Roundtables on Sustainability Summary of Discussion

Roundtable on Sustainable Design II: Economic Opportunities
The American Institute of Architects
Washington, D.C.
December 13, 2004


Economic issues were the focus of the second roundtable on sustainable design, managed by the AIA Center for Communities by Design (CxD) and held at the AIA national component offices in Washington, D.C., on December 13, 2004.

The session attracted nearly 30 representatives of industries, professions, and organizations with a shared stake in how design, building practices, and related public policies affect the three interdependent aspects of sustainability in communities and society: environmental responsibility, social equity, and economic development.

The roundtable on economic issues advanced a national discussion begun in October 2004 (see “Roundtable on Sustainability I: Housing”). In conjunction with several AIA knowledge communities, the CxD will hold six sustainability roundtables in all, to be followed by a national, AIA-sponsored symposium on sustainable design in Fall 2006.

The roundtable series grew out of the AIA’s mission to support architects in creating healthy, sustainable, safe communities nationwide and, more specifically, from recommendations from the AIA’s Sustainability Task Force, said David Downey, Assoc. AIA, CAE, managing director of CxD. Because the sustainability movement involves so many people and organizations outside the profession of architecture, he noted, a collaborative, interdisciplinary approach is required—one ever-mindful of the role played by business, finance, and consumer interests as well as the those dedicated to environmental sustainability and social equity. Toward that end, Downey posed this question to the group: “From an economic standpoint, how do we make these decisions [for sustainability] easier for business and consumers to make?”

Indeed, understanding the changing economic drivers of growth, development, job creation, and social equity will be crucial to the balanced perspective needed to inform a cohesive, actionable sustainability agenda, added 2005 AIA President Douglas L. Steidl, FAIA, in his welcoming remarks. The Institute is committed to helping to forge this broad perspective as well as a new leadership network that can mobilize both private and public sectors to take the necessary actions. “Better communities aren’t going to happen unless we all take our little slice of [community development] and put it together and understand the interoperability of it,” Steidl said.

Financial institutions have an inherent interest in sustainability “because bankers are interested in growth and development,” said keynote speaker David Parish, a “recovering architect” and former senior vice president, housing and community investment, of the Federal Home Loan Bank (FHLB) of Boston. At a time when people in much of the country “are increasingly resisting growth,” the finance community is justifiably concerned, he noted. “This, ladies and gentlemen, is not good for business. Unless we are able to change patterns and perceptions of growth, many of you will be joining me in retirement,” Parish said.

Sustainability is essential from almost any standpoint, as Parish defined it: “Sustainability is an activity that improves conditions for future generations; the goal is not preservation but improvement. Sustainability doesn’t only have to do with energy conservation or more efficient development patterns; it has to do with improvements in the lives of all people.”

Designers are in an excellent position to lead the way, but many other interests are getting involved—and should be involved, Parish said. “Here comes the truly frightening part of my comments: I have taken it as my personal goal to get bankers much more involved in design decisions. We have a terrible problem with literacy in this country, particularly in the area of design. Until we involve more people in the debate on sustainability and design, we will never get to really test the validity of our arguments.”

One way in which the FHLB of Boston (with $50 billion in assets, one of the smallest of the 12 federally chartered institutions in the FHLB system) has gotten involved is by incorporating The Design Advisor (www.designadvisor.org) as a tool in developing a “Community Development Checklist” that must now be submitted with every grant request to the bank. Over the past 10 years, the FHLB of Boston has provided more than $127 million to help fund more than 19,000 units of affordable housing in New England and has disbursed more than $3.9 billion in reduced-rate funding for moderate-income housing and community economic development.

The Design Advisor “has proven to be a wonderful tool to introduce those developing and financing affordable housing to the design process,” Parish said. The bank’s checklist “requires applicants to articulate the relationship of their development to a list of smart-growth principles, and questions, among other things, the green-building experience of the development team.”

Parish’s leadership on this issue shows what can happen when you blend the perspectives of those who know how to finance housing, those who know how to design housing, and those who know about environmental issues, said roundtable co-facilitator David Dixon, FAIA, principal-in-charge of planning and urban design at Goody Clancy in Boston. “The AIA is very committed to an interdisciplinary approach, to collaboration with your organizations and many others to create an understanding of how our society can commit itself to sustainability—economic as well as social and environmental sustainability,” Dixon said. “We have before us the ability to provide leadership that is in search of new models.”

