Why Are Developers Still Building Sprawl?
Boomers and Millennials say they want to live in compact, walkable developments, but builders are putting their money into suburban McMansions.
LAS VEGAS—A decade ago, home builders put up thousands of new spacious stucco homes in the desert here, with marble countertops, ample square footage, and walk-in kitchen cupboards.
Then the recession hit, the values of these homes plummeted, and economists talked of the overbuilding of Las Vegas.
Now, though, developers are building once again, on projects derailed during the recession, including master-planned communities such as the 1,700-acre Skye Canyon, the 2,700-acre Park Highlands, the 1,900-acre Inspirada, and 555 acres of luxury living in an area called Summerlin.
The homes being built here and in many cities across the country look very similar to the ones built during the boom. Some, in fact, are even bigger. The average single-family home built in 2013 was 2,598 square feet, 80 feet larger than the average single-family house built in 2008, and 843 feet larger than homes built in 1978, according to Census Bureau data.
Here in Vegas, many of the new homes going up are two-story tan stucco with garages that fit two cars and look pretty similar to the house next door. Others, like those planned for the development Ascaya, which bills itself as “a new level of luxury in Las Vegas,” and sold one lot last year for $1 million, are even bigger.
“Vegas is about as homogeneous in our housing stock as any city you’ll ever be in,” Michael Montandon, the longtime mayor of North Las Vegas, who now works for a building company, told me. “Ninety-nine percent of the residences are two-story frame and stucco buildings.”
It may be surprising to hear that so little has changed in the homebuilding industry since the recession, especially in Las Vegas, one of the epicenters of the housing bust. After all, low gas prices aside, surveys suggest that both Boomers and younger generations are interested in living in more urban places where they don’t have to spend so much time in the car getting to and from work. They also don’t mind smaller homes, especially if they’re close to public transit or retail or restaurants. And studies have shown that sprawl has negative health impacts: People who live in far-out suburbs walk less, eat more, and exercise less than those who live in urban environments.
Urban planners and “smart growth” advocates argue that builders should eschew the practice of buying empty land further and further out and building on it, and should instead build more compact, walkable communities near public transit, rehabbing existing land to fit new projects. Doing so is important for the environment, they say, and will save valuable resources and money in the long run.
“Is there still a market for this, do people still really want to live there, and to the extent thats that's true, is this a sensible development project for private sector to be continuing to produce?” asks Stockton Williams, the executive director of the ULI Terwilliger Center for Housing at the Urban Land Institute, about master-planned communities in the suburbs.
The other question we should be asking, Williams says, is whether these types of development impose big costs on taxpayers who must foot the bill to provide resources to far-flung developments. For example, one report calculated that in Teton County, Idaho, cars driving to subdivisions on roads built in unincorporated areas cost the county $8.30 per mile in upkeep. Suburban development demands more water, roads, and services the farther out it spreads.
“What are the real infrastructure demands of these more spread out, suburban-style communities, whether they're more planned and slightly more urban or not, and can cities continue to afford to invest in them?” he asks.
Building more walkable communities could also help jump-start a housing market that’s been slow to recover, some urban planners believe. Homebuyers want something new, they say, but builders aren’t listening, and keep building more sprawl.
“I think that the building industry has been incredibly resilient at resisting change,” says Chris Leinberger, a land-use strategist who is also a senior fellow at the Brookings Institution. “It’s somewhat akin to carriage makers not wanting to shift to making cars.”
It’s not just urban planners who think developers should be thinking more sustainably. The United Nations, in 1992, got 178 countries (including the U.S.) to sign onto Agenda 21, pledging to promote sustainable development, investment in infrastructure, and the rehabbing of old buildings, among other things.
But changing the way we build homes has proven challenging. That’s in part because redoing plans for already-approved developments is costly and difficult. But it’s also because builders argue with the idea that homebuyers want compact, walkable developments. Americans want space, they say, and they want backyards and private patios and big closets and places to park their big cars.
“Some of the home builders couldn’t sell the houses we originally wanted them to sell,” Steve van Gorp, a Las Vegas development consultant who is a member of the Congress for New Urbanism, told me. “The market wouldn’t bear it—people just wanted to have traditional single-family houses out here.”
In some parts of the country, there’s been a rallying call against sustainable development. A group, influenced by the Tea Party, formed a group called Resist 21, which pushes back against the U.N.’s Agenda 21, calling it “the strategy that seeks to transform America from the land of the free to the land of a collective.”
The Republican Party adopted a platform that “exposed” Agenda 21 at its 2012 Convention, pledging to inform state and local governments around the country about the “underlying harmful implications of implementation of United Nations Agenda 21 destructive strategies for ‘sustainable development’.”
