A demographer predicts big changes for the West’s housing landscape
by Samuel Western
Arthur “Chris” Nelson has an unofficial motto: Act now. In his new book, Reshaping Metropolitan America, Nelson documents the “sweeping generational changes” underway in housing demographics. By 2040, he says, most of America will live in “megapolitan” areas, such as Utah’s Wasatch Front, Colorado’s Front Range or Arizona’s Sun Corridor. Ownership of single-family dwellings will plummet as the demand for rentals climbs. Nelson calculates that, by 2040, the United States – with an estimated population of roughly 450 million – will need 464 billion square feet of new retail, residential, office and educational space. He recommends that communities start preparing for the future now, rather than waiting passively until change is forced upon them.
Nelson is 61 and brims with energy. A native Oregonian, he spent over 20 years teaching urban planning, public policy and urban finance at colleges in the South. Currently, he is the presidential professor of city and metropolitan planning at the University of Utah’s Metropolitan Research Center. Freelance writer Samuel Western spoke with him in his office in Salt Lake City in August.
High Country News Your research indicates that, as far as development patterns go, we’re on the cusp of a major change. Can you describe it for us?
Chris Nelson From 1950 to 2010, the baby boomers drove the market. They made up 84 percent of America’s housing demand. Between 1990 and 2000, about three-quarters of all houses built were single-family detached homes in the suburbs. Yet people can’t seem to grasp that pattern is history. When we look forward, it’s a little daunting: That same 84 percent who drove the demand for suburban homes will drive the demand for smaller lots, smaller homes and rental homes.
HCN Home ownership is declining, right? But there’s going to be 1.5 million new homes built in the average year. How does that work?
NELSON Between now and 2030, 86 percent plus of all population growth in America will be among minorities, which I define as everyone else except white non-Hispanic. We’re not educating these minorities to the extent that we educated the boomers. With their education, boomers drove the economy and they invested in the economy through their homes. The people following them are much more diverse, more challenged in education, and with a different cultural orientation. Whites own homes at a 74 percent rate. Minorities – except Asians – own homes at about a 45 percent rate. So the alternative is to depress housing prices so low that minorities can buy the homes.
HCN Will that happen?
NELSON Possibly, in some markets. The more likely scenario is that the people who want to sell the homes will realize that they can’t unlock the equity. They’ll rent them out.
HCN What about the senior housing market?
NELSON Many more will become renters. They will begin unloading homes by the millions at the end of this decade. When they sell, they will either rent or go into independent living or apartments.
HCN What does America's growing population mean for the Rocky Mountain West?
NELSON Rural outlying areas are not going to grow much. But they are a relatively small part of the population. The population centers like Denver and Albuquerque will grow. The dynamics of the Wasatch Front are particularly worth watching. In the Salt Lake City metropolitan area, about half the demand for new housing will be for rentals. All the growth will be attributable to minorities.
HCN You mentioned a survey in your book that shows that while 56 percent of the people interviewed prefer some sort of smart-growth option, 43 percent preferred sprawl.
NELSON At best, half of all people want to live in a walkable neighborhood with an integrated mixed-use environment. But the other half doesn't. My issue is that we're not meeting the demand right now for those who want to live in that different living environment. To move our markets from where they are now to where the market says it wants to be, every new home has to be built in the new configuration. (At the present rate) by 2040, we still wouldn't meet the demand.
HCN Even in rural counties?
NELSON When you drill down on the rural counties in the West, you're getting into people who are culturally different or who move there to join the engrained culture. Rural counties with resource-based economies lend themselves to more open spaces and larger lots.
HCN But where do their children want to live?
NELSON Some want to stay close, but many – more than half from the studies I've seen – want to get out of the country and get to Denver as fast as they can and live in a loft.
HCN What about energy production, with its high-paying jobs, as it expands across the West?
NELSON Fracking is going to change the dynamics of many rural counties. In 30 years, there might be – at most – 1 million people involved in the energy economy, up from 200,000 now. So in 2040, you have 1 million people out of a workforce of 240 million people. ... They will have a huge impact on those counties but not on the nation.
HCN What's the future of second homes in the West?
NELSON It's a tiny market, really. Only 4 percent of all dwelling units are second homes. But they can be a big share of the local economies in some parts of the country. As the boomers age, they are unloading their primary homes and their second homes. Thus, when it comes to the second-home market, you'll need to be unusually well-positioned in an affluent market and/or located near a major metropolitan area where they have an airport, like Park City. You take away those niche markets, the rest of the second-home market in the West is basically doomed.
HCN How about ski area towns in general?
NELSON Park City, Breckenridge and Aspen will be just fine. But if you look at those more outlying areas, possibly Crested Butte, possibly Big Sky, those second-tier and definitely third-tier ski area markets, they're in trouble. Even Taos may be challenged.
The perfect analogy is golf courses. Golf courses boomed in the '60s, '70s, '80s and '90s and early 2000s. The boomers had the money and the cultural orientation towards golfing. Now, more golf courses are closing each year than are being built. By the 2020s, there might be two or three closed golf courses for every one built.
HCN Pretend I'm a county commissioner from an isolated and modestly depressed Rocky Mountain county. A developer wants to build a large-lot subdivision, mostly for retirees or for people desiring second homes, about 15 miles from town. I get between 30 and 50 percent of my annual revenue from property taxes. What advice would you give me?
NELSON I would want to do a fiscal analysis to see the extent to which the county over 30 years is better off or worse off from this development. (Then I'd) ask the developer to provide a qualified market analysis showing there really is a demand for his project. Then I would recommend that once I see his market study, I might spend $10,000-$20,000 of your own money to double-check. I'd hire a third party. Then I'd hire another staffer or another consultant – and yes, spend some more money, because it's better to spend $100,000 up front than be losing $1 million per year at the back end – and figure out the fiscal costs and benefits of providing services to the development.
HCN Why aren't more county commissioners and planning and zoning departments doing this?
NELSON The word isn't out. It's all a matter of education.© High Country News