPlanning Council and as a member of the FederalHome Loan Mortgage Corporation Housing Ad-visory Committee. He has been a visiting adjunctprofessor of urban planning at Hunter College


and holds degrees from the State University ofNew York at Buffalo and the American University.

Susan A. MaxmanPhiladelphia, Pennsylvania

Susan A. Maxman, FAIA, is a nationally recog-nized advocate and expert on the principles ofsustainable design. She has been principal of herown firm, Susan Maxman & Partners since 1980.She has served as the first female president ofthe American Institute of Architects. Maxman isassistant chair of the Urban Land Institute’s En-vironmental Council. She also has sat on thePresident’s Council on Sustainable Development.A graduate of Smith College and the Universityof Pennsylvania, she holds numerous awards andhonorary degrees.

Georgia Murray Boston, Massachusetts

Georgia Murray joined Boston Financial in 1973and is currently a senior vice president responsi-ble for leading the property management area.She is a member of Boston Financial’s Board ofDirectors, Senior Leadership Team, and Invest-ment Committee. Murray has managed the firm’sInstitutional Tax Credits, Investment Real Es-tate, and Asset Management divisions. She ischair of the Multifamily Housing Institute andthe director of Friends of Boston’s Homeless. Sheserved as the industry adviser to the Manage-ment Policy Review Committee of the Massachu-setts Housing Finance Agency.

Shekar Narasimhan Vienna, Virginia

Shekar Narasimhan is president, chief executiveofficer and director of the WMF Group, Ltd., apublicly traded commercial mortgage financialservices company headquartered in Vienna, Vir-ginia. WMF is a leader in providing multifamilyand commercial real estate financing and securiti-zation services in the United States. Narasimhanserves on the board of the Mortgage Bankers As-sociation of America, National Multi Housing

Council, National Housing Conference, and Co-operative Development Foundation. He was ap-pointed to the Fannie Mae National AdvisoryCouncil, elected as the first chair of the FannieMae DUS Advisory Committee, and served onthe executive committee of the National RuralHousing Coalition.

Sandra J. NewmanBaltimore, Maryland

Sandra J. Newman, Ph.D., is the acting directorof the Institute for Policy Studies at the JohnHopkins University and research professor in theDepartment of Geography and EnvironmentalEngineering. Her research focuses on the natureand effects of housing assistance policy for thepoor, and the housing problems and needs of vul-nerable populations, including welfare recipients,the frail elderly, and persons with severe mentalillness. Her recent writings include BeyondBricks and Mortar: Re-examining the Purposeand Effects of Housing Assistance; SubsidizingShelter: The Urban Relationship Between Wel-fare and Housing Assistance; and Worlds Apart?Long-Term Care in Australia and the UnitedStates. In 1983, she was a Fulbright Senior Fel-low at the Research School of Social Sciences ofthe Australian National University in Canberra,Australia.

Christine M.J. Oliver Chicago, Illinois

Christine M.J. Oliver is a nationally known ex-pert in the areas of community revitalization,public and assisted housing, and mixed-incomedevelopments. She has extensive experience inboth the private and public sectors. Currently,Oliver serves as president and CEO of the Chi-cago Dwellings Association, the oldest city-widenonprofit housing development corporation inChicago. She is the former chair of the NationalHousing Conference and served as director of de-velopment and special housing programs for theChicago Housing Authority. Oliver is a trustee ofthe Multihousing Council of the National Asso-ciation of Home Builders and she serves on theBoard of Directors of Enterprise Mortgage In-


vestments, Inc., and the Executive Committee ofthe Center for Housing Policy.

Patrick L. Phillips Washington, DC

Patrick L. Phillips is the senior vice president ofEconomics Research Associates (ERA). Hiswork, which includes all property sectors, ofteninvolves creative approaches to resolving com-plex ownership interests, market relationships,financing strategies, and political dynamics.Phillips is a frequent speaker on urban develop-ment issues, Phillips is the author or coauthor ofseven books and numerous articles. Phillips is amember of the Urban Land Institute, and he isactive on ULI’s Urban Development and MixedUse Council. He also teaches at the Berman RealEstate Institute at Johns Hopkins University.His academic training includes a graduate degreein public management and finance from SyracuseUniversity’s Maxwell School of Citizenship andPublic Affairs.

