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New Realities Require New Planning, New Ways

Three critical themes came out of a recent forum hosted by the Urban Land Institute: 1.) while every city is unique, some cities are better equipped to cope with economic change; 2.) new ideals must emerge to maintain levels of prosperity that are feasible for residents; 3.) the time is now to reconcile and revisit plans for accommodating growth because of the “reset” opportunity afforded by the great recession.

Piggy-backing on the big ideas that came out of the ULI forum, I offer up three major ideas that need to be considered as the region deals with its need to revisit its land-use policies.

The “skybox effect” is a reference to the phenomenon where success breeds success in the nation’s “1 percenters” who sit in their skyboxes, allegedly out of touch with mainstream lives. Skybox economics is a factor in gateway cities, including San Francisco, New York and Washington, D.C. These markets benefit from the bulk of investor capital because their hyped-up economies stimulate real estate values.

Gateway cities seem to generate micro-stimuli which are catapulting their economies into recovery. Their economic conditions are dissimilar to the rest of the U.S.

By their very nature, the gateway cities consist of dense neighborhoods connected by convenient mass transit.

These cities attract well-educated persons, people who want to live and work in a stimulating, fast-paced environment.

Herein is the tricky part. In a world of limited resources, where the state of California has redirected growth inward to curb urban sprawl, how can San Diego incorporate the attributes of the gateway cities without becoming a city of high-rises? It’s a challenge that the real estate industry and public policymakers have yet to tackle.

Many of us got spoiled during the last economic “up-cycle.” We wanted the best of everything, so we leveraged ourselves to attain it.

After World War II, the U.S. had the only middle class on the planet. As the middle class acquired things, many households became “dual income” to afford their lifestyles. Now households are economically squeezed.

In the past 30 years, many new middle classes have emerged elsewhere, offering up economic competition. To deal with this shift, we need a new “middle-class” definition of prosperity. A prosperity that is truly affordable. This includes how we live, what we need (vs. want) and a general redefining of lifestyles.

The place to start is to make sure we can deliver housing and office space to keep pace with demand in the region.

It used to be a relatively simple task. Cities would look at vacant plots, determine the zoning, and estimate how much development could be accommodated.

This “supply side” method of planning is now archaic and unreliable.

We cannot look into existing built-out communities, which have no remaining land, and “identify” where the growth is going to occur because a property is “physically underutilized.” While it may be the case that a low density building presents an opportunity, it is not prudent planning to “just assume” that physical redevelopment is a ticket to market acceptance or economic feasibility. This was a major point of discussion at the ULI forum because this turning point is occurring in many urbanized metopolitan areas.

It is time for our planning departments to start thinking about the “economics” of planning, rather than approaching it from this “supply side.” The great concern of land-use professionals is that policymakers will assume that there is a development pipeline simply because planners say so. Community plans must now begin to reconcile what is economically or market achievable in their growth plans and land-use allocation for growth.

There is a “new economic paradigm” which must now be dealt with by public policy. Cities must more carefully evaluate how they will grow, prosper and accommodate whatever comes next. Our regions’ policymakers and public agencies must seriously respond to the need to recharge our regional economy through the planning process. San Diego will enjoy future successes only if we can deliver affordable lifestyles while accommodating the future economic growth that keeps us competitive.

Nathan Moeder is a principal at The London Group Realty Advisors.

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