“Exposing” sustainable development might seem laughable, but it points to a growing divide about how different people think Americans want to live in the future. Do they want to continue to live in spread-out, single-family homes with lawns and garages and spare bedrooms? Or do they want smaller, compact houses where they can easily hop on a train or walk to the coffee shop, without even needing a garage, or a car to park in it?
Which side is right could very well determine whether the rows and rows of homes going up in Las Vegas are a worrying sign of another crash yet to come, or a positive sign that the economy is coming back, and with it, the traditional vision of the American dream.
To get to Inspirada, a master-planned community about 20 miles south of Las Vegas, get off the I-15 and drive for about 10 minutes across barren desert dotted with shrubs and telephone poles. There’s not much around, save dirt and a few billboards.
Crest a hill, though, and the desert gives way to homes. Thousands of them. There are homes that have just been completed, homes where the foundation is just now being erected, homes that are planned and sold but not yet built.
Inspirada opened in 2007, and developers initially planned for 8,500 houses, a casino, parks, and walking trails. But the lenders forced the project into bankruptcy in 2011, and building was halted, with only 1,350 homes constructed. Building is now starting again, though some of the project’s original developers have gone out of business.
Klif Andrews, president of the Nevada division at Pardee Homes, showed me around a few of the models in Pardee’s Solano development, which is part of Inspirada.
Even the smallest home could probably fit my not-so-tiny New York apartment ten times over. The first home had a walk-in cupboard, a five-burner cook stove, granite slab countertops, and a double sliding door that led out onto a covered patio. Another model had a separate suite for a mother-in-law, with a putting green out back. The homes, which range from 2,000 to 4,000 square feet, were going for $300,000 to $500,000. They feel like something out of a magazine.
“These are our standard appliances,” Andrews told me, running his hand across a granite countertop of a model home. “We weren't offering this level of finish as a standard before, but now this is what the market likes to see.”
Before means a decade ago, in 2005, when Pardee and other builders in Las Vegas were pulling permits for 30,000 new homes a year, right before the crash (they’re now up to about 7,000 a year). But when I asked what, if anything, was different from the homes built a decade ago, Andrews talked about home layout: Buyers now want covered patios for outdoor living, less-formal dining rooms, lots of space for entertaining. They do not want smaller homes, he said.
“For us, we’re building 1,800 to 4,800 square feet, and that’s identical to what it was 10 years ago,” he said.
Andrews knows this, he says, because builders tried to introduce sustainable development to Las Vegas when they build Inspirada. It was initially planned as a walkable, mixed-use community, adhering to many of the principles of new urbanism. Builders constructed some compact homes with garages in the back—a key new-urbanist principle. They put a big, public park in the middle, with a swimming pool and dog park, so residents could walk and interact with each other. They had plans to build coffee shops and other retail within the community.
But, Andrews says, nobody wanted those homes. Or at least, builders couldn't sell them.
"As a home builder, you get to know very much what buyers want," he told me. "They pay you for things, or they don't."
So when Pardee came in and took over a part of the development in 2009, it asked the city for permission to revert back to more traditional homes.
“The original Inspirada design was very neo-traditional, we were required to build smaller houses, with more front-facing architecture,” he said. “But we went back during the recession and said ‘Hey, city, this doesn’t really work that well, buyers prefer something else, can we do it more conventional?”
The city agreed to let Pardee and the other builders abandon the new urbanist plans, though developers kept the park in the middle. Andrews calls it a happy hybrid of suburbanism and new urbanism, but planners might disagree: There’s little that’s walkable in Inspirada, except for the parks. Still, builders in Las Vegas say the area is one of the most compact in the country—bounded in by mountains and federal land, so developers can't sprawl too much.
Whether the failure of Inspirada as a new-urbanist community can really be attributed to buyers’ lack of interest is difficult to parse. After all, the community opened in 2007, right when the economy was tanking. It’s possible buyers didn’t purchase homes there because they weren’t purchasing homes anywhere.
But builders don’t seem interested in trying again. The Las Vegas communities that stalled during the recession and are now being started again seem more focused on luxury and space than on walkability and transit. Homes in Ascaya, the luxury development going up in the hills above Henderson, must be 4,500 square feet or more, according to development guidelines. Howard Hughes Corporation recently announced plans to build a 555-acre, high-end community that it says will offer an “unparalleled luxury living experience.” And a 9,000-home master-planned community north of Las Vegas called Skye Canyon has found builders, with models—some costing as much as $600,000—ready in the fall.
It’s not just Las Vegas, either. I visited the Atlanta region back in December, stopping by a city called Covington, about 40 miles outside of Atlanta, to report on an attempt to save a failed subdivision. Covington has a mix of homes in various communities, including a new-urbanist mixed-use development called Clark’s Glove, that has front porches close to the sidewalk and lanes in the rear. The Clark’s Grove section of town was lovely: many of the homes have porches that look out onto the tree-lined streets. There was a second phase planned for Clark’s Grove, and builders even put in the streets and lots—but then stopped in 2009 as the recession began. The second phase of Clark’s Grove is still on hold.