Nicolas P. Retsinas Cambridge, Massachusetts

Nicolas P. Retsinas was appointed director ofHarvard University’s Joint Center for HousingStudies in March 1998. The joint center, estab-lished in 1959, is a collaborative venture of theHarvard Design School and the John F. KennedySchool of Government. Retsinas is also a Lec-turer in housing studies at the Design School andthe Kennedy School. Prior to his Harvard ap-pointments, Retsinas served for five years as as-sistant secretary for housing-Federal HousingCommission at the U.S. Department of Housingand Urban Development. In that capacity, he ad-ministered the Federal Housing Administration(FHA), which insures over $406 billion in mort-gages for homeowners and multifamily propertyowners in the United States. To improve andstreamline the FHA’s single-family field opera-tions, he reduced 81 field offices to 4 Home-ownership Centers.

Retsinas has served on the Federal Housing Fi-nance Board and on the Board of the Federal De-

posit Insurance Corporation. He also has been anadjunct assistant professor of Urban Studies atBrown University. He received his master’s de-gree in city planning from Harvard Universityand his A.B. in economics from New York Uni-versity. Retsinas currently chairs the FederalHome Loan Bank of Boston and serves on theBoard of Trustees for the National Housing En-dowment, the Executive Committee and Board ofDirectors for the National Housing Conference,the Board of Directors of Habitat for HumanityInternational, Shorebank, the National Commu-nity Capital Association, the Community Devel-opment Trust, Inc., the Low-Income HousingFund, and the Editorial Advisory Boards of theHousing and Development Reporter and Apart-ment Finance Today.

Ann SchnareWashington, DC

Ann Schnare, Ph.D., is senior vice president ofcorporate relations at Freddie Mac. She is re-sponsible for the corporation’s industry relations,corporate communications, and philanthropic giv-ing. Previously she was vice president for hous-ing economics and financial research at FreddieMac. In that capacity, she directed the company’sresearch on housing and mortgage markets, de-fault and prepayment behavior, capital planning,and costing models. Schnare holds a Ph.D. in eco-nomics from Harvard University where she grad-uated Prize Fellow.

Stephanie Smith San Francisco, California

Stephanie Smith is the national manager for com-munity lending and senior vice president at Bankof America’s mortgage group. She is responsiblefor increasing the mortgage group’s lending tolow-income and minority borrowers, and borrow-ers in low-income communities. Prior to joiningBank of America, she was with the Clinton Ad-ministration for four years as a political appointeeat the Department of Housing and Urban Devel-opment. She served as the general deputy assis-tant secretary for housing and the chief deputyto the Federal Housing Commissioner. Smith was


responsible for ensuring that the policies of theFHA and the Office of Housing were imple-mented through their programmatic, budget, andlegislative initiatives. She has an M.B.A. and amasters in urban planning from the University ofCalifornia, Los Angeles.

J. Ronald Terwilliger Atlanta, Georgia

J. Ronald Terwilliger is national managing part-ner of Trammell Crow Residential and is one ofthe largest builders and managers of multifamilyrental housing in the United States. He is alsothe CEO responsible for all residential develop-ment and operations conducted by Tr a m m e l lCrow partners and associates in 22 offices through-out the United States. He joined the TrammellCrow organization in 1979 as president of theCrow-Terwilliger Company and a regional part-ner responsible for residential development inthe Eastern United States. Terwilliger is anhonor graduate of the U.S. Naval Academy andreceived an M.B.A. with high distinction from theHarvard Graduate School of Business, where hewas elected a Baker Scholar. He is the incomingchair of the Urban Land Institute and a memberof the Real Estate Roundtable. He served as the1995-96 chair of the Advisory Board of the Whar-ton Real Estate Center and currently serves asvice chair of the Atlanta Neighborhood Develop-ment Program.

Mark Ellis Ti p t o nRaliegh, North Carolina

Mark Ellis Tipton, former president of the Na-tional Association of Home Builders, is the CEOof SMART HOUSE, Inc. SMART HOUSE, LP isbuilding a national sales and marketing networkfor installed home electronic systems, and it willbe positioned as a distributor of home automationproducts through a network of independent deal-ers. A home builder by trade, Tipton has experi-ence with wetlands policies, rural housing, hous-ing finance agencies, land development, and theNAHB’s national insurance program.

