Home building in suburban areas continues to dominate housing construction in America's largest metropolitan areas, according to a study by the Brookings Institution and Harvard University.
Construction of homes in metropolitan areas grew by almost 78%, from 447,000 permits in 1991 to 793,000 in 1998, the study said.
Though home building is red-hot in some cities, in others it remains ice-cold. The pattern closely correlates with a city's land area, the study found. It concluded that "geographically larger cities are capturing most of the new construction." Fewer homes are being built in cities that are "compact" or "densely developed," such as Miami and Boston, and these cities have a somewhat smaller share of regional housing permits than cities such as Phoenix and Houston, which have "substantial amounts of undeveloped land," the study said.
The study, "Housing Heats Up," by Alexander von Hoffman, a senior research fellow at Harvard University's Joint Center for Housing Studies, was done in cooperation with the Center on Urban and Metropolitan Policy of the Brookings Institution in Washington. It examined housing permit data from a variety of periods, including the economic boom of 1986, the bust of 1991, and the revival in 1996 and 1998, for the 39 largest cities. These cities - with metropolitan-area populations of more than 200,000 - were chosen according to land area.
The study suggests that home builders will have to focus their efforts on cities such as Phoenix and Dallas, where there is a "vigorous" demand for new housing and where "undeveloped, suburban-looking tracts" exist. Builders in economically viable but cold housing markets such as Los Angeles and St. Louis must focus on job and population growth in central urban areas, the study said, and other cities that lack economic strength must invest capital in housing endeavors to spur growth.
Despite a strong national economy, growth in home construction is "distributed unevenly among the cities and suburbs of our metropolitan regions," the study said. What's more, suburban home building is expected to continue to overshadow residential development in urban centers. During the past 15 years, suburbs have had the largest share - 80% to 85% - of new homes built in metropolitan areas. In 1998 about 82% of all homes built in metropolitan areas were constructed in suburbs, the study said.
Though construction was hot in suburbs, the number of housing permits in large cities more than doubled. The growth rate of permits for the cities was 116%, a faster rate than in suburbs and metropolitan areas.
The growth of housing permits in both large cities and suburbs from 1991 to 1998 is still overshadowed by permit issuance in 1986. Large cities had 29% fewer permits in 1998 than in 1986, and suburbs had 23% fewer.
In examining the period between the boom of 1986 and the bust of 1991, the study found that 23 cities had lost share of their metropolitan areas' permit activity to the suburbs, a finding that suggests "economic downturns affect urban markets more than they do suburban markets."
Sorting cities by land area above or below 150 square miles also showed that the more spacious ones had a "strikingly larger share of housing construction thancompact cities." The finding held true regardless of local economic conditions, the study found.
Orlando, one of the hot markets in the less-than-100-square-mile category, had 41 permits per square mile in 1998 - the second highest concentration among the 39 cities.
Jim Lewis, vice president of HomeBanc Mortgage Corp. in Orlando, which is part of FT Mortgage Companies, said "new construction in Orlando is running at a very high pace," with housing developments going up across the entire city. The disparity between the number of resale homes on the market this year and last is "helping fuel construction of new homes because of the limited number of new homes on the market right now," he added.