Development Option Theory

The real option theory of land development was a hot topic in the mid 2000′s, as the volatility of the real estate market peaked. Now that we have a break from the U.S. housing bubble and financial crisis, it’s worth talking about how we might decrease the volatility of the development market over time.

Urbanism by right is achieved with tools such as form-based codes, which allow walkable, compact, mixed-use, sustainable development, at the scale of the lot, block, neighbourhood, and region. Changing the law to allow urbanism by right makes walkable communities go “in the money” for several reasons, including decreased uncertainty, shortened planning and approval processes, increased flexibility, and increased long term asset value.

Snow falls on The Waters, a traditional neighborhood development in
Montgomery, Alabama, governed by the form-based SmartCode.

One of the best ways to decrease volatility is to decrease uncertainty. You change what developments pencil when you decrease the uncertainty of what is developable. Uncertainty is “beta” from the option theory perspective. As beta decreases, the required rate of return also decreases, because people don’t need to be paid so handsomely if they aren’t taking as much risk when they “buy” their option to develop.

The time value of money is less of a factor when the playing field is levelled to allow urbanism by right, because the development process is drastically shortened. If the developer isn’t owning a call option on a property as long, her interest fees decrease. The reason that form-based codes shorten the timeline is because a prerequisite is consensus on the community vision. By agreeing in advance about the sort of development that locals want, developers have both shorter plan approval times, and increased certainty about what their options are. Less emphasis is put on individual mojo and political connections that allow discretionary power over development decisions. Community NIMBYs have already spoken to what is and isn’t allowed in their back yards.

As flexibility increases, the option value increases. Form-based codes are inherently flexible, and nimble in their responsiveness to adapt to changing conditions. The mixture of compatible uses allows one building or block to respond to market demands, changing from a townhouse, to a live-work, to a storefront, and back again, all as a matter of right. Higher densities encourage more compact development patterns, allowing narrow lots that can provide a range of price points. Blocks within form-based codes are easily re-platted to move up or down the Transect, because the basics of the urban form and street grid are honoured. Conversely, in suburban bedroom communities, along strip retail, or within other auto-centric patterns, sprawl repair is expensive and time consuming. Once a developer commits to one of these uses, they’re locked in.

Increased long term asset value is enjoyed by walkable neighbourhoods, which are healthier for the economy, society, and environment. This is from myriad reasons, including increased walkscore, decreased vehicle miles traveled, increased housing value, decreased carbon emissions, decreased auto costs, increased personal fitness, decreased infrastructure cost, increased hours available, real community, and the list goes on.

All of this is captured in the intrinsic and extrinsic value of the development option. Intrinsic just marks the asset to market once the land is developed, while extrinsic is the value of the volatility around which a developer can bet or trade. Too much of the latter builds your house of cards, and bubble bursts. The extrinsic value decreases and intrinsic value increases when physical and policy planning reforms are undertaken.

A recent NY Times article discusses several market factors of the development landscape over the next two years, as we recover from recession. These include the current scarcity of construction financing, the lowering price points of residential demand along with increasing housing types to include condos, town homes, and flats, and that in many places, conversion is less expensive than new construction. All these items, with the exception of financing, find solutions within the flexibility, certainty, and timeliness of form-based codes. In fact, in places that have adopted optional form-based codes, locals indicate that most of the recessionary development is occurring under these optional form-based codes instead of under the auto-centric laws.

“One of the economic conundrums of the past year has been the great divergence in the Canadian and U.S. housing markets. While American home prices swooned in 2009, the Canadian market only stumbled before resuming its inexorable climb upward,” according to the Globe & Mail last week. Some economists say this is the result of Canada’s fiscally sound banking practices, while others argue that the Canadian housing market is 15 to 35% overvalued. If the latter is true, a careful look at the predominance of Euclidean bylaws in Canada that increase market volatility via destabilizing uncertainty is worth consideration. Indeed, western provinces are leading with bylaw reform, with 12 out of the current 14 Canadian form-based bylaw initiatives being based in the west.