But there is building going on in Covington, where construction workers are quickly erecting large single-family homes on big lots on a golf-course development a little farther out from the town center.
It was a surprise to Vinson, who had thought there would be demand for places like Clark’s Grove, not for the stalled, golf-course development.
“I thought there was a change in homebuyer expectations and attitudes, and that they were going to be looking for a slightly-smaller house in a neighborhood that has all the components of a true neighborhood,” he told me, driving past the wooden frames and hammering of the homes going up on the golf course. “But the golf-course subdivision is the one coming back first.”
The South, like many regions of the country, seems to be buying big. In 2013, 37 percent of new single-family homes sold had three or more bathrooms, compared to just 25 percent in 2005, according to Census data. And in 2013, the last year for which there is data available, 9 percent of homes sold were 4,000 square feet or more, the highest percentage in recent decades. In the South, 11 percent of homes sold were 4,000 square feet or bigger.
When I asked Vinson if the activity in the golf-course development meant people hadn’t learned anything since the recession, he replied that builders were merely returning to normal.
“The big guys just see it as, ‘Yeah, we had our pause, and now we’re going to go back to what we were doing before.'”
Builders say that’s because they know what people want. Studies may show that the younger generation wants small, compact, transit-accessible housing now, Andrews of Pardee, says. But once they decide to have kids and dogs, they’ll want the traditional suburban home with more space.
“Sure, there are people who live downtown forever, but when they say, ‘I want to have a kid or two,’ or, ‘Gee, my girlfriend wants to move in together and we want to have a house,” they’ll move to the suburbs, he said.
Emily Ellis-Santana and Freddy Santana, both 32, may be a case in point. Though they currently live in downtown Las Vegas, renting a 1,500-square-foot house from the 1940s, they recently bought a traditional stucco 2,700 square foot, four-bedroom home, in Inspirada, for $415,000.
“We were once those loft-style kids, but now we’ve grown out of that, we want to be adults,” Ellis-Santana, who is pregnant with the couple’s first child, told me. “We wanted a place we could take our kids out to the park and run around, and not have to get in a car and drive to the park.”
Ellis-Santana admits the couple wouldn’t seem to be the type who would go for a home in Inspirada: They both wear black most of the time, he has long hair and is from New York City and she lived for a long time in downtown Los Angeles.
But the couple visited the development on a lark one day, and said it had a Truman Show feel, of a picture-perfect American suburb where people were walking their dogs, pushing their strollers, and smiling.
“We kind of wanted a neighborhood that was Americana/Truman Show,” she told me.
Some people might shudder at the thought —after all, Jim Carrey’s character in the film, Truman Burbank, becomes desperate to escape the master-planned bubble where he lives. But the couple liked the amenities of the house—being able to unlock their door wirelessly, having a courtyard inside their house, having a touch-screen sink. Yes, the outside is stucco and looks similar to many other houses on the block, but the inside, Ellis-Santana says, they can make their own. She says she wouldn’t mind having a more modern exterior to the house, but her husband, she says, wouldn’t change a thing.
Examples like this are proof to Andrews that you can’t tell homebuyers what they want.
“A whole bunch of that is social engineering—you’re telling people that you need to have more public space, but people say, ‘I still want the private spaces for my dog and my baby, but I love the public space,” he said. “That’s where the free market gets involved with social engineering and says, wait a minute, hey, I’m interested in what I can sell.”
There is, of course, another way to look at the home-buying habits of Millennials, and of Americans in general, after the recession. That is: Many of them are not buying, because they’re not interested in the homes that are being built. If the builders in Vegas had tried harder to stick to new-urbanist principles—maybe putting in restaurants and retail and other things to walk to—perhaps they’d be selling more homes.
That’s the belief of Chris Leinberger, who has some disdain for the business model that home builders are still trying to use.
“The home builders for 56 years made a lot of money by going out to the fringe and buying farmland and subdividing it,” Leinberger told me. “That formula now has to change.”
After all, the homeownership rate is at its lowest levels in more than two decades, according to Census Bureau data. Many economists believe that in the aftermath of the recession, developers should be building 1.5 million homes a year—but they’re building less than half of that.
Some economists say that’s because of tight credit standards and lower wages. But Leinberger says it’s because home builders aren’t building the type of affordable, compact units that Millennials want.
“There’s too many McMansions out there, for one thing,” he told me. “And then a lot of it is the product doesn’t exist that they want to buy.”
