Years ago at the University of Maryland, I taught "Economic Determinants in Architecture," an elective course introducing architecture students to the real world of capitalism and showing how that world influences design and development. Students learned that market and financial conditions, along with governmental fiscal and monetary policies, can profoundly influence what gets designed and built.
These lessons will be refreshed as government-backed mortgage funding provided by Fannie Mae, Freddie Mac and the Federal Housing Administration diminishes. The effects of more stringent underwriting standards - higher down payment requirements and lower loan ceilings -and tighter credit will ripple through the real estate industry, dampening home buying and construction. At the same time, demand for rental housing will increase, which means architects, including my former students, will have more multi-family projects to design.
Tougher mortgage financing standards are likely to slow creation of exurban, single-family subdivisions, which means less sprawl. While this is bad news for many homebuilders, it may be good news for smart-growth-minded jurisdictions. In areas well served by transportation infrastructure, counties and municipalities are crafting new master plans calling for development or redevelopment at higher densities with mixed-use buildings and lots of apartments. Examples in this region include Tysons Corner in Fairfax County; Potomac Yards in Alexandria; National Harbor in Prince George's County; the White Flint area in Montgomery County, and downtown Columbia, Md.
Rising market demand for rental housing is already a fact, the result of economic recession, rising unemployment, flat or falling home prices and more-conservative loan practices. For a growing portion of the American population, the probable reality is that conventional home ownership will be economically unfeasible and, with gradual or no appreciation in home value, relatively unprofitable. Increasing numbers of American households will rent.
But will this be detrimental to American society and culture, perhaps signaling the end of the American dream of home ownership?
Tomorrow's reality will not be a nightmare. Rather it will be the manifestation of a common-sense, rational concept disregarded during the housing bubble years: Homes should be bought and owned only by people who can sustainably afford to pay the full gamut of home ownership expenses, including mortgage principal and interest, taxes, insurance, utilities, maintenance and repairs. For others, renting will be the economically prudent and necessary choice. Yet it can be a desirable choice.
Rental desirability will depend on several factors:
l Favorable location and multi-modal transportation options within a community, including convenient access to good jobs, good schools, ample shopping, restaurants, recreation, entertainment and cultural facilities.
l Adequate housing unit size and layout. Rental dwellings must be conceived as "homes," with more apartments designed to accommodate families with children.
l Higher levels of aesthetic and construction quality. Apartment buildings and individual apartments must be commodiously planned with well-designed kitchens and baths, soundproofed walls and floors, ample daylighting, reliable elevators, well-appointed public spaces and attractive landscaping.
l Convenient, shared amenities such as parking, outdoor terraces and gardens, playgrounds, swimming pools and spas, meeting and exercise rooms.
l Affordable rents. Desirability will always depend on rental rates being a reasonable percentage of total household income.
Although somewhat affected by tighter credit, rental housing will be less constrained by changing mortgage finance practices because most projects are funded privately without government support. Unfortunately low-income tenants will continue to struggle, since their rents are made affordable through government subsidies. Regardless of what Fannie, Freddie or FHA do, public-sector budget cutting is likely to reduce housing subsidies and cause considerable pain for low-income families.
Destined to be more urbanized, America will increasingly resemble European metropolises, where renting a home is more commonplace and bears no social or economic stigma. For some of America's next generation of citizens, the American dream of home ownership, and more specifically of owning a single-family detached home in a suburban subdivision, will be less compelling and harder to achieve. This is why rental housing must become a desirable choice and not merely an acceptable necessity.
Roger K. Lewis is a practicing architect and a professor emeritus of architecture at the University of Maryland.