–Hazel Borys

A Rapid Kick Off for CNU18 Atlanta — “Urban Labs” Point to May Conference

The 18th national conference of the Congress for the New Urbanism doesn’t officially start until May 19, 2010. But Atlanta, the host city, is getting a running start.

Conference organizers in Atlanta are working with Metro governments, non-profits, and the private sector to create lead-in events tied to all the big themes of the May gathering. The broadest of the themes, of course, is the “healthy communities” category, reflecting the association with the Atlanta-based Centers for Disease Control and Prevention. You can read about that in one of our previous posts.

There are also opportunities to integrate CNU responses on topics having to do with transportation and transit, sustainability, affordability, “aging in place,” and retrofitting suburban sprawl.

The first of the CNU18 lead-in events were held on January 14 and 15. Central Atlanta Progress, the leading convener of a broad cross section of advocates for downtown redevelopment, joined with CNU18 organizers to stage an information forum and a one-day urban lab in one of the downtown neighborhoods. The two events attracted an impressive array of local leaders and organizations – plus CNU president John Norquist, CNU co-founder Stefanos Polyzoides, and international designer/planner Dhiru Thadani.

Here’s a video overview.

Norquist provides a strong “why Atlanta” explanation here:

And Polyzoides offers his overview on Atlanta’s challenges and opportunities here:

Next up is another lead-in lab opportunity on March 1 and 2, when Sustainable Urbanism author Doug Farr appears as one of the main speakers at the annual Greenprints conference. The conference is sponsored by Southface, the Atlanta-based non-profit that trains builders, developers, and others in state-of-the-art green building practices.

– Ben Brown

Easy Rider: David Byrne Unfolds Bike, Reviews Cities of the World

Over the holiday I experienced a very 21st century weekend. Upon downloading my new Kindle App on my iPhone, I read David Byrne’s Bicycle Diaries, 2009 Viking Penguin. The $14.99 book caught my attention at the local bookstore and became my first Amazon Kindle App purchase for $9.99. I know, I know… but I promise to never buy eBooks that have exclusive Wal-Mart deals.

David Byrne, artist, musician and now author, is this year’s CNU 18-Atlanta Keynote speaker. His Talking Heads music taught me to dance in early 1980′s High School proms and one of my partners was in a punk rock band on the same New York City club circuit. While traveling through Texas recently, I re-watched Mr. Bryne’s 1986 movie, ‘True Stories,’ which I found to be an enjoyably restrained criticism of suburban sprawl. So, I was connecting with the author on many levels and eagerly swiped through the e-book on my iPhone.

Still talking: David Byrne

The hook is that Mr. Byrne sees our townscape as New Urbanist do while writing down his observations from the perspective of his well-travelled folding bicycle. While traveling the world to perform, Mr. Bryne brings his bicycle with him to refresh his senses and understand the places he is visiting. Through his years of bicycling around the world, coupled with his musician point-of-view, the book’s hook on me was his chapters on experiencing cities in an intelligent and artistic manner. He poignantly captures the landscapes of Manila, Berlin, Istanbul, Detroit and Baltimore in political, social and cultural ways. His account of finding the visionary urban planner Jan Gehl, great New York urban theorist Jane Jacobs, and Transportation Innovator Enrique Penalosa, seemed illuminating for Mr. Byrne, and I look forward to hearing his reaction to meeting our Congress this spring.

My personal reaction to the book was that Bicycle Diaries is a more artistic version of James Howard Kunstler’s more caustic City in Mind. After an easy-to-agree-with suburban sprawl critique introduction, I began to feel like a NASCAR spectator awaiting the carnage! Blow up Las Vegas; put Detroit out of its misery; and, yes, San Diegans are rude! The fun part was Mr. Byrne’s unexpectedly sharp critique of European and foreign cities both culturally and while biking. Except for Melbourne, of course. It seems Melbourne has become the new Barcelona – the greatest city in the world – probably because it is located in the far corner of world and most of us can only imagine how great it is.