It’s not just Leinberger who thinks that some builders are investing in the wrong product. John Burns, a real-estate consultant, visited thousands of communities all over the country in 2014. Those visits, coupled with slower sales of master-planned communities, made him conclude, in an email newsletter, that “the land development and homebuilding industries need to shift their mix of communities to target a different mix of buyers than the traditional mix.” There needs to be less “move-up” housing, since traditional “move-up” buyers aren’t interested, more housing for retirees that’s close to entertainment, and more luxury housing, he wrote.
Of course, it’s not simple for companies to change the types of homes they’ve been building for decades and start something new. Much of the land that they’re holding is out on the fringes and would be hard to make walkable. Building bigger homes is cheaper than building smaller ones—developers can make a wall a few feet longer, and give buyers more square feet without costing themselves anything. Smaller homes, though, cost about the same to build, and because they’re smaller, cost buyers more per square foot.
And making homes walkable to transit centers requires more investment in mass transit, which hasn’t been a big priority for state and local governments in the aftermath of the recession, Leinberger said. And the federal Highway Trust Fund has long prioritized funding for highways and roads over mass-transit projects.
Building some of these developments requires rezoning, which can be difficult to do, especially since it sometimes requires putting in alleys. And attempts to create smart-growth communities often meet loud opposition from neighbors who are used to a more traditional type of community. Even an attempt to put sidewalks into one Minneapolis suburb was nixed by residents who complained about the city taking away their private space.
“If I wanted urban, I would have purchased urban. I wanted suburban, and bought that," one resident told the Minneapolis Star-Tribune.
There are communities that have successfully made the shift to building more compact, walkable developments, even in the most unlikely places. Some of the most excessive sprawl during the housing boom, for instance, occurred in the inland areas of Northern California, places like Brentwood, Antioch, Vacaville. But those areas are now rethinking what kind of building they want to allow, and what kind they don't.
“There was, up until 2008, a profound overbuilding of single-family homes,” Jeremy Madsen, with the Greenbelt Alliance, a Bay Area smart-growth group, told me. “The ‘drive 'til you qualify’ syndrome ran rampant in the Bay Area.”
Now, many of these developments are half empty or unfinished, waiting for demand to come back—if it ever will. But cities in the Bay Area are starting to put in urban-growth boundaries, which prevent building from happening outside of that area. Voters handily defeated a proposal to allow developers to build on Doolan Canyon, an open space outside of the city of Dublin’s urban-growth boundary. In the city of Windsor, in Sonoma County, a new-urbanist developer decided to create a downtown and built a mixed-use combination of offices, retail, and homes near a transit station. And a planning commission in Stockton, another epicenter of the housing boom and bust, recently said no to developers who wanted approval to build 2,000 homes on what is currently farmland, the first-time observers could remember the commission doing so.
Even San Jose, once considered just a giant suburb of San Francisco, has shifted its mentality, Madsen said. The city’s newest general plan, adopted in 2011, emphasizes ‘smart growth’ and called for the growth of ‘urban villages’ located along current and future transit lines. It promotes infill development rather than sprawling out to open lands, aims to reduce the number of trips that have to be made by car, and rethinks street design to encourage walking and biking.
“I think we’ve moved into a different era in the Bay Area in term of how we're going to grow in the future,” Madsen told me. "The consumer preference side of things appears to be changing."
But, he said, even though leaders and consumers might be on the same page, it isn't going to be easy, since a lot of the zoning and building layouts are from the old era.
“There’s going to be a major challenge when it comes to implementing this shift, but there’s a critical mass of opinion and market direction to get it going,” he said.
It’s easy to dismiss the Bay Area’s plans as another California anomaly. But California often leads the rest of the country when it comes to adopting environmentally-friendly policies that are sustainable for the long term.
Other areas may continue to eschew 'smart growth,' and just as America is divided politically, it could become a more divided country in the way its residents live. People in cities such as Washington D.C., Boston, and Seattle, will want more walkable developments, while consumers in what Leinberger calls “the laggards,” including Phoenix, Dallas, and Las Vegas, will continue to live in sprawling suburbs.
But it's also possible that Boomers and Millennials in the laggard cities will come around. After all, even in Las Vegas and Atlanta, some builders are starting to shift their mentality. Zappos founder Tony Hsieh has poured $350 million into downtown Las Vegas, creating a shopping center built from shipping containers, mixed-use residential development, and a host of walkable amenities like a donut shop and a bookstore. And in Atlanta, a developer is in the midst of converting a former Sears building near downtown to a mixed-use community of apartments, restaurants, and retail.
Not everyone will want to live in downtown environments like these. But if they're appealing to consumers, they could motivate a whole new segment of buying, even in cities such as Las Vegas and Atlanta. If consumers come around to “smart growth” in those areas, perhaps builders will too.