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Beyond Gentrification: Roundtable of Experts

Joe Molinaro - National Association of Realtors

Harold Simon: The planning term "smart growth" is often thought to mean "stop growth," especially at the urban/suburban periphery. How does the National Association of Realtors (NAR) define smart growth? What strategies does your membership use to encourage appropriate redevelopment to minimize costs (traffic congestion, air pollution) while maximizing existing urban and suburban assets (cultural, infrastructure)?

Joe Molinaro: We do not define smart growth as "stop growth," nor do many others involved in the smart growth debate. Many of the "growth management" techniques that were adopted in the 1970s, such as moratoria and urban growth boundaries, could be viewed as attempts to stop growth. We believe smart growth, on the other hand, represents a different approach that tries to encourage better growth and can provide for wider choices in housing and neighborhoods.

NAR defines smart growth as growth that protects the environment, builds better communities, protects the right of Americans to own and transfer real property, and provides housing opportunity and choice, including the building of affordable housing. But each community must define for itself what smart growth is. In some places, for example, the priority is preserving farmland or natural lands. Other communities are more concerned with addressing traffic congestion. And for many older cities and first-ring suburbs, the major focus is revitalizing older neighborhoods or increasing the supply of low income housing. Realtors support a community planning process that includes all stakeholders working together to decide what the priorities are in that community and what approaches would work best.

In many communities, state and local Realtor associations have supported new approaches to achieve smart growth goals. For example, on Cape Cod, Mass., Realtors developed and supported a property tax increase to pay for the purchase of open space. In Wisconsin, Realtors supported legislation that provided local government with more tools to create comprehensive plans, including a requirement that towns adopt a Traditional Neighborhood Development ordinance that allows higher density, mixed-use communities to be built. This year in Massachusetts, Realtors have written and championed legislation that would grant local governments the power to provide density bonuses to builders who build affordable housing. In Washington State, Realtors were the catalyst for a broad-based Infrastructure Coalition that is promoting potential solutions for funding needed roads, bridges, water and sewer facilities. Of course, not all efforts are successful -- in 2002, Realtors in Virginia devoted a lot of resources to support a major referendum campaign to increase taxes to pay for roads and transit, but the voters turned down the proposal.

In many communities, reforming zoning ordinances could be a good step toward smart growth. For example, zoning that requires large lots for houses results in more expensive housing and creates more sprawl. Many municipalities do not permit apartments to be built at all. And building new mixed-use, walkable neighborhoods with a range of housing types and neighborhood shopping is forbidden by most zoning ordinances. NAR is providing training and information to our members to inform Realtors that there are better approaches; we are encouraging Realtors to get involved in the public debate about these issues.

Simon: When urban centers are weak, spillover problems affect suburbs, from higher taxes to increased crime. When city residents try to get away from these urban problems by moving to the suburbs they contribute to sprawl. Yet most suburban
communities don't see how closely they're tied to the well-being of their central cities. The result is a competition for resources creating political tensions and social balkanization. How do local Realtors challenge these entrenched beliefs and move towards creating more regional cooperation to strengthen inner cities?

Molinaro: Regional cooperation is difficult in this country due to its strong tradition of local government. While there are obvious benefits of local control of a community's affairs, the strong local government powers and the large number of local governments in a region make coordination and cooperation difficult.

One of the sources of political and social tension is fiscal issues. Every state has its own way of collecting taxes and spending tax revenues, but often the method of taxation used in a state can be a big contributor to decline in central cities, sprawl in the suburbs and a lack of affordable housing. For example, in some states, local communities keep much of the revenue raised by sales taxes in their communities, which leads to local governments competing for retail development such as shopping malls, which leads to more highway strip commercial development. However, residential development is seen as a money-loser for local communities since new residents greatly increase expenditures for public education. Many communities use zoning to keep out affordable housing and encourage expensive housing because they believe that this will improve their fiscal situations. Central cities often have large expenses for supporting an infrastructure that is used during the day by workers who don't pay taxes there.

I believe that regional cooperation and equity -- as it relates to tax issues, education funding, affordable housing, transportation funding -- will only occur when the state government mandates it. We are seeing some changes in how education is financed. Due to court decisions that have found that using local property taxes for education is inequitable to students in poorer jurisdictions, a few states are increasing state funding or otherwise trying to improve equity in education funding. One part of Maryland's smart growth effort has been to spend more state school construction money repairing schools in older neighborhoods rather than building new schools in the distant suburbs. And in Minnesota, there is a much-written-about program of tax-base sharing that tries to better balance the fiscal disparities between city and suburb and reduce the competition among jurisdictions for development that brings in high tax revenues. I think a good place for Realtors to address this issue, as civic leaders, would be to support efforts to improve equity in education -- Realtors are well aware of the importance of schools in selling homes, and they can appreciate that for central city communities to improve, the quality of schools must be on a par with those in suburban communities.

Simon: You mention that local governments often don't see (or don't feel they have the luxury to see) equity and regional cooperation as being in their primary fiscal interest. Residential development, especially affordable housing, is seen as a money-loser, where as sprawling shopping malls bring in sales tax revenue. What can we do to bring about a change in how communities (including local governments) calculate their cost-benefit analyses and envision the goal of community development? How can we bring about a shift in the worldview and values of community development, aside from waiting and hoping that states will mandate it?