The ending of the book sort of drifted off for me as I was less interested in Greenwich Village bicycle rack design as I had been about a city of hookers in the Philippines (an unfortunate personal bias). The revelation that resonates with me is because of David Byrne’s desire to simply get out of the car to see and experience the world he has become a well-respected transportation advocate in his hometown of New York.

– Howard Blackson

Learning from Leon

My colleagues have quickly grown tired of my repeated references to the week I recently spent with Leon Krier while he toured Southern California to promote his new book, The Architecture of Community. The book, published by Island Press and co-edited by Dhiru Thadani and Peter Hetzel, is an updated compendium of Leon Krier’s most significant work to date. The book was included in Planetizen’s Top 10 Books published in 2009.

Leon me, when you're not strong..

Before this publication, Geoff Dyer, one of my business partners, and I had been engaged in a silly professional competition to acquire Leon’s books because it was difficult to find his many brilliant books and projects for sale in United States book stores. My rare French copy of Architecture Rationnelle put me in the lead until Leon autographed Geoff’s copy of Architecture: Choice or Fate, led with “To the very talented…”

With a stroke of Leon’s pen, Geoff now sits comfortably in the lead.

Leon came to San Diego to give a lecture on architecture and urbanism to 250 interested people in a beautiful Balboa Park theater and then to 200 excitable students and faculty at the NewSchool of Architecture and Design. Local reporters, planning directors, and political leaders heard, met and learned from Leon throughout the week. San Diego Union-Tribune and San Diego City Beat wrote about his time in the city.

After San Diego, Leon then spoke to a class at Arizona State University with Emily Talen and Nan Ellin. He then joined Stefanos Polyzoides in Pasadena to discuss architecture and urbanism at the invitation of the Mayor of Pasadena. Pasadena Star News and Pasadena blogs Inside Socal and Media Bistro covered the visit.

The lessons learned from Leon while touring the Southwest were varied, complex and meaningful. The more general themes surprised me most. For example, upon picking him up from the airport, I immediately drove Leon to the latest modernist infill project in my turn-of-the-century streetcar neighborhood. The villa savoye copy had been in Architecture Record as the local architect is well known.

Upon passing by the building slowly, I was expecting an affirmation of my disgust when Leon says–disappointingly– “It’s good.” My eyes widened and my hands gestured wildly as I explained that the fenestration was backwards, the building completely out of context, and the urbanism only existent in materials and scale. Leon agreed that all were true, but that for a modernist building it was a very good example.

The lesson being, “If you do modernism (or anything for that matter)… then do it well.” He is correct. I forget how difficult it is to get buildings and places built. He said that to build anything in today’s toxic environment (naturally and politically) was laudable and then to build it well was meaningful. So, I relaxed a little about a building I had previously wished acts of God upon and drove Leon downtown.

Driving past the single core of the city, townhouse-wrapped, Vancouver-model towers proliferate San Diego’s downtown cityscape. I explained the ugly politics that gave additional entitlement to buildings that had green roofs rather than civic spaces. I was expecting a classic Leon Krier diatribe on the lack of value Vancouver brings to the New Urbanist dialog and both the ecological and social failure of high-rise towers as a building type. Instead, he thought San Diego’s towers were somewhat playful and fun. He explained that while towers are regretful, these had an element of lightness and amusement that made them easier to live with than those being stamped across Vancouver and the east coast.

Finally, he quickly surmised that our monotonous grid must become more complex. As he had pointed out years ago in Houses, Palaces, and Cities, the grid is rural in structure with its visual terminus toward infinity. A simple ‘center’ was needed in key locations to ‘urbanize’ the neighborhoods within the monotonous grid. Due to the width of San Diego’s typical streets, 80’, a majority of the infill retrofit could occur within city right-of-way and include civic buildings.

