Why walkable urban areas are America’s efficient economic engines

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Lisa Chamberlain, Communication Lead, Urban Transformation, World Economic Forum

• Only 1.2% of the land mass of the largest 35 metropolitan areas in the US are walkable urban areas.
• This fraction of land in the top 35 metropolitan areas generates 20% of US GDP.
• Building more walkable urban areas will increase tax revenue for cities while easing the affordability crisis.

Rankings always generate headlines and controversy: the 100 greatest books of all time, the best living athletes, the most significant historical events, etc. So, it’s no surprise that the recent report from Smart Growth America and Places Platform, a real estate information services company, ranked the most ‘walkable urban’ metropolitan areas in the US. But is any metropolitan area really walkable? Neighbourhoods are walkable, but metropolitan areas are not. Case in point: Los Angeles ranks eighth on the list.

Once you get passed the headline-grabbing list of most walkable metropolitan areas, more useful information can be found in Foot Traffic Ahead: Ranking Walkable Urbanism in America’s Largest Metros 2023; namely, the outsized (and underappreciated) economic benefits of walkable urban areas.

The report compares ‘walkable urbanism’ to ‘drivable sub-urbanism’ in the largest 35 US metropolitan areas by analysing commercial rents, multifamily rental rates and for-sale home prices. Four critical findings related to the economic vibrancy of walkable urban areas – and the pent-up demand for more of it – make an important case for mixed-use infill development in the suburbs and better placemaking in urban areas.

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What is the World Economic Forum doing to promote sustainable urban development?

Cities are responsible for 75% of global greenhouse gas emissions and are home to over half of the world’s population—a number that will grow to two-thirds by 2050. By going greener, cities could contribute more than half of the emissions cuts needed to keep global warming to less than 2°c, which would be in line with the Paris Agreement.

To achieve net-zero urban emissions by 2050, the World Economic Forum is partnering with other stakeholders to drive various initiatives to promote sustainable urban development. Here are just a few:

• The Coalition for Urban Transitions is the first major global initiative aimed at helping countries achieve inclusive, sustainable economic growth through better urban policies. Consisting of 50 partner organizations, the coalition brings national governments into the process of decarbonizing our cities by connecting them with city leaders. Read our impact story to learn how this coalition is making a difference.
• The Zero Carbon Buildings for All Initiative pledges to fully decarbonize all new buildings by 2030 and all existing buildings by 2050.
• The Systemic Efficiency project arose from the Zero Carbon Buildings for All Initiative. Jointly led by the Forum’s Platform for Shaping the Future of Energy and Materials and the Platform for Shaping the Future of Cities, Infrastructure and Urban Services, the Systemic Efficiency project brings global policy-makers, financiers and the private sector together to create systemic change in the urban ecosystem by optimizing energy efficiency in buildings, transport and various industries.

To learn more about our initiatives to promote zero-carbon cities and to see how you can be part of our efforts to facilitate urban transformation, reach out to us here.

Walkable urban areas have a price premium

First, the report establishes that walkable urban areas have a substantial price premium over drivable sub-urban areas as of the end of 2021, the depth of the pandemic. The rent or sales premiums in walkable urban areas are 35-45% for office, retail, rental and for-sale housing. In 2019, the price premiums were 40-50% due to the pandemic, but are still substantially higher. What’s more, all 35 metropolitan areas saw their walkable urban areas gain market share at a weighted average of 2.8 times their 2017 market share. This also means that drivable sub-urban places dramatically lost market share. As the co-authors, Michael Rodriguez, AICP, and Christopher B. Leinberger, note, “Substantial price and market share premiums is the definition of pent-up demand.”

Second, the report quantifies for the first time that only 1.2% of land mass in the largest 35 US metropolitan areas are walkable urban areas. The vast majority of the US is zoned and regulated in such a way that makes walkable urbanism illegal. The report’s research shows that the affordable housing and homelessness crises are in large part due to extraordinarily high land costs created by the scarcity of in-demand walkable urban land, coupled with exclusionary drivable suburbs.

The third critical finding builds on the second. This tiny sliver of desirable land – 1.2% of the top 35 metropolitan areas – generates nearly 20% of US GDP. In the context of the entire US, it’s only 0.07 of the total land mass, where 7% of the US population is privileged enough to live.

Walkable urban areas have net fiscal impact

All of this makes the fourth finding very clear: research shows that walkable urban areas almost always generate a sizable positive net fiscal impact for local government. Indeed, most drivable sub-urban places depend on subsidies, even high-end subdivisions. Building more walkable urbanism is the best way to keep local government fiscally healthy while increasing the availability and affordability of desirable places.

The report points to Arlington, Virginia, as a national model. The city’s walkable land mass is disproportionately high for the US. This has created financial support for its nationally ranked schools, in spite of the fact that Arlington has a large immigrant community with 80 languages spoken in its public schools. The city achieved this by converting 10% of the county’s land mass to high-density walkable urban places along the underground Metrorail that connects to downtown Washington, DC. This 10% of land generated 20% of tax revenues 30 years ago. Today, it generates more than 50% of tax revenues.

Another example is Carmel, Indiana, an historical drivable suburb on the outskirts of Indianapolis. The long-serving Republican Mayor Jim Brainard has, through a redevelopment authority, recreated its original downtown, a civic/performing arts centre and mixed-use developments that are connected by a walking/biking trail lined on both sides by townhouses and mid-rise multi-family buildings. When asked about the city’s ongoing redevelopment approach, the Mayor pointed directly to increased tax receipts.

Walkable urban areas are operationally efficient

Co-author Christopher Leinberger – a real estate developer and consultant, and a former Brookings Institution fellow and researcher – points out that most local jurisdictions, including suburban towns, cities and counties, face grave financial futures due to unsustainable, sprawling infrastructure (in addition to unfunded pension plans). Walkable urban areas are 5-20 times denser than most drivable suburbs and consequently are more efficient and less costly to maintain.

As noted in the Arlington example, the revenues generated by walkable urban areas are many times that of drivable sub-urban places. More importantly, the cost to build, maintain and operate walkable urban places is a tenth to a twentieth on a dollar-per-square-foot basis of drivable sub-urban places. Be it public safety, water and sewer lines or cell phone networks, infrastructure in high-density walkable urban areas is far more economically viable.

To better assist cities and suburbs make financially-sound redevelopment decisions, firms such as Places Platform, are developing software to enable developers, real estate asset owners and local jurisdictions to make real-time decisions about their spending (both capital and operating). For real estate asset owners, these new platforms show the current price premiums for walkable urban assets and probable future price/rent trends. For local government, these tools allow for infrastructure spending and subsequent operating cost decisions to be made instantaneously, even during public hearings, to assess the fiscal impact of increased density, transportation improvements and social equity outcomes.