Molinaro: Elected officials will continue to calculate the cost and benefit of development, in strictly today's dollar terms, as long as citizens' prime interest is in keeping their taxes lower. If citizens want to change the approach of their local government, one approach would be to convince their elected officials that they (the citizens) are more interested in the longer view of building a more sustainable and equitable community, even if it means bearing the potentially larger costs. Or, they can change business as usual and reprioritize or downscale their wants in terms of publicly-provided facilities and services. For example, do we really need to build a new school on 80 acres of land on the edge of town, or could we fix up our old school that is within walking distance of more students, for less money? Do we really need to spend millions of dollars on a new highway, or should we improve transit and invest in close-in, higher-density, transit-oriented development that will help take cars off the road and provide greater housing options? It would be possible to craft a political message that a shift to smart growth and sustainable communities will be more economical in the long run, will provide greater opportunity for poorer people to have better access to jobs and affordable housing, and will provide greater options for everyone.

How can this shift in thinking be fostered? I believe the incremental approach works best -- a good idea here, a good project there, helps people get past the "it can't be done here" mentality. Case studies of successful communities can inspire. And creating a first project that encourages people from several local jurisdictions to work together is a great start. I take part in many smart growth seminars at the local level, and often the major accomplishment of the event isn't any decision or new policy direction -- it is simply getting citizens groups, housing advocates, environmentalists, and real estate groups to talk together for the first time in a non-confrontational setting. From this small start, new alliances and new projects can arise.

But I still believe state action can play a large role in appealing to local governments' "enlightened self-interest" by developing a taxing system that does not encourage localities to fight for some types of development and shun others; by developing an educational finance system that does not rely on property taxes to fund schools; by spending transportation dollars in a way that provides greater travel options for everyone and mobility for those who do not own cars; and by providing incentives to local governments to promote the development of a wider variety of housing types and prices.

Simon: In changing communities, especially in older urban or inner-ring suburbs, there is often a tension between long-time residents and new arrivals. That tension can be a by-product of the disparity in wealth between the newcomers and the current residents or it can be caused by cultural differences. Sometimes it's both. How do Realtors balance self-interest, the positive value of a strengthening real-estate market, with the goals of stability and retaining long-term residents who were in part responsible for the area's redevelopment? And what role should Realtors, as civic leaders, take in reducing inter-group tensions when they arise?

Molinaro: Changing communities often bring tensions between long-time residents and new arrivals. Whether it is racial or ethnic change or an economic change due to rising property values, new and old residents are often faced with the task of adapting to changes they may not have desired or planned for. A Realtor has a responsibility to his or her client to represent their interests and get the best price and contract for their client, whether it is buyer or seller. A Realtor may not, according to fair housing laws and the Realtor Code of Ethics, encourage or discourage sales or rentals in a community because of the racial composition of a community or changes in the racial composition (as well as changes based on other protected classes such as national origin or religion).

Realtors help long-term residents in a price-appreciating community by assisting them to purchase housing using many available housing affordability programs, sponsoring homeownership classes and more. Realtors often work with local community-based non-profit organizations to help long-term homeowners use their increasing equity to improve their homes. In addition, Realtors and the Realtor Association often sponsor or participate in community-based activities to reduce tensions and improve community relations.

Recently, NAR began a Housing Opportunity program (see related links) to provide better information to Realtors about programs in their states and communities that assist people in buying homes. And for many years, we have had a diversity program that includes a training program called "At Home with Diversity" that improves the ability of Realtors to effectively reach out to all racial and ethnic groups in their community. (Thousands of Realtors have taken these courses.) Our diversity program also includes programs to increase the success of minority Realtors and to reach out to minority organizations including minority real estate organizations not affiliated with NAR.

Simon: One way to help retain existing residents when housing costs are escalating is through increases in density -- more units built in the same area. What are some of the advantages of increasing density in fighting sprawl and creating a "housing ladder," and what are the problems that Realtors are encountering in accepting this idea or advocating for it?

Molinaro: Realtors understand the importance of density in providing affordable housing and a wide range of housing opportunities. As land gets more expensive, it is more important than ever to use land more wisely. Home buyers are learning this too -- according to NAR's research, in 2002, 13 percent of home sales in the U.S. were condos, the highest number ever. And, of course, the development of rental apartments requires building at higher densities.

Density brings many benefits, including the following:

  • Density enables walkable neighborhoods, so more people can walk to shops, to school, and to visit friends in the neighborhood.
  • By reducing the need for a car for every trip, density can improve air quality.
  • Density supports housing choice and affordability because it gives developers the flexibility to integrate diverse housing types in a development, and because higher densities mean less land cost per unit.
  • Density makes transit work because it is more efficient to serve a high-density place.
  • Density enables protection of open space and slows down sprawl because more of our need for new housing can be met on a smaller amount of land.

