America's hidden urban laboratory: the South
June 14th, 2023
America hasn't built many walkable places in the last few decades, but there are a few exceptions. While collecting a list of these special places, I was shocked to discover that most are in the Southeast.
My mental image of contemporary southern development did not include an appreciation of urbanism, walkability, and public spaces. On the contrary, it conjured images of massive highways and repetitive suburban sprawl.
There certainly is a lot of that type of development too, and yet almost all of the best new urban fabric in the last few decades has happened south of the Mason-Dixon line.
This clustering in the South makes more sense now that I've studied the question of why the US doesn't build more walkable neighborhoods and towns. The first, obvious answer is that the South generally has less land use regulation than the Northeast and the West Coast, giving real estate developers more latitude in how they build.
A prime example is Seaside, the 80-acre village in Florida that kicked off the New Urbanism movement in the early 1980s. The stretch of the Florida Panhandle where Seaside sits was such a backwater that the county didn't even have a Planning Department when Seaside was first getting built! As a result, the creators of Seaside had an incredible amount of freedom to build to their vision.
But as I've learned more, I don't think this concentration of new walkable places in the Southeast is just about more open-minded regulation. Notably, even though Texas bars counties from imposing zoning codes, Texas doesn't have many of these places (at least that I know of). And yet the development that has been sprouting up all around Texas is rarely mixed-use, even though there is nothing standing in developers' way from a zoning perspective. If the lack of good new walkable places was just a function of restrictive land use policy, you would see more of this type of development in unincorporated parts of Texas counties!
I think another critical factor is that Seaside served as a model of success, which became the seed of a growing community of practice throughout the region. Seaside provided a example for developers and public officials to point at and say, "Wow, that model of development worked out great in the neighboring county. Let's build something like that here, too." People are much more likely to learn about models of development that are close by rather than across the country, because they're easier to go see in person and it's more likely that someone they know has been there.
Planning departments are risk-averse, and they have lots of reasons to be that way. They get little credit when they approve an unconventional project that the public loves; meanwhile they get an earful if they approve one that the public hates. As a result, having a successful example of a new development model nearby makes it a much easier ask for an official to take a swing at a big idea.
Nearby role models are possibly even more important for developers. One aspect of real estate that I didn't appreciate before is just how driven by comparables the industry is (known in the industry as "comps"). Developers are constantly asking themselves "What other projects in this region have succeeded? Which have failed?" and then shaping their projects to match the successes and avoid the failures. As a result, the industry is very self-referential and self-reinforcing. What gets built today is typically just a slight variation of what got built yesterday. Changing the zoning and building codes is risky, non-deterministic, and political; meanwhile it's much more straightforward to just do what's already been done.
Besides land use regulation, financing projects with debt is another Great Filter that kills innovative projects, or at least nudges them in a more conventional direction. Lenders are understandably risk-averse, because they get no upside if the project does spectacularly well. If a developer's bold bet pays off, the lender gets the same amount of money as if it did just ok; meanwhile the lender can lose all of their money if the project fails. As a result, lenders will often insist on making the project as similar as possible to something that they've already seen work. To lenders, boring is a feature not a bug.
The obvious way to avoid this Great Filter is to simply not use debt. However, leveraging a project with debt makes returns much more attractive to equity investors, so it's often necessary to make a project competitive as an investment. If real estate were funded by pure equity rather than debt, I think we would see a lot more experimentation. And indeed, the most innovative real estate projects are often funded by wealthy individuals with deep pockets who don't need to bring on debt to fill out the capital stack. If a project is special enough that it makes for outsized returns even without debt, then it can work out very well for investors in the end too. However, getting that multiple with debt doesn't require innovation in the end product, and thus feels safer to many investors.
Those rare innovative projects that do get built have outsized impact on the industry, because they can prove out a model that more conservative capital can then invest in. Seaside, FL was originally built by a single developer with a crazy idea and a piece of land he already owned, which gave him time and autonomy to build his vision. By contrast, most developers are working on literally borrowed time, so they don't have the luxury of experimenting with a new model.
But then once a place like Seaside has proven out a model, then other developers can take those learnings and apply them to projects with more conventional investors and lenders. As Seaside took off, nearby communities popped up along the Florida Panhandle following their playbook, including Alys Beach, Rosemary Beach, and Watercolor. Disney also took note of the Seaside model and built Celebration, FL following many of the same design principles. Developers just over the border in Georgia and South Carolina began to take note too, building beautiful places like I'On, Newpoint, Palmetto Bluff, Trillith, Serenbe, Habersham, and beyond.
These design patterns, loosely referred to as "New Urbanism", are slowly spreading from the South into the rest of the country. As you can see from the map at the top of this post, there are some lovely places popping up in Washington, Arizona, Colorado, Oklahoma, and beyond (and those are just my count – it's very likely that I'm missing some!).
However the South is still the epicenter of this community of practice, and I can count on one hand the number of New Urbanist communities that have been built west of the Mississippi or north of the Mason-Dixon line. If we can show more people that these places are existing and thriving, and expand the community of practice beyond the Southeast, we will see more wonderful places built across America.
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