U.Va. Planning Professor's Book Sheds New Light on Foreclosures

March 03, 2010

Listen to the UVA Today Radio Show report on this story by Jane Ford:

March 4, 2010 — A new book by University of Virginia planning professor William Lucy looks more deeply at the reasons behind the foreclosure crisis and its future impact on cities and suburbs.

"Foreclosing the Dream: How America's Housing Crisis Is Changing Our Cities and Suburbs," published by the American Planning Association, examines factors beyond financial manipulations that fueled the crisis, and identifies signs that herald a fundamental change in our communities – change that Lucy predicts will continue and gain momentum in the coming years.

Lucy examined 236 counties in the 35 largest metropolitan areas, combined with housing and income data in each of the 50 states. The research shows a revival in central cities throughout the past decade. That trend is leading to a change for cities and suburbs alike, with suburbs on the decline.

Lucy's research identifies factors in addition to the financial crisis that are playing a key role in the foreclosure crisis, and finds that they will not disappear with the global financial recovery.

These factors include higher foreclosure rates in new suburbs and exurbs as compared to a lower rate in cities, signifying a change in the American Dream of home ownership in the suburbs; declining demand for large suburban houses due to demographics, as the number of households headed by those in their 30s – prime candidates for suburbia – has declined by 3.4 million since 2000; and the reversal of the "white flight" exodus from central cities in most metropolitan areas.

Census data began to show the revival of cities in the 1990s, but the rise in incomes and revival of the pre-1940s suburbs immediately adjacent to cities was not recognized by policymakers at the city level until years later. After 2000, the data shows an income increase among non-Hispanic whites in cities.

Those factors – which Lucy brought to light in his 2006 book "Tomorrow's Cities, Tomorrow's Suburbs," co-authored with U.Va. planning professor David Phillips – plus the increased rate of condominium construction in the past 10 years, with the largest increase between 2005 and 2010, have contributed to the revival of cities, Lucy said.

In "Foreclosing the Dream," Lucy's research shows the pattern of foreclosures is significant in the suburbs, with foreclosures greater in the counties surrounding major cities. This relationship is greatest in San Francisco, followed by Washington, D.C., and Los Angeles County.

The rates of home ownership are also changing as foreclosed homeowners remain outside the home-buying market. This, in addition to the fact the more houses are becoming available as aging suburban homeowners move to the cities and younger (age 30 to 44) people choose to not replace them, indicates that changing demographics are playing a significant role in relative health of cities and suburbs.

In addition, political support for high-density development, investment in transportation initiatives and the role that climate change has played in influencing attitudes all are having an impact on development patterns. People are looking for better transportation options and shorter commutes, Lucy said.

"These shifts will lead to shorter commutes to work and less carbon dioxide emissions," Lucy said. "But these same shifts will lead to more poverty in suburbs and more financially stressed suburban governments."

Lucy added that this suburban decline was masked by the housing price run-up that occurred between 2002 and 2006 and contributed to the acceleration of foreclosures.

"We are at the threshold of some sort of reversal," Lucy said.

That said, he believes there are positive outcomes of the financial crisis. Construction rates are the lowest in 18 years, making it an opportune time to build. Traditional business models that are no longer viable will lead to new public and private collaborations and partnerships.

The next year or two could be "bumpy" for housing, Lucy said. It depends on how public and private organizations can adapt.

"Lucy's research illustrates that the foreclosure crisis has implications beyond just revising our current lending practices," said W. Paul Farmer, the American Planning Association's chief executive officer.

What does this mean for the future?

"Two key questions will be answered during the next decade," Lucy said. "Is 2010 the threshold for rapid city revival in coming decades, just as 1950 was the threshold for rapid suburban development during the next half century? And will developers, lenders, and government officials facilitate these positive changes in housing markets while also adapting to support declining suburbs?"

"'Foreclosing the Dream' is a warning for communities and elected officials," Farmer said. "Lucy identifies a fundamental change in our communities that will only continue to gain momentum. His research illustrates that the foreclosure crisis has greater implications beyond just revising our current lending practices."

The book includes data for 35 metropolitan areas: Atlanta; Baltimore; Boston; Buffalo, N.Y.; Charlotte, N.C.; Chicago; Cincinnati; Cleveland; Columbus, Ohio; Dallas; Denver; Detroit; Houston; Indianapolis; Kansas City, Mo.; Las Vegas; Los Angeles; Miami; Milwaukee; Minneapolis/St. Paul, Minn.; New York; Orlando, Fla.; Philadelphia; Phoenix; Pittsburgh; Portland, Ore.; Sacramento, Calif.; San Antonio; San Diego; San Francisco; Seattle; St. Louis; Tampa/St. Petersburg, Fla.; Virginia Beach; and Washington, D.C.

— By Jane Ford