Home values rise in dense neighborhoods

Kirsten Kaufmann

Living close to the store, coffee shop and library isn’t just convenient, it also makes a home more valuable. It’s hard to say exactly why this is the case, but it’s clear that even in the current economy, a backlog of unmet demand for real estate in walkable, dense, urban communities (PDF) exists. To some, this means development patterns are due for a change.

A study released by CEOs for Cities in August called “Walking the Walk: How walkability raises home values in U.S. cities,” found that an additional one point increase in Walkscore means an increase of between $500 and $3,000 in home values. Walkscore.org calculates how walkable an address is based on what services are available within a mile radius.

Other statistics back up the study written by Portland-based Impresa Consulting. In August, sales of existing condos and co-ops were up more than 10 percent from August 2008, while existing single-family home sales rose only 2.5 percent nationally, the National Association of Realtors reported.

“People are willing to pay more for walkable neighborhoods,” says Clark Williams-Derry, research director at Seattle’s Sightline Institute, a nonprofit think tank. “The reason is that there is more demand than there is supply.”

Actual on-the-ground experience on the West Coast bears out this theory. Kirsten Kaufman is a Portland real estate broker who focuses her business on buyers who want to live in a place that allows them to drive less. While most of her colleagues have seen their business take a dive in the past year, Kaufman says hers has nearly doubled. She uses Walkscores to help her clients identify potential properties. Most want something that scores at least 75 out of 100, she says.

A couple of large national brokerages also use Walkscores. ZipRealty, based in Emeryville, Calif., introduced the feature to its online listings in the summer of 2008. It’s been a useful tool for customers, according to Leslie Tyler, vice president of marketing for ZipRealty, which in Q2 2009 saw its revenue grow to $32.1 million, a 5.6 percent increase from the year-earlier period.

“The mismatch between supply and demand is, in part, an artificial one that we’ve created through zoning codes and planning practices,” says Williams-Derry.

The way to address this problem in a time when there is not a lot of undeveloped land left in cities is for them to focus their current “piecemeal decision making” by planning around natural urban centers such as transit hubs, he says.  Also, allowing permits for more “backyard cottages” is a tactic that increases density to a point where more local businesses can be supported without changing the character of single-family home neighborhoods too drastically.