21 November 2012 — A US report, examining Philadelphia house price declines against New Urbanist principles, found that walkability and inner city living were both associated with a decrease in falling prices.

Dr Kevin Gillen, who wrote “The correlates of house price changes with geography, density, design and use: evidence from Philadelphia, said the report “analysed if different magnitudes in house price declines were associated with varying characteristics of New Urbanist principles: walkability, central location, density, mixture of uses and access to public transportation”.

The Congress for New Urbanism commissioned this research paper to analyse how variation in urban form and composition may influence the relative performance of local residential markets during the recent and unprecedented downturn in the US housing market, Dr Gillen said.

“Using comprehensive data on Zip-level (post code regions) house price declines in the Philadelphia metro area from the market’s peak in 2007 to its trough in 2012, the following main results were identified:

  • Being located in Centre City, Philadelphia is associated with a 9.17 per cent decrease in the magnitude of house price declines
  • Being located in a walkable town centre in the suburbs is associated with an 8.05 per cent decrease in the magnitude of house price declines.
  • Every mile further that any Zip is located from Centre City, Philadelphia is associated with a 1.4 per cent increase in the magnitude of house price declines.
  • Every mile further that a suburban Zip is located from Centre City, Philadelphia is associated with an additional 3.0 per cent increase in the magnitude of house price declines.”

Dr Gillen said the results differed from previous US housing downturns for a number of reasons including significantly higher energy costs making long commutes in a car and heating and cooling a larger suburban home relatively more expensive.

“Second, many downtown areas and urban neighbourhoods have experienced a significant revitalisation in the past twenty years due to investments in public services by these municipalities that have resulted in an improved quality of life (such as) better policing, business improvement districts,” he said.

“Lastly, there appears to have been a shift in consumer preferences towards a renewed desire and interest in urban living by many younger and older households.”

Kevin Gillen

Dr Gillen said his report found that in past downturns, homes in conventional, low-density, single-use, auto-oriented suburban developments held their value relatively better.

“During the current downturn, however, it has been dwellings located in an urban form that takes advantage of walkable densities to allow access to amenities such as transit and mixed-use districts that have exhibited greater price stability,” he said.

“The Philadelphia story thus seems to demonstrate that communities with centre city locations, mixtures of usage and suburban rail-served town centres out-perform sprawl.”

Dr Gillen said other factors, including household income, vacancy rates and population density, were also a factor.

His findings included:

•           Every $1 increase in a Zip’s median household income is associated with a -0.00018 per cent decrease in the magnitude of house price declines.

•           A city Zip code with a majority low-income population is associated with a 19.5 per cent increase in the magnitude of house price declines.

•           A suburban Zip code with a majority low-income population is associated with a 3.05 per cent increase in the magnitude of house price declines.

•           Every 1 per cent increase in a Zip’s vacancy rate is associated with a 2.006 per cent increase in the magnitude of house price declines.

•           Being located in Centre City, Philadelphia is associated with a 9.17 per cent decrease in the magnitude of house price declines.

•           Being located in a walkable town centre in the suburbs is associated with an 8.05 per cent decrease in the magnitude of house price declines.

•           Every mile further that any Zip is located from Centre City, Philadelphia is associated with a 1.4 per cent increase in the magnitude of house price declines.

•           Every mile further that a suburban Zip is located from Centre City, Philadelphia is associated with an additional 3.0 per cent increase in the magnitude of house price declines.

•           Every mile further that a suburban Zip is located from a suburban town centre is associated with an additional 0.00011 per cent increase in the magnitude of house price declines.

•           Every 1-person increase in a Zip’s population density is associated with a -0.00287 per cent decrease in the magnitude of house price declines.

•           Being a relatively high-density community in the suburbs is associated with a 20.2 per cent decrease in the magnitude of house price declines.

•           Every 1 per cent increase in the per cent of a Zip’s building stock that is classified as “residential” is associated with a 70.4 per cent increase in the magnitude of house price declines.

•           Every 1 per cent increase in the per cent of a Zip’s housing stock that is classified as “detached” (as opposed to “attached”) is associated with a 10.8 per cent increase in the magnitude of house price declines.

•           Being a Zip code that contains a balanced mix of both residential and commercial properties is associated with a 6.4 per cent decrease in the magnitude of house price declines.

•           Being a suburban Zip code that contains a balanced mix of both residential and commercial properties (“mixed use”) is associated with an additional 6.6 per cent decrease in the magnitude of house price declines.

•           Every additional business (per square mile) that a Zip code has is associated with a 0.01 per cent decrease in the magnitude of house price declines.

•           Every additional bus stop in a suburban Zip code is associated with a 0.06 per cent decrease in the magnitude of house price declines.

•           Every additional commuter rail stop in a suburban Zip code is associated with a 9.2 per cent decrease in the magnitude of house price declines.

•           Every additional subway stop in a city Zip code is associated with a 0.6 per cent decrease in the magnitude of house price declines.

“So, in summary, house prices declined less in areas that have fewer households living below poverty,  have lower vacancy rates, are located in the downtown of the central city, are closer to the central city, are either a suburban town centre or are closer to suburban town centre, are suburbs with relatively higher densities and have attached homes, have a balanced mix of both residential and commercial uses, have relatively more businesses, are suburbs with relatively larger numbers of rail and bus stops and are city neighbourhoods with subway stops,” Dr Gillen said.

“Since almost all of these characteristics are consistent with New Urbanist principles, the empirical evidence indicates that communities and neighbourhoods with New Urbanist characteristics have generally held their value better during the most recent housing downturn.”

The Congress for New Urbanism promotes walkable, mixed-use neighbourhood development, sustainable communities and healthier living conditions.

Click here for the Congress for New Urbanism.

Dr Gillen is with the Fels Institute of Government at the University of Pennsylvania.