Therefore, mostly what I learned from Leon (besides the fact that driving around was much less informative than walking) was to approach places and projects with a positive, optimistic attitude in order to work towards a better future. Why is this simple lesson meaningful? To see this man remain positive after 35 years of being vilified in our modern design world is very inspirational. While his professional lectures are polemic and absolute, his professional perspective is equally optimistic and conclusive.

The following are Leon Krier’s recent drawings of how to create more urban centers in our more rural grid:

Existing US Condition

           


           

–Howard Blackson

Miami Just the Tip of the Iceberg for Form Based Coding

When Miami, Florida adopted a SmartCode on October 22 by a 4-1 vote, an important step was taken for the global knowledge base of placemaking. This zoning reform is clearly a turning point away from the energy-intensive, environmentally-destructive, auto-centric development patterns of the 20th century. Miami 21 represents the “Miami of the 21st Century,” and takes into account all of the integral factors necessary to make each area within the City a unique, vibrant place to live, learn, work and play. The initiative is the largest mandatory form-based and transect-based unified development ordinance in history.

While this is a massive step for the 4th most populous urbanized area in the U.S., Miami is not alone. About 200 other cities are in the process of zoning reform that utilizes form-based codes to reverse the negative effects of use-based zoning. Use-based codes separate the uses into pods of commercial, residential, industrial, and agricultural. And generally requires an automobile to get from one pod to another. Form-based codes allows a mixture of compatible uses that enable neighborhoods to develop again, nodally along transit corridors.

Form Based Coding's thousand points of light.

To get an idea of where all form-based codes are happening, Collaborative Google Maps show the lay of the land. These maps provide an informal support group of SmartCodes and other form-based codes at some point along the process of code writing, adoption, and implementation.

While most of these other initiatives are not on the scale of Miami, several are close, including El Paso, Texas; Denver, Colorado; San Antonio, Texas; Montgomery, Alabama; Memphis, Tennessee; Nashville, Tennessee; Phoenix, Arizona; St. Petersburg, Florida; and Philadelphia, Pennsylvania. On the other end of rural-to-urban transect is the “New Ruralism” that is occurring among the towns and villages that are seeking to deal with sprawling placeless-ness through form-based codes that protect their rural character.

The idea is that by learning from the experience of others, ideas can grow more quickly, and the continental community consensus building power can increase. The maps allow individuals to change their own information, however the general format includes:
- A description of the work at hand
- Links to the draft or final codes
- Illustrations and maps
- Project, client, and consultant websites
- General statistics on adopted codes, including population and acreage
- Links to news articles regarding each initiative

Currently, the maps contain information on 41 adopted SmartCodes, 51 SmartCodes in progress, and 97 other Form-Based Codes. This is not an exhaustive list, as new initiatives begin every day, so everyone is encouraged to add their own work.

Check them all out:

SmartCodes Adopted
SmartCodes in Progress
Other Form Based Codes

Green markers indicate SmartCodes adopted, yellow SmartCodes in progress, and purple other Form-Based Codes.

Additionally, TND maps give details on projects that are being designed in form-based development patterns. While many of these projects were done without the benefit of form-based codes but rather as Planned Unit Developments (PUDs), others are designed under adopted form-based codes. These maps are intentionally not a ranking or review system, however turning on satellite view and zooming in is an instructive virtual tour on the successes and challenges of thse developments.

All of these maps may be opened simultaneously, to get a regional idea of the sorts of initiatives that are occurring across the continent. When traveling to a particular region, the maps become a tour guide for progressive urbanism and zoning reform.

TNDs US – West
TNDs US – East
TNDs US – Florida & Caribbean
TNDs Canada

For TNDs, blue markers indicate greenfield development, and turquoise for infill, brownfield and grayfield.

– Hazel Borys

A Prescription for Healthy Places

The not-so-good news persists: The continuing economic woes, including long-term concerns about housing, infrastructure, and transportation policy. The complications (to put it mildly) of climate change. And the crisis in public health.

It’s no wonder the whole country feels a little under the weather.

