Finance

Chapter 14 of the New Urbanism Best Practices Guide

Finance is a challenge for New Urbanism, in part because a mix of uses and a variety of housing types generate more variables — which are often equated with higher risk. Complexity also means diversity, however, and diversity is a proven way to manage risk. This chapter examines finance and investment in new urban communities from varying perspectives — those of developers, investors, governments, and individuals.

Because new urban projects are not all alike, they are able to satisfy consumer demands in a variety of places, including big cities, small towns, and transit centers. This chapter draws from studies such as Valuing the New Urbanism, a 1999 analysis that showed that communities with new urban principles generated premiums of 4 to 25 percent (or 11 percent on average). A survey in Urban Land in 2003 found that new urban town centers performed as well as, or better than, typical shopping centers in key characteristics such as lease rates, occupancy rates, and sales per square foot.

This chapter presents financial strategies for developers, such as taking out two loans (one for the residential portion, another for the mixed-use town center) and making the landowner an equity investor. Christopher Leinberger says financial returns from new urban communities lag behind conventional suburban development in the first few years but, if done right, greatly outstrip them in the long run. He offers advice here on debt/equity ratios. Bob Chapman of Traditional Neighborhood Development Partners also offers ideas on sources of financing. Scott Polikov of Gateway Planning Group discusses tax-increment financing in the Verano development in San Antonio. Case studies are presented on projects in North Carolina and Colorado. The chapter closes with a list of new urban and smart growth investment funds and their sizes and characteristics.