In June, a trio of federal agencies celebrated the second anniversary of one of the Obama administration’s most significant real estate–focused programs, the livability initiative. The celebration didn’t include cake and ice cream, but it did highlight how much progress has been made in a relatively short period of time in support of sustainable development patterns.

“This is very, very popular out in the rest of the country,” says John Hempelmann, a partner at Cairncross Hempelmann, a Seattle, Washington, real estate law firm, and a vice chairman of ULI’s Transit-Oriented Development Council. “The die have been cast toward new communities that are livable and walkable, and that is without question the wave of the future.”

The administration essentially launched the federal livability initiative in June 2009, when three agencies—the Department of Transportation, the Environmental Protection Agency, and the Department of Housing and Urban Development (HUD)—formed the Partnership for Sustainable Communities. They defined livability as providing more transportation choices, promoting affordable housing, and encouraging coordinated investments in more compact, walkable, and sustainable growth. The agencies promised to incorporate those principles into programs, policies, funding, and projects through grants, workshops, and continual collaboration.

Derek Douglas, special assistant to President Obama for urban affairs, calls the partnership the “cornerstone” of the administration’s efforts for sustainable communities. In two years, the partner agencies have advanced livability from a feel-good idea to a core philosophy that is becoming rooted in the federal departments and influencing some real estate patterns in metropolitan areas. So far, livability’s federal progress includes the following:

  • Substantial federal investment. The three agencies have together doled out close to $2.5 billion in livability-oriented grants, ranging from regional planning to the stimulus-funded Transportation Investment Generating Economic Recovery (TIGER) program. These have included affordable housing plans in metropolitan areas such as Boston and Cleveland, transit-oriented development station plans in the metro areas of Minneapolis and Salt Lake City, plus multimodal transportation corridor plans in metro Denver and Seattle.
  • Increasing political support. When federal budget cutters attempted to eliminate livability funding during Congress’s FY 2011 budget standoff earlier this year, a coalition of livability advocacy groups including Smart Growth America and Reconnecting America helped lobby to preserve some funding this year. In addition, the Obama administration intends to make livability one of five or six primary funding categories in a new transportation bill, backed by a proposed $28 billion six-year funding commitment, although that figure is not likely to pass Congress.
  • Advancing new legislation. A Livable Communities Task Force, an initiative of the Democratic Caucus of the U.S. House of Representatives, in June called for a variety of government policy changes to reduce Americans’ rising transportation costs. The recommendations ranged from increasing federal funding for transit, to new legislation requiring states and metropolitan planning organizations to institute a complete-streets policy of multimodal transportation access. A complete-streets policy bill has already been introduced in the House.
  • Even outside of Washington, “there’s been just an explosion of interest in this program,” Shelley Poticha, director of HUD’s Office of Sustainable Housing and Communities, explained during a partnership conference in June. A recent livability progress report produced by the Federal Highway Administration found that more than 100 publicly funded transportation projects nationwide were incorporating some form of livability, primarily by accommodating multifamily housing and multiple transportation modes—cars, mass transit, bikes, and walking.

For real estate development, this type of public sector planning and investment “has the opportunity to give the real estate community some predictability. With the community planning process getting done on the front end, that is a huge advantage for developers,” says Ilana Preuss, chief of staff for Washington, D.C.–based Smart Growth America, which promotes sustainable development.

Hempelmann already sees opportunities in Seattle, where apartments around new light-rail stations are renting at higher rates than originally anticipated and more stations are planned. “Real estate developers are interested in livability, believe in livability, and know it sells,” he says. “The most valuable land now is in current and future rail station areas, because developers know that’s where people are going.”

Nevertheless, the federal livability initiative has plenty of critics, particularly on the Republican side of the political spectrum. One U.S. House member described livability as a further “federal government intrusion” into how Americans live and travel, and one conservative policy center labeled livability as a “socialist trap.”

The federal livability initiative is just in its beginning stages, and while it has momentum, the deficit-reduction climate in Congress still threatens it.

“We’re facing this overall mentality in Washington now where the entire focus is on cutting government spending,” says Sarah Kline, policy director for Reconnecting America, a Washington, D.C.–based nonprofit organization that advocates for multimodal transportation. “There’s a groundswell building to put pressure on congressmen to preserve these programs. But it is by no means a certainty that they will be preserved.”