What drove the shift toward urban living?

In Canada’s cities, prices in the older urban areas as well as the suburbs generally stagnated for over a decade between the early 1990s and early 2000s.  Not coincidentally, during this time an abundance of new housing opened in suburbs like Milton and Markham (Toronto area) as well as Coquitlam and Surrey (Vancouver area).  Calgary annexed more land, and suburban style homes proliferated. Metro area residents did not seem to show much of a preference for urban vs suburban living.

Starting in around 2002 prices everywhere began to rise, but over time the urbanized areas experienced more rapid increases.  I know of homes in walkable East Vancouver communities that tripled in value over just 6-7 years.

From talking to friends and realtors, it seems that today, the housing market is hot in walkable urban areas, and a softer in the suburbs.  Evidence of continued strong demand for urban living.

As pointed out by the Economist this week in a cleaver parable about Gotham vs Pleasantville, rising house prices rising faster in in urban areas vs the suburbs are a clear indicator of accelerating demand for these urban homes.   Many urban areas have limited or no room to increase supply, so if demand rises so do prices as those with the most money are able to secure the most walkable, transit oriented homes.

So what changed in or around 2002?

What has led an increasing number of home buyers to have a preference for urban living?

Here’s my partial list.  Please add to it!

  • Maturation of the knowledge economy, reliant on the internet, that has benefited from a very urban workforce constantly looking for inspiration
  • De-industrialization in many metro areas as manufacturing declined either outright or as a percentage of employment (while service and knowledge jobs grew)
  • Generations X and Y started to make their ideas and culture felt in cities, as they embraced an experience economy over a consumer goods and large-home-and-car based one.
  • Women’s higher rate of degree attainment resulted in career women selecting short commutes and urban living (with the trade offs) over suburban homes
  • The fertility rate edged up slightly, likely as younger boomer and older gen x women who had postponed children had 1 or 2, but didn’t give up urban living or urban careers and wanted short commutes.
  • Millennials defining freedom as their “first iPhone” rather than first car, and driving less.
  • More recently in 2008 and now in 2011, high gas prices are encouraging more people rethink auto-motive lifestyles

Agree? Disagree? What else has changed?

7 comments

  1. Definitely agree, especially re being attracted to urban life, mobile lifestyle / workstyle, more green living, access to sidewalks and public parks, diversity et cetera.

    Suburbs are really just huge parking lots with some trees, streets and houses. The only way to move around is via gas guzzlers.

  2. Jeff says:

    Agree. I also think that many cities were slowly abandoned in favor of suburban living for a period of one or two decades. This caused the urban areas to decline in price and aesthetic to the point where developers moved in and snatched up properties at low prices and put money into them. The new urban areas were modernized and became attractive and efficient again drawing in the perfect new residents – Gen X and Y.

  3. Wendy Waters says:

    Thanks for the comments. Jeff–I’d love to know of examples of the developers moving in early when no one wanted to buy properties (I’m sure some did some “land banking” but I haven’t seen too many examples until the neighbourhood was clearly moving more upscale).

    I think Richard Florida may have had it right in “Rise of the Creative Class” when he noticed that uber creatives (often gays and bohemians) gradually took over the cheap, less desirable old urban neighbourhoods, made them into a community with locally owned and operated retail/restaurant/cafe amenities, which then gradually attracted “more mainstream” home owners who liked the urban edge. Ironically it has been these places that then saw real estate values shoot up during the early 2000s.

    People made the communities, rather than developers.

  4. Dave says:

    The decline of the suburbs is tied to the decline of the quality of the suburbs. The early suburbs like Llewellyn Park (West Orange, NJ), Riverside, IL, and Forest Hills Gardens (Queens, NY) are all of amazingly high quality that are still beautiful today. With that image competing with a dirty dingy city, there wasn’t much competition.

    But as available land close to cities became scarce, and as developers tried to squeeze more profit out of the middle class, the quality of the suburbs declined. The built quality suffered first, but eventually the economic quality suffered as well. Suburbs began chasing ratables to pay for the schools that were needed because of all the houses. Formerly pristine lands were upzoned so that suburbs could see growth when they had otherwise stagnated.

    While this suburban decline was occurring, the cities had been given time to lay fallow. The dirty, polluting industries had been dismantled. The mistakes of urban renewal had been revealed. The financial crises of the 70′s and 80′s had passed.

    Beginning this century, comparing the declining suburbs and the resurgent cities only appears like a competition to those who still believe in the sitcom suburbs of the 50′s when Wally and the Beave still roamed the streets.

  5. Chad says:

    Violent crime reached a near 20-year low in 2007. Cities simply feel safer than they did in the 1970′s and 80′s. Homes prices were bound to respond.

  6. D says:

    So what to do if you want to live in a walkable urban environment in a city like Vancouver or Calgary and were too young/poor to buy circa 2000-2005?

    Is more walkable urban supply going to come on stream? Maybe, but the conversion of fallow industrial areas seems to be coming to a close, and there are a lot of NIMBY policies in place that prevent the addition of almost any new housing outside of suites or perhaps laneway cottages…

    Are prices ever going to decrease, with boomer aging? Will there be a flood, or just a trickle, and what sort of impact will this have on prices?

    This is my situation, so I’m curious if you have any advice or perspective…

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    The Beach and east Toronto specifically remain a popular place to live because of a good population density, wide selection of transportation options, and close proximity to transit and highways. And yet in spite of this, the community has retained its quiet residential streets and healthy storefronts.