As Urban Home Prices Rise, Millennials Are Returning to the Suburbs

Trendy, affordable suburban housing is making a comeback with Millennials, and city-like amenities are following

by Patrick Duffy

It wasn’t too long ago that many experts were eulogizing the suburbs as young Millennials (and even many aging Baby Boomers) seemed to prefer the sights, sounds, and amenities of urban environments. However, as Millennials have grown older and been increasingly priced out of expensive downtown areas, they have been gradually returning to the suburbs in order to lay down roots and start families.
But they’re not really leaving the city behind. Instead, they’re demanding and supporting the types of unique, city-like amenities that attracted them in the first place. Yes, suburbs are again becoming trendy.
Part of this trend is due to simple math: given a reported 32 percent increase in births between 1978 and 1990, it stands to reason that many cities would be hosting a huge influx of residents born about 25 years ago. Indeed, many cities may have reached “peak Millennial” as the largest group of this generation passed the milestone age of 25 in 2015, and then gradually moved away as they settled into their careers and started planning for the next stages of life. By that same year, nearly 73 percent of those aged 25 to 34 were already living in suburbs, versus the 21 percent living in cities.
According to U.S. Census Bureau data as analyzed by demographer William Frey at the Brookings Institution, since 2012, the growth of suburbs and rural areas has quadrupled, while that of urban areas has fallen by half. Using the same data sets, Demographia’s Wen- dell Cox found that, between 2016 and 2017, nearly 440,000 residents moved away from counties with urban cores, while the outlying suburbs gained 252,000 residents. Although some large urban areas have grown — such as Dallas, Houston and Atlanta — they tend
to have smaller downtown areas ringed by residential areas with a suburban feel.
Although we saw this kind of urban-to-suburban flight between the 1950s and the 1980s, it was usually due to fear of rising crime, as well as the evolution of more suburban employment centers. Today, however, the same type of migration is due to the enormous success of the rebirth of many urban centers, which has been accompanied by soaring home prices and rents. Another difference today is that the amenities once considered specific to urban cores, such as craft breweries, fitness boot camps and gluten-free bakeries, are increasingly popping up in the suburbs.

One method with which developers can quickly jump on this emerging trend is with a more modern version of the master-planned community. Whereas yesterday’s behemoths were centered around golf courses designed by the sport’s biggest names and usually required car trips to the neighborhood shopping center, today’s master plans now include not just open space and walking trails, but also retail stores and event spaces more uniquely branded to the community. And, instead of selling out home sites to merchant builders and then moving onto the next project, some enterprising developers are partnering with HOAs to host regular events ranging from movie nights and luaus to happy hours and cooking classes.

Another industry that could benefit from the urban-to-suburban trend is retail, especially as more old-style malls are increasingly being converted into spaces for offices, schools and homes. Given that a 2017 Gallup survey showed that 43 percent of employed Americans work partly from home, local versions of the co-sharing office space company WeWork are increasingly sprouting up in suburbs. For local Millennial entrepreneurs, a flexible retail landlord could offer pop-up stores, galleries and incubator spaces to help test-market their ideas before a formal launch.

Of course, perhaps the biggest challenge to the renaissance of the suburb will be how to pay for it. In the early 2010s, there was a fortunate blending of demographics and the economic cycle in which most Millennials were looking to rent apartments, and fewer barriers existed to new development in urban cores. But, as this group moves to the suburbs in search of quality schools, mass transit options and adequate infrastructure, how to provide these basic services at a time of rising public pension commitments for many state and local governments will require some new solutions.

Still, some cities are fighting back to retain their Millennials by encouraging suburban-type projects (such as duplexes, row houses and townhomes) to address the “missing middle” of housing options. By leveraging existing urban amenities with more family-friendly homes, they aim to keep their Millennials in town for as long as possible.

Patrick Duffy is a Principal with MetroIntelligence and contributes to BuilderBytes. He can be reached at pduffy@metrointel.com or at 310-666-8288.

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