“Not Your Father’s Economy”—The Big Picture

The need for new models arises from rapid and dramatic changes, over just the past 20 years, in both the demographics of the U.S. population and economic conditions. “We’re still a society committed to sprawl” despite these changes, Dixon said in a presentation summarizing current economic challenges and opportunities.

The bad news: “Economic development patterns, aka sprawl, are literally undermining our way of life,” Dixon said. Decades of lip service to the goals of smart growth and environmental protection have not stopped the expansion of sprawl, a major contributor to traffic congestion, pollution, social fragmentation, and declining public health.

The good news: With a public sector “nearly broke” when it comes to infrastructure funding, especially for new development, almost no U.S. state or city can afford the costs of further sprawl, and sustainable solutions will be the only option. “It’s called ‘smart growth,’ but it’s really ‘we can’t afford the alternative’,” Dixon said.

Dixon outlined numerous pressures, both demographic and economic, that give sustainability advocates an opportunity to assume new leadership roles in shaping the environment:

• The workforce has changed radically since 1980; it is older, more racially and ethnically diverse, and relatively less well-paid. Manufacturing’s share of the labor market has decreased by 40 percent.
  
• The wealth and income gap between rich and poor continues to widen, with the lowest 40 percent of Americans having much less buying power than in the 1980s. The national savings rate is close to zero. This economic fragmentation produces greater social fragmentation.
  
• Despite an increasing need for compact, mixed-income development, such development has become economically more difficult to accomplish. Experience in markets such as Baltimore and Seattle shows that 1,000 to 2,000 new housing units are needed within a 10- to 15-minute walk to support one block of new Main Street retail.
  
• Unprecedented demand for affordable housing and urban housing is not being met, although some major homebuilders are beginning to respond. The demand arises from U.S. population growth (expected to double over the next 50 years); flat spending on housing across age groups now that baby boomers with children no longer dominate the housing market (70 percent of U.S. households today do not include children); decreases in average household wealth and income levels; and a growing population that desires walkable communities, shorter commutes, and other benefits of living in more compact or urban areas.
  
• “Health concerns are creating new constituencies for smart growth,” including public officials who are responding to pressures to help protect public health. Studies are beginning to confirm a link between suburban sprawl and increases in chronic health problems (e.g., diabetes, respiratory ailments, and high blood pressure) often associated with higher obesity rates.
  
• Investment trends now favor development in “24-hour cities” where people can both live and work—a reversal from the mid- to late-1980s, when major lenders saw “9-to-5 cities” or “edge cities” as the being the safest areas for investment.

As a society, Dixon concluded, “We are finishing a chapter that was created by a confluence, not only of demographic [changes] but also a series of federal policies, cheap energy, the ways in which we financed housing and development, that conspired to create a dynamic of sprawl, and that had much to do with how we shaped our economy. But that chapter is profoundly over.”

In its place will be the disappearance of the “mass market” as developers and other businesses seek to serve the more diverse and fragmented “nation of niches,” the Urban Land Institute predicts. Rising energy costs, growing congestion, health concerns, and the sheer financial burden of supporting infrastructure and public services will result in regulation to encourage compact development. Meanwhile, cities and states will increasingly rely on the private sector to pay for the services, amenities, and infrastructure traditionally funded by the public sector.

Improving Economic Opportunity and Choice for Those in Need

Social equity, diversity, and justice are among the greater economic challenges for sustainable communities. Leading a wide-ranging discussion to frame the questions and define these issues was Reese Fayde, CEO of Living Cities, a New York City-based national investor collaborative of financial institutions, foundations, and government agencies. Part of Living Cities' agenda is to invest in rebuilding urban neighborhoods for long-term sustainability. “Once the investment is made, you want to believe the investment will be sustained,” Fayde said.

Some of the design-related issues that affect community sustainability and opportunity for those in need revolve around financial independence, asset-building, and growth. In addition, enduring communities need diversity. New urban investment often leads to gentrification instead of mixed-income development.

Opportunities to achieve financial independence are critical to any lasting solution, said Alix Contave, program officer, economic development, at the Local Initiatives Support Corporation in Boston. “People who are financially independent have choices” in how and where they will live and work. “People who are financially dependent do not.”