Which is why we think it’s clever that famed designer/planner Dhiru Thadani came up with the cool graphic to the left to remind us that there is a prescription for what ails us. Or, at least, that there’s an approach to healthier living that should be included in national strategies for renewal.

The cure for what ails us?

Not coincidentally, that theme “Rx for Healthy Places,” provides the sub-title for CNU18, the annual gathering of the Congress for the New Urbanism, which will be held in Atlanta, May 19-22, 2010. The healthy places angle gets an extra shot of credibility because of the active participation in CNU18 of the Atlanta-based Centers for Disease Control and Prevention.

The public health connection to New Urbanist principles has always been implied. It’s important these days, especially during a heated debate over the future of health care, to make it explicit. The most authoritative link-up between public health and land use planning is “Urban Sprawl and Public Health: Designing, Planning, and Building for Healthy Communities” by Howard Frumkin, director of CDC’s National Center for Environmental Health. Dr. Frumkin will be honorary chair of CNU18.

Adding to the work of CDC researchers and epidemiologists who study links between physical health and environmental factors is an increasing body of work on mental health and social conditions, especially with regard to social isolation. Remember “Bowling Alone,” Robert Putnam’s 2001 best seller about “social capital” and community? That book inspired a lot of discussion in New Urbanist circles. And research has continued to connect isolation and ill health. Here’s a recent L.A. Times column on the topic (thanks to Ann Daigle for the link).

And to read more about the book that inspired the column, “Loneliness: Human Nature and the Need for Social Connection” by John T. Cacioppo and William Patrick, go here.

We’ll be reporting more and more about what’s beginning to shape up as an historic gathering in Atlanta next May. So keep coming back.

– Ben Brown

Infrastructure v. Economy: The Battle Continues

In the battle for pedestrian-oriented streets, it’s clear that walkability isn’t the only thing at stake. The heavy economic and environmental burden of auto-centric roads and utilities is starting to become painfully obvious. Both in scholarly research and the daily management decisions by local governments.

While compact development patterns are cheaper to build, they’re also cheaper to maintain. During a meeting of midwestern county governments last month, it was reported that most midwestern paved county roads soon will be turned back into gravel. This midwestern trend has been escalating over the last 12 months, as counties grapple with dwindling budgets. Repaving one mile of road costs about $120,000, while grinding it up into a gravel road costs $4,000, according to an article from Kalamazoo News. Lowering the cost 30 times leaves little choice for many strapped county governments.

The grass is always greener when it's slowly destroying your infrastructure.

From a more metropolitan perspective, this summer Calgary estimated compact development patterns would save them $11.2 billion in infrastructure costs, making it 33% less expensive to build the roads, transit, water, recreation, fire, and schools that it expects to need over the next 60 years.

The US EPA commissioned Morris Beacon Design this summer for a study on the subject, indicating TND infrastructure costs 32% to 47% less than conventional development patterns. Calgary pegs the lower end of this spectrum.

Taking a more holistic view of economy, energy, and emissions, The Transportation Research Board released “Driving and the Built Environment: The Effects of Compact Development on Motorized Travel, Energy Use, and CO2 Emissions” this month. This report details the effects of land development patterns and vehicle miles traveled (VMT) on petroleum use and greenhouse gas (GHG) emissions. While the findings are completely obvious to urbanists, it’s good to see some quantifications through the scholarly attentions of this 180 page study. The primary findings are:

1: Compact development reduces VMT.
2: Doubling residential density while increasing nearby employment, transit, and mixed use can decrease VMT by 25%.
3: Compact, mixed-use development produces reductions in energy consumption and CO2 emissions.
4: These reductions will grow over time.
5: The biggest obstacle is zoning — regional and state governments need to take a stronger role in land use planning.

More governments than ever are starting to step up to this plate, to enact the sorts of zoning reforms that can:
1. Decrease their costs of building and maintaining infrastructure,
2. Decrease the amount of oil and natural gas required to fuel their local economies, and
3. Cap their local greenhouse gas emissions.

Here’s an informal support group of some of the governments currently undertaking exactly the sort of zoning reform that can achieve these lofty yet expedient goals.