John To r t iSilver Spring, Maryland

John Torti, AIA, is president of Torti Gallas andPartners + CHK, Inc., a planning and architec-tural firm based in Silver Spring, Maryland. Hejoined the firm in 1973 and has served as princi-pal-in-charge of many large-scale planning, resi-dential, and commercial projects, including De-sire, a public housing redevelopment project inNew Orleans, Louisiana; Barrington, continuingcare retirement community outside Chicago; andArlington Courthouse Plaza, a $150-millionmixed-use office, residential, retail, hotel, andgovernmental complex in Arlington, Virginia.Torti worked for the National Capital PlanningCommission and hold degrees from University ofNotre Dame and the Catholic University ofAmerica.

Susan Wa c h t e rWashington, DC

Susan Wachter, Ph.D., on leave from the Whar-ton School of Business of the University of Penn-sylvania, working in the Office of Policy Develop-ment and Research as consultant to the secretaryof Housing and Urban Development. She hasmore than 20 years of experience in housing anal-ysis, with research on housing affordability, urbanpoverty, spatial house price dynamics and hous-ing abandonment. She is the founder and directorof the Wharton GIS Lab and serves as editor ofReal Estate Economics. A graduate of Harvard,Wachter received her Ph.D. in economics fromBoston College.

James Wa l l a c eBoston, Massachusetts

James Wallace, Ph.D., has worked for Abt Asso-ciates, Inc., for more than 27 years and has di-rected and participated in research and evalua-tion studies of virtually all of the major housingprograms of the federal government. Wallace wasa chief policy analyst with the President’s Com-mission on Housing from 1981 to1982 and he wasthe technical director for the National Low-In-


come Housing Preservation Commission in 1985.He has published extensively on housing policyissues, including the low-income housing taxcredit. His doctorate is in urban studies and plan-ning from the Massachusetts Institute of Tech-nology.

Todd Zimmerman Clinton, New Jersey

Todd Zimmerman is one of the managing direc-tors of Zimmerman/ Volk Associates. As editorand publisher of Multi-Housing News and SeniorLiving News, and as the founding publisher andeditorial director of Real Estate Ti m e s, he es-tablished a national reputation for his early iden-tification of real estate trends, including seniorhousing, affordable housing, and traditionalneighborhood development. Zimmerman is one ofthe framers of the charter of the Congress forthe New Urbanism, and chair of the Finance andImplementation Task Force of CNU. He alsoserves on the Advisory Board of AffordableHousing Finance. Zimmerman was a founding director of the National Association for SeniorLiving Industries and served on the executivecommittee for two years. He was also chair ofMulti-Housing World, the nation’s largest confer-ence devoted solely to density housing, and afounding director and former president of theNorth County Conservancy, a non-profit housingdeveloper.


S p o n s o r sFannie Mae FoundationFreddie MacNationsBank [NOW Bank of America]National Housing EndowmentCentury Housing CorporationKargman Charitable and Education FoundationNational Multi Housing CouncilCommunity Preservation CorporationKimball Hill, Inc.

Program Committee MembersNicolas RetsinasDirectorJoint Center for Housing StudiesHarvard University

J. Ronald TerwilligerNational Managing PartnerTrammell Crow Residential

Gregory T. BarmoreChairmanNational Institute for Community Empowerment

Larry H. DaleManaging DirectorNewman & Associates

Jane FortsonSenior FellowThe Progress & Freedom Foundation

F. Barton Harvey, IIIChairman & CEOThe Enterprise Foundation

Gary KachadurianPrincipalRREEF Fund

William KargmanPresidentRental Housing Association

Michael LappinPresident & CEOThe Community Preservation Corporation

Angelo MoziloCEOCountrywide Home Loans, Inc.

Shekar NarasimhanPresident & CEOThe WMF Group

Ann B. SchnareSenior Vice President of Corporate RelationsFreddie Mac

Lilla SuttonExecutive Coordinator Housing Assistance Council

John C. Weicher,Senior FellowHudson Institute

Ronald WittenPresidentM/PF Research, Inc.

Sponsors and Program Committee

housing in the 21st century - urbancenter.utoronto.ca · presenter: ed blakely, university of...

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