Among those choices should be a diversity of housing options, Fayde noted. The prevailing emphasis on homeownership has become something of a religion, but it should be just one tier among the housing opportunities for people of different income levels. “Affordable housing” also needs to be redefined, she added. While many people continue to assume it is needed only for people in the lowest income brackets, affordability today is an important consideration for a broad range of working people such as firefighters, nurses, and teachers.

Complex issues concerning availability of high-quality educational opportunities, jobs, green spaces, and transportation and housing options all pose barriers to diversity in many urban communities—barriers that will require creative, even unconventional, steps to overcome.

The massive shift in capital for city infrastructure from public to private sources has created new voids, new tensions between various constituencies for sustainability, and a need for new leadership, several roundtable participants noted.

“What we want to do is preserve the level of diversity, and the market is dumb about things like this,” said Parish, noting that society cannot rely on conventional free-market forces to address all these issues. “If we’re a community, we need to act communally,” and at some point that means public resources, he said.

Kaid Benfield, director of the Land Use and Transportation Program of the Natural Resources Defense Council, said he often has had to convince environmentalists that density in some places means more green places elsewhere. “While I think the environmental community has been willing to join the business community” in promoting dense development, “we’ve had little success” in getting the business community to help the environmental cause, he said. “Until it becomes more two-sided, I don’t think we’ll make as much progress as we need to.”

Such issues may not be quickly addressed, Dixon said, but developing new policies and promoting new ways of thinking is part of the process. “The resources we used are disappearing, but as a society we have tremendous resources.” The AIA roundtables can provoke discussions that produce a communal response and take leadership to the next level. “We’ve had public-to-private capital transfer but not a parallel leadership transfer,” Dixon said. “That should be an important part of what the AIA comes out and talks about.”

Supporting the Private Sector—Tale of One City

The city of Gaithersburg, Md., recently developed economic development partnerships with builders, engineering firms, architects, and a major biotech company that attracted thousands of new jobs, revitalized a troubled residential area, and developed a new town center with several major retailers.

The success of these early projects has made other businesses and lenders willing to invest in the city’s projects, which include ongoing restoration of the city’s Olde Towne section, said Gaithersburg City Council Vice President Henry F. Marraffa Jr. Marraffa also is vice chair of the National League of Cities’ Community and Economic Development Steering Committee.

Gaithersburg, the third-largest city in Maryland (population, 56,000), has one unusual characteristic: It has always been debt-free. With a $35 million annual budget and no increase in the city tax rate in 40 years, the city earns $3 million to $4 million a year in interest and follows a strict pay-as-you-go policy, Marraffa told roundtable attendees.

The public-private partnerships have included the following:

• A real-estate management company built two buildings in Gaithersburg assisted by favorable 50-year lease terms for the land ($1 per parcel) and loans to expedite construction. The buildings included parking facilities and have successfully attracted tenants.
  
• MedImmune, a biotechnology company that recently located its headquarters in Gaithersburg, will bring 3,000 to 5,000 jobs to the city—“one of our better investments,” Marraffa said. The city worked with state and county officials to coordinate efforts and put permitting and approvals on a fast track.
  
• The city donated two pieces of land and provided a developer with a $2 million, no-interest loan to demolish an apartment complex that had become “the drug capital of Montgomery County” and to build a more upscale building that now is fully occupied. The city handled relocation of the former tenants, paying their expenses and attempting to keep families in the same school district, with equivalent or better housing.
  
• The city created mixed zones (requiring city council approval) to assist with Olde Towne restoration, moving from a shopping-center model to a town-center model. It limits major stores to a 60,000-square-foot footprint but allows them to build upward. Target agreed to build two stories, and others have followed suit. Central garages have been built to handle traffic flow while getting people to walk around the town center.

With public-private partnerships, “everybody wins,” Marraffa said. “The city gets a new building up three or four years faster than we regularly would, and we get an increase in revenue stream without raising taxes.”

The ensuing discussion emphasized the importance of public investment to create energy and attract people, thereby attracting business interest. A vision shared by both the public and private sectors, with citizen input, is also essential. “Green tape” policies, to streamline permitting and review processes, is inviting to businesses. Design standards to ensure sustainability (e.g., links between housing and transportation, green design, codes to ease rehab of older buildings, and “fix it first” programs) are also critical.

