How Real Estate Developers Think. Peter Hendee Brown
the streets would go, built the streets, and subdivided the land. Over time, investment and development followed the path of least resistance: those new streets that provided access to the parcels of land that were for sale.
The industrial era led to urbanization, as people from the countryside made their way into town looking for manufacturing work in the factories that sprang up around the road, rail, and maritime infrastructure that was concentrated within urban areas. Cities filled up with workers who lived in dense housing within walking distance of their factory jobs. At the turn of the twentieth century, public health problems in cities stemming from deplorable housing conditions, overcrowding, inadequate water and sewer systems, and the lack of light, clean air, and public space caused city leaders to begin planning again. The City Beautiful movement that followed resulted in grand plans for urban space and infrastructure. Plans were created for St. Louis by Harland Bartholomew, for San Diego by John Nolen, and for Chicago by Daniel Burnham, who was known for having said: “Make no little plans. They have no magic to stir men’s blood and probably will not themselves be realized.”7
Since the nineteenth century, suburban commuter towns had grown up around train stations but these stations became less important as the invention and improvement of the internal combustion engine led to rapid growth in automobile and truck use, initiating the “rails to rubber” movement. Henry Ford’s mass production of cheap automobiles accelerated this movement, opening up the entire countryside to a new form of suburban development while the influence of the railroads on development patterns continued to decline. Automobile use grew throughout the post–World War II era, and the Federal Aid Highway Act of 1956, a $10 billion-investment in more than forty thousand miles of interstate highways, further fueled this growth. These roads opened up access to the countryside and accelerated the exodus of people and industry to the suburbs, leading to the hollowing out of cities, which were often carved up by the new highways that cut through and isolated urban communities. The flight of the middle class left only low-income immigrants and African Americans in the urban cores of most cities.
In the 1950s and 1960s, the federal government attempted to stimulate private investment in America’s struggling inner cities by implementing big plans. While the majority of urban land in the United States is privately owned and developed, the Urban Renewal program of slum clearance and large-scale urban redevelopment projects put the government in the role of a visionary developer by combining federal funding with public planning and private development partners at the local level. Urban Renewal, however, was costly, had mixed results, and dislocated many of the low-income people left behind in the urban core whose homes and communities were bulldozed to make way for new, modern housing projects that generated new social problems of their own. In the 1980s Urban Renewal became a memory, city governments largely ceded responsibility for planning back to the private sector, and few cities possessed enough land, money, or political will to make any plans at all.
At about the same time, many formerly working-class industrial cities, which had suffered from population losses and the depleted tax base that resulted, started to implement a new economic development strategy. Recognizing the permanent loss of industry and blue-collar factory jobs, these cities sought to transform their downtowns and increase private investment and the tax base by attracting the “FIRE” businesses of finance, insurance, real estate, and other businesses that created white-collar professional jobs. These new workplaces, along with improvements to existing arts and culture institutions and tourist infrastructure, initiated the revitalization of the city as a cultural attraction and place to visit, if not a place to live. In addition to these cultural institutions, many higher education and medical institutions with historic roots and large campuses and specialized buildings in the city that could not be easily relocated began to reinvest in their facilities and surrounding communities. Together, arts and culture institutions and the “eds and meds” began to fill some of the gaps in the urban core and began to attract the middle and upper classes back to the city.
But cities still faced a big challenge, because the only property available for large-scale urban development after the 1970s was land abandoned by former industrial uses like factories, railyards, and waterfronts. Many of these sites were in great locations, close to the downtown core, but they often lacked traditional infrastructure and presented significant environmental challenges that together increased costs, risks, and liabilities to cities and private developers alike. Visionary developers and public officials began transforming these kinds of sites into communities in many cities, including Chicago and Portland, Oregon, as we will see. These sites were so large, however, that they took decades of building production and absorption to completely redevelop and in many places they were still being built out in the 2010s. Urban universities, colleges, and major healthcare systems were among the few remaining institutions that could still develop and build according to “master plans” but many of these had become increasingly landlocked too and had to resort to piecemeal infill planning and the replacement of existing facilities with higher-density development.
At a smaller scale, private property owners and developers were no longer converting agricultural land to whole new neighborhoods and commercial and retail districts, as the Mount Vernon Proprietors in Boston had done. Instead, they were replacing aged building stock and infilling smaller vacant parcels, often with new uses and at increasingly higher densities. But many of the parcels that were available came with the same challenges as the larger industrial sites. For example, cities were full of quarter-block parcels that once housed gas stations or laundromats that sat vacant atop contaminated soil that would be costly to clean up and that imposed risks and liabilities on new owners. Efficient development requires an area of minimum size, shape, and dimensions, so parcels that were oddly shaped or too small to accommodate marketable building types presented yet another set of challenges. In these cases a developer would have to buy up and “assemble” one or more adjacent parcels to create a single, large, contiguous parcel of the right size and shape to accommodate an economically viable development. But land assembly requires patience and entails significant transactional risks, because several if not many parties may be involved and a good development idea can be frustrated by a single landowner who does not want to sell, who wants to hold out for a very high price, or who wants to work with a competitor. And for those who control urban property at any scale, private development is no longer as private as it once was since the public has started to directly engage developers and the governments that regulate them after having lost trust in both.
Challenges of Developing in the Twenty-first Century
Developers like the Mount Vernon Proprietors operated with extraordinary freedom because there were few neighbors at the time who would have objected to the development of agricultural land, but cities have changed through urbanization, population growth, and other trends and forces. Four key movements that started in the 1960s increased the public’s skepticism of both private- and public-sector development and construction activities and led to the rise of “public participation.” First, in 1961, an observant Greenwich Village housewife named Jane Jacobs wrote the classic Death and Life of Great American Cities. Jacobs’s book was the first significant critique of the Urban Renewal program and the failure of its modernist planning efforts. Death and Life marked the turning point in how Americans thought about building their cities, and it has remained a classic and a largely relevant urban planning and design text today. Second, other classics soon followed, including Rachel Carson’s Silent Spring (serialized in The New Yorker and published as a book in 1962), which was widely credited as causing the ban of the pesticide DDT and launching the environmental movement. Third, the mass demolition of blocks of older buildings in city centers by Urban Renewal’s “federal bulldozer” culminated in the destruction of New York City’s magnificent McKim, Mead, and White–designed Pennsylvania Station. Its replacement with what many considered to be a soulless, modernist monstrosity sparked the birth of the historic preservation movement.8
The fourth movement began in 1978 with the passage of the popular ballot initiative Proposition 13 in California. “Prop 13” limited the California state government’s ability to increase property taxes in California, initiating a “taxpayer revolt” and ushering in the era of “no new taxes” throughout the United States. One effect of the antitax movement was that cities began to seek alternatives to using general-fund