– Hazel Borys

Everything’s Connected: Health, Healthy Aging, Community Design

Among the most encouraging trends in Smart Growth is an emerging consensus that good community design can address a bunch of issues at once. Which makes for much more comprehensive, cost-effective strategies to match the complexity of challenges before policy-makers.

Take, for instance, the agendas of separate entities concentrating exclusively on topics such as public health, environmental protection, energy conservation, and aging issues. Just in the last few months:

Those of us who fall under the category of “aging Boomers” are going to be particularly interested in how this confluence affects both our personal and professional lives. Thankfully, healthy aging is becoming an increasingly hot topic and seems likely to offer some of the most immediate opportunities for unifying strategies.

In blog posts below, we’ve reported on how senior co-housing might fit into planning for New Urbanist TNDs and infill. And we talked about DPZ’s landmark Lifelong Communities Charrette for the Atlanta Regional Commission here and here.

The complete report from the DPZ/ARC effort in Atlanta is now up on the ARC’s website, and it’s a must-see for planners and municipalities concerned about how to work aging-in-place planning into other goals – such as retrofitting dead malls and creating infill TODs. Check it out here.

With this convergence of Big Ideas gaining momentum, what’s the next step? Scaling up. The bad news in this good news/bad news scenario is that the challenges of demographics, energy depletion, and climate change are bigger than any effort to confront them so far. Listen particularly to the ARC’s Kathryn Lawler in the video below, as she joins other presenters from a recent Healthy Aging conference in Chapel Hill, NC.

– Ben Brown

And Now the Rest of the Story: Stewart Brand Promotes Urbanism, Including Slums

This could be the next must-get book for Smart Growthers, New Urbanists, and lots of us who bought into the eco-techno connection decades ago. Stewart Brand, creator of The Whole Earth Catalog and author more recently of How Buildings Learn (Penguin, 1994) – which Jane Jacobs called “a classic and probably a work of genius” – will have another big title out in the next week.

WholeEarthIt’s called Whole Earth Discipline: An Ecopragmatist Manifesto. And you know how New Urbanists love manifestos.

Brand’s new work seems capable of raising eyebrows. In fact, it hit the No. 7 spot among “12 Shocking Ideas that Will Change the World” in the October issue of Wired magazine. In the realm of not-so-shocking, at least for Smart Growth types, is Brand’s championing of cities as good for the environment. More provocative maybe are his positive views about genetic engineering and squatter shanty towns

“We made the mistake of romanticizing villages, and we won’t need to make that mistake again,” Brand told Wired. “But the main thing is not to bulldoze the slums. . . That’s where vast numbers of humans – slum dwellers – are doing urban stuff in new and amazing ways. And hell’s bells, there are a billion of them!”

– Ben Brown

Call for Cool Plans

New Urban Guild plans Southern Living plan book

Miami-based architect and author Steve Mouzon, founder of the The New Urban Guild, has made the deal he and the Guild have been working toward for years. Southern Living magazine, arguably the most influential shelter mag in the southeastern US, is going to publish Guild collections of TND-worthy homes. And Mouzon is inviting all comers to submit designs.

Read all about it here

“We’re looking for a wide range of house plan sizes, from cottages to mansions,” says Mouzon. “And we’re also looking for many types of plans, including side yard houses, courtyard houses, carriage houses, townhouses, mews units, live/work units, and Katrina Cottages. There’s only one type we don’t need — ordinary houses — as in ordinary suburban houses with garages in front, facing the street. There are enough of those plans out there already.”

PrintPlans will be selected by a jury of Guild members. “It’s a tough jury, so only a fraction of plans submitted are likely to be selected,” says Mouzon. “But that’s what it takes to make sure this is the best collection of traditional neighborhood homes ever assembled.”

Go here for plan submission requirements. And if you want to see Mouzon’s narration of two of his own designs, Katrina Cottages constructed for Cottage Square in Ocean Springs, MS, check out this: