It is probable that the future holds considerable challenges to the viability of this type of long-term, large-scale development, and that market trends will require new and even more expensive development patterns.


It can take years to plan and obtain approvals for a major master-planned community, and full buildout can require as many as ten years. So, to pursue such a project today, confidence is required that over the next ten to 15 years there will be a strong and steady market for the homes, stores, offices, and amenities that would make up a new community. What, then, does the market look like in the years ahead?

The demographic outlook for the coming years looks promising at first take, with a huge tranche of young people—the echo boomers—now in their 20s. This should promise a bulge of first-time homebuyers looking for single-family homes, backyards, and parks. This may not prove to be the case, however, because the unemployment rate for those under 30 is triple or more that of the general population. Add to that an unprecedented level of school debt, more conservative mortgage underwriting, and parents too stretched to provide a downpayment, and the homebuying picture looks different.

There also is a growing shift in the market to more urban lifestyles. Boomers and their echo boomer kids are both reporting growing interest in walkable neighborhoods providing nearby stores and services and requiring less driving.

Again, none of these trends precludes master-planned communities, but suggests some new approaches may be worth considering.

Build smaller homes. Already the median size of new homes is steady or dropping in many communities. Smaller lots have been acceptable to many homebuyers with two incomes and no time to take care of big yards. Now smaller, more energy-efficient homes that are well designed but cost less are becoming more popular.

Build homes that are more livable and functional. Today’s new homebuyers are more diverse than those of the past. There are more single women, some with kids and some without. And the number of multigenerational families is rising. The fastest-growing segment of the population is immigrant households, especially Latino households. (See, Top 10 Metropolitan Areas for Immigrant Population Growth.) The most consistent aspect emerging is a retreat from the desire for the oversize McMansion and a growing desire for a livable, functional home that is practical as well as attractive. This does not mean simply using the home designs of the past and making the rooms smaller. A new financial conservatism has replaced the go-for-broke, “the bigger the home, the more its value will go up” approach of the past decade.

Rethink home design. Attractive does not always mean granite countertops. As a new generation of homebuyers emerges, they will think of housing less in terms of investment and resale value, and more in terms of how they want to live in the home. The parts of the home that were added for resale—like entries with cathedral ceilings, the Viking and Sub-Zero refrigerators, the dining room used only at Thanksgiving, the over-large living room, etc.—are luxuries that can be traded for flexible, open spaces where the kitchen opens to the dining and family areas and where parents and children can gather. The need exists for the office/den, wired and wireless connectivity, and parks, but big backyards that take time and money to care for are out.

Focus on energy efficiency. Think of replacing the fancy kitchen and bath appliances with top of-the-line, Energy Star–rated heating, ventilation, and air-conditioning (HVAC) equipment and lighting systems that will save money and pay for themselves in time. Insulation and upgraded, energy-efficient doors and windows that exceed code make sense, as does placing homes more open to the south and west to benefit from passive solar heating.

Consider new trends like universal design. Universal design involves making a home convertible for use by people with handicaps or with limited mobility as they age. It also provides flexible space that can become a “granny flat” for an aging parent or a son or daughter returning home after college, or space for a home business or office.

Expand the town center. Clustering more homes, especially smaller ones, around the center of a community begins to create a real downtown feel and allows people to walk to stores and services. Here, also, is where that elusive but increasingly important idea of “community” can occur, facilitated by locally owned businesses, places for people to interact informally, a community center with a hall for community events, and an intriguing mix of stores and services. Consider creating an association of business owners, homeowners, and renters to advise on the management of the town center, and to create events, musical and otherwise, to bring the community together.

Consider rental housing. Well-designed apartments in buildings that fit into the architecture of the town center can provide a way for many younger families to enter a community where they may buy in the future. Their older parents, tired of owning a home, may want to rent as well.

Consider a range of price points and rents. More expensive homes may be more profitable, but the large cohort of young households will have limited resources; many will rent because they have to or want to until they can afford a starter home. The smaller homes suggested above may be the logical next step for them after a few years of renting. Moderately priced apartments will attract these younger families and those who work in the stores and service firms, as well as teachers, local government workers, police, and firefighters. Higher-priced homes, condos, and apartments may attract older baby boomers who want to be near their kids and grandkids.

Consider forgoing expensive amenities like golf courses and clubs. Among the most popular amenities these days are project layouts promoting walking and bicycling. Tax breaks and other benefits are available for dedicating land to be held in open space permanently. (See ULI’s new book Conservation Communities: Creating Value with Homes, Open Space and Agriculture by Edward T. McMahon.)

Reconfigure floor plans to add one home office and eliminate one bedroom. Flexi-force households need space to work from home—with the accoutrements of communication, such as broadband, a computer workstation, a printer, and a quiet businesslike environment. To obtain that, residents must either share the living/dining area with the rest of the family, or convert a small bedroom into a true home office. The latter is the better option, especially with plummeting broadband costs and rising commuting costs, both personal and external. To maximize the use of such semidedicated home office rooms, they should be wired with extra electrical outlets, coaxial or broadband cables, and wi-fi nodes.

Encourage conversion of suitable new-entry ownership properties into permanent high-quality rental properties. With several million households downshifting to rental properties, several million dwellings constructed for occupant ownership should be converted to become permanent rental units. Aside from condos being converted into rentals, the market may see the return of the intermediate-term, furnished-flat lease or the American adaptation of London’s market in tradable leasehold interests. The U.S. market may reinvent the investor/landlord model through hybrid financing approaches, such as rent-to-buy or shared-appreciation hybrid ownership/rental finance vehicles.

Rethink leases and security deposits to allow greater flexibility. Leases and deposits can be modified to allow multiple signers who can add to or drop out of the housing configuration. No longer do multiperson tenancies merely mean students shacking up; they now reflect shifting consumption patterns by people attendant on being in the flexi-force. Landlords want all residents on the lease, but if those residents are making and unmaking household configurations, the landlord will want to ensure there are enough wallets among the tenants that their changing status does not change his or her creditworthiness.

There are many other ideas out there for remaking the master-planned community. The single most important idea to remember is that the housing markets are changing, and change is happening faster than ever before. Opportunities lie ahead, but it will require creativity and sensitivity to the new market to take advantage of them. Flexibility and being close to the market are now as important as experience in planning the communities of the future.