Fostering Regional Economic Competitiveness

To a great extent, the economic component of sustainability is a regional matter. Economic regions are not bound by political boundaries; they can cross state and even international borders. However, political divisions within a region can be important to sustainability because they may create fragmentation in policies that can hinder development or have ripple effects throughout the region, said Peter Kwass, principal of Mt. Auburn Associates of Somerville, Mass., an economic-development consulting firm.

He defined an economic region as a contiguous area with shared characteristics that distinguish it from surrounding areas:

• A similar economic structure requiring a similar labor force (e.g., workers in electronics, automotive, or tourism industries
• Common industrial clusters, i.e., companies connected through designing, producing, and distributing similar products
• Shared workforce and labor mobility throughout the region.

Job creation may be closely related to a region’s “traded sectors,” Kwass said. A region’s dominant traded sectors typically attract people from outside that region for certain products or services. For instance, Boston is known for its “eds and meds” (educational institutions and medical institutions). In Washington, D.C., government is a dominant traded sector, attracting many defense and other contractors as well as nonprofit organizations with strong government affairs agendas.

Regional economic competitiveness depends on many of the same elements that cities do—a skilled workforce, quality of life, available financial capital, transportation infrastructure, the tax and regulatory environment, and so on—but on a larger scale, a region's competitive strength or weakness affects the municipalities it contains. Therefore, a strong civic culture and leadership throughout the region that mobilizes public-private partnerships is “a very important factor in competitiveness,” Kwass said. In addition, the ability of municipalities to set aside parochialism and self-interest to think and act regionally naturally improves regional competitiveness, he said.

Sustainable development practices support regional competitiveness, Kwass said. For instance, local labor markets operate at optimal efficiency only if people have public-transportation and housing choices near their workplaces. However, sustainability advocates lack the data to convince many business interests and public officials that environmentally sound practices reduce costs and boost the bottom line, he noted.

In addition, one notable deterrent to sustainability is what Kwass called “the fiscalization of economic development”—decision making based strictly on local property tax revenue. He cited this common rationale: “We don’t want affordable housing because when we have more families with kids, it costs more for us to educate them than we get in tax revenues.” These same officials may also want to attract big-box retailers to reduce the tax burden on the existing local tax base, exacerbating sprawl and strip-mall development.

Full-cost accounting for such development, including all the infrastructure costs associated with the big-box stores, could be one way to combat this tendency, some roundtable participants suggested. Another disincentive would be “impact fees” attached to development to help handle infrastructure costs; such fees already are being levied as one-time costs to homeowners in some areas. Another means could be a “policy academy” to develop and promote leadership for sustainability among public officials. The Alliance for Regional Stewardship (ARS) (www.regionalstewardship.org) has some initiatives in the works.

Conclusions, Consensus, and Next Steps

The importance of a vision for regional economic sustainability emerged as a dominant theme of the roundtable. “In the past, regions didn’t have to be sustainable. Now they do,” Kwass said. Despite a changing economy and escalating public concerns about the cost of housing, congestion, transportation, and access to good health care, few regions devote much funding or attention to planning. “The public sector either needs to pay for this, or we need public leadership to get others to pay for it.”

On the positive side, Dixon said, the network being developed through the AIA roundtables can play an extraordinary role in promoting that leadership. “We have an opportunity to promote a sustainability agenda . . . that we have not had for decades,” he said.

Another recurring theme was the importance of social equity, particularly through economic opportunities and investments. “Part of this is creating choice for a much broader range of our society by helping them to create the resources to have choice,” Dixon summarized. “A sustainable agenda needs to be married to one about providing choice to those who don’t have it.”

A huge part of that agenda must address access to high-quality education, many roundtable attendees emphasized. The new economic paradigm is that jobs increasingly follow people rather than the other way around. In an economy where jobs increasingly come from “industries of the mind” instead of smokestack industries, education has become especially critical.

This interdisciplinary dialogue will continue with the next Roundtable on Sustainable Design, to be held March 4, 2005, at the AIA offices in Washington, D.C. The third roundtable will focus on environmental issues and is entitled “Measures of Sustainability: Qualitative and Quantitative Metrics from Materials to Buildings to Land Use.”