Washburn

The Answer to the US Financial and Housing Crisis

Much ink and paper profits have been spilt over the past few months over the financial and housing crisis.  Almost all of it has been focused on the short-term consequences of the US housing industry structurally overbuilding the wrong product in the wrong location; the fringe of our metro areas.  The market does not now and will not in the future want this product, as I have mentioned in previous postings. The only parallel to the current structural change was in the 1950s and 1960s when Americans were abandoning our cities, implementing the de facto domestic policy of suburbanization.  This structural shift also resulted in severe write downs of housing values in the city, provided much improved housing for the poor who took over that housing and the beginning of a massive wave of building the infrastructure and real estate along the drivable sub-urban model. Since transportation drives development, the center piece of the previous structural shift was the largest infrastructure project ever undertaken in human history; the building of the Interstate Highway System, along with equally significant state and local highway investments (think the Pennsylvania Turnpike, Pasadena Freeway and the work of Robert Moses in the NYC metro area).  The new car/truck-only transportation system drove the flight to the suburbs.  It is important to note that this was not some conspiracy; Americans wanted this radically new way of organizing the built environment and we got what we subsidized and legally mandated. The problem today is that this same domestic policy is still in place.  Like generations of military strategists, we are fighting the last war. The market, budgetary and environmental conditions have changed and we need to change our domestic policies.  The most important way to do this is by investing massively in a mixed-mode transportation system that fits the current market realities; rail transit, bicycles and walking transportation systems, along with maintenance of the current car/truck roadway system.  With demand surging on our rail transit systems while car-based trips are down, it is time to give the market what it wants and what the environment demands. There are over $200 billion in pending applications to the Federal Transit Administration (FTA), a record.  However, the current Federal administration despises rail transit, have been starving it and even when a regional transit system gets through their ungodly bureaucratic process, the Feds try to kill the application; like what recently happened on the Dulles Metro rail line in the DC region.  The perverse Bush administration proposal of borrowing money from the Transit trust fund (money NOT spent on those hundreds of billions of requests) for the currently bankrupt Highway Trust Funds is consistent with the current policy. The Stimulus II proposal currently knocking around Congress, a proposal focused on capital projects to help the hapless infrastructure of this country, should have a majority of its funding focused on these pending FTA transit projects.  It would provide far more jobs than a comparable roads-based approach and it would stimulate real estate development around rail stations, what the market wants.  This starts an upward cycle of investment that will help reverse the direction of the American economy. As the oft-used expression observes; when you are in a hole, the first thing is to stop digging.  Then we need to build the transportation infrastructure that will both add jobs in the short term while driving market-appropriate, walkable urban, real estate investment (that needs to be mixed-income, as well) that will get the economy moving again. ———- Christopher B. Leinberger is a land use strategist, developer, teacher, consultant and author, helping to make progressive development profitable. He is currently a Visiting Fellow at the Brookings Institution in Washington, D.C. He is the author of The Option of Urbanism: Investing in a New American Dream from Island Press.