Having the ability to live without a car is important for many people. The very young, the very old, and those with low income are not served very well by a system that requires driving. And it is a much better long-term investment to spend your money on buying a home than on buying a car. That might seem to be a self-serving (for Realtors) statement, but many studies have shown that the primary way for Americans to build family wealth and provide a brighter future for their children is by owning a home. Higher-density, walkable, mixed-use neighborhoods with good transit can provide a good option for those who want to live without a car (or families who want to live with one less car!) and save money that could be used for housing.

Often, people in a community will fight the development of apartments or townhouses. One objection often raised is that higher density will worsen traffic -- but if built as a true walkable community with transit instead of a stand-alone "apartment complex" surrounded by parking lots, higher density can generate much less traffic per housing unit than detached homes in a sprawl pattern. Another common objection is that "high density" or &quotaffordable" or "low income" housing will decrease property values, but many studies have shown this is seldom the case. Currently, we are preparing material to educate Realtors on better methods of working with communities to receive their input and gain their support for new development.

Simon: Can you tell us a bit more about the history of Traditional Neighborhood Development Ordinances? I know you mentioned that Wisconsin realtors have been involved in implementing these ordinances -- is it a national trend? Is the traditional neighborhoods movement an outgrowth of the smart growth movement or just one way to approach it?

Molinaro: Traditional Neighborhood Development (TND) ordinances are zoning codes that encourage the development of compact, walkable neighborhoods that contain a mix of uses (residential and commercial) and a mix of housing types (detached houses, rowhouses, and apartments) on a connected network of streets. Historically, suburban zoning codes have separated development by use and by type of residences, resulting in single-use areas of low densities. In effect, the zoning codes of most jurisdictions have made the development of walkable mixed-use neighborhoods illegal.

In the early 1980s, several developers began building developments that were more like traditional towns than low-density suburbs. These early examples of neo-traditional development -- Seaside, Fla.; Kentlands in Gaithersburg, Md.; Harbor Town in Memphis -- did not conform to typical suburban development patterns and indicated the need for new ordinances that permitted this type of compact, walkable community. Now, several new model ordinances for traditional neighborhoods, or "New Urbanism," have been written; about 25 local governments have adopted this type of zoning ordinance, and four states have enacted enabling legislation that provides for local governments to adopt TND ordinances. The Congress for New Urbanism has tracked and compiled these ordinances and state laws (see related links).

TND ordinances were beginning to be written by the late 1980s, while the term smart growth began to be used later, in the mid-1990s. I would say that smart growth is a term that encompasses many more elements than TND, such as open space acquisition and transportation improvements, but the ability to build new areas as traditional neighborhoods is a vital part of making smart growth happen.

Simon: You mentioned that Realtors often work with local nonprofits to help long-term residents in price-appreciating neighborhoods improve their homes. Can you tell us more about some creative community-based organization/Realtor partnerships that support a local housing ladder in changing urban neighborhoods, including the preservation of low and moderate income housing?

Molinaro: Many local Realtor associations are involved in programs that provide homeownership assistance to low income residents or that assist in the development of affordable housing. For example, the Southwest Los Angeles Board of Realtors has established The Multicultural Real Estate Alliance for Urban Change, an outreach effort in partnership with The Enterprise Foundation, which obtains HUD foreclosure homes, rehabs the homes, and sells them back to qualified first-time homebuyers; the Alliance also offers monthly homebuyer education courses. The Tucson Association of Realtors is active with the Southern Arizona Housing Center. As part of this effort the Realtors are developing a program for 2003 implementation to train Realtors about affordable housing loan and first-time buyer programs. The Fort Wayne Area Association of Realtors is in partnership with Project Renew, the Fort Wayne Neighborhood Partnership and other housing-related public and private organizations to provide $20,000 per project as seed money to rehab homes in the inner city. Once the properties are sold, the association receives its investment back and works to identify other similar projects. The Spokane Association of Realtors has formed a Spokane Homebuyers Resource Center, with local lenders, that provides homeownership counseling seminars 2 or 3 times monthly and one-on-one counseling sessions just prior to purchase.

The Greater Milwaukee Association of Realtors has joined forces in a broad-based coalition developed by the Metropolitan Milwaukee Fair Housing Council. The coalition is working to develop a project that will expand housing opportunities within the region. The effort is coinciding with the state's smart growth legislation, which requires all communities to have comprehensive plans by 2010.

The California Association of Realtors has just embarked on a major effort by creating the Housing Affordability Fund. The fund receives funding from members, non-members, and other institutions that are committed to addressing the housing affordability problem in California. The initial goal of the fund is to raise $20 million dollars within five years. The funds will be distributed through its local associations to promote homeownership and to address housing affordability issues statewide.

Joe Molinaro manages NAR's Smart Growth Programs. Prior to joining NAR, he was Director of Land Development Services for the National Association of Home Builders. He holds a Master of Urban and Regional Planning and is a member of the American Institute of Certified Planners.

Related Links:

»Visit the National Association of Realtors and learn more
about their Smart Growth Programs at realtor.org.
»Check out NAR's Housing Opportunity Program.
»Learn more about The Congress for New Urbanism at cnu.org.