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Efforts to Attract Millennials Are Reshaping Downtown Areas

New research is lending insights on how millennials’ preferences are changing urban environments.

This story was originally published on The Urban Edge

Millennials are on the cutting edge of a great inversion happening to U.S. urban areas. Many white millennials and baby boomers are leaving their suburban roots for central city downtowns, while people of color and immigrants, who have historically lived in inner cities, are relocating to the suburbs. Living downtown allows millennials, who are delaying or rejecting marriage and parenthood at higher rates, to have new experiences, meet new people, and be in walkable, amenity rich and transit-accessible neighborhoods.

Downtowns are changing in response to millennials, but we know less about how or why these changes are occurring. Our report, “Cementing Millennials Downtown: Expressions and Impacts,” reveals how real estate developers are helping to attract and retain millennials in the downtowns of two central cities, Phoenix and Houston, which are emerging sites of millennial migration. We draw findings using data from the U.S. Census, regional media, and interviews with 22 experts involved in Phoenix and Houston’s downtown housing markets.

Growing Concentrations of New Housing and Millennials

As millennials were moving to downtown Phoenix and Houston during the 2000s and 2010s, new housing was also being built to keep up with demand. Both regions’ downtown concentration of new housing and millennials increased from 2000 to 2010; downtown Phoenix experienced additional gains from 2010 to 2016. Millennials headed over half of households living in newer homes in downtown Phoenix and Houston from 2011 to 2015, with most in multifamily rentals.

Millennials living downtown typically fit one of two distinct lifecycle stages: emerging adulthood, a term coined by psychologist Jeffery Arnett, or attempting adulthood. Emerging adults, who tend to be in their 20s, value flexibility, mobility, and new experiences above traditional adult milestones, such as financial independence, homeownership, and parenthood; these Millennials make “a lifestyle choice” in deciding to live and stay downtown. Attempting adults, who tend to be in their 30s, value the material and emotional trappings of these milestones above the freedoms enjoyed by emerging adults. However, attempting adults experience constraints in achieving milestones like homeownership downtown and often “are renting because there’s no choice” rather than being “renters by choice,” like those in emerging adulthood.

Molding Millennial Preferences into the Brick and Mortar

Downtown housing targeted to millennials tends to have unique design features tailored to meet millennials’ preferences, as perceived by real estate developers. Developers in downtown Phoenix and Houston targeted millennials by creating “authentic,” one-of-a-kind, and context-specific properties. These developers believed that housing was an important part of millennials’ identity and tried to differentiate their projects from others on the market by working with historic buildings, doing adaptive reuse, incorporating modern design features or art installations, and building on unique sites. For instance, one developer in downtown Phoenix commissioned a local graffiti artist to paint murals reminiscent of Arizona sunsets. Developers in downtown Phoenix and Houston also designed their buildings and chose sites to cultivate an inside/out lifestyle, as they perceived millennials as engaging in activities outside of their homes that other generations would engage in inside of their homes, such as eating, relaxing, and exercising. Building design features that support an inside/out lifestyle incorporate opportunities for these activities in common areas or have porous borders to adjacent amenities, allowing residents to fluidly move between their homes and the coffee shops, restaurants, and parks that they adopt as their living rooms, kitchens, and yards.

Constant connectivity and social consciousness are other features of new properties designed to attract millennials downtown. Developers integrated high-tech features, such as commercial speed fiber, electronic package delivery notification systems, and balcony outlets. These developers also built housing that was energy efficient, made from reusable materials, and located near transit or ridesharing services. Some projects included reduced onsite parking. Overall, housing in downtown Phoenix and Houston has become more innovative as a result of developers’ translation of what they perceived to be millennials’ preferences into the built environment.

Transforming the Regional Housing Market

The symbiotic actions of millennials and developers in downtown Phoenix and Houston are reshaping these regions’ housing markets. Millennials and developers are endowing downtown Phoenix and Houston with a greater sense of place and diversity of activities. Developers have transformed vacant or surface parking lots into housing, stores, and restaurants. Millennials have created “nodes of walkability,” attracting amenities like bars and festivals. These investments have helped to remake downtown Phoenix and Houston as entertainment and leisure destinations. However, there is a social cost to these investments. For instance, organizations that serve homeless populations have faced pressures to relocate.

Growing housing unaffordability downtown also was mentioned by many of our interviewees. Downtown Phoenix and Houston have long been more disadvantaged than the rest of their central cities and suburbs, but their populations became markedly more affluent and educated from 2000 to 2016, with the largest increases occurring from 2010 to 2016. Tax breaks and other policies that encourage luxury housing construction have contributed to this trend. Millennials in the emerging adulthood lifecycle stage are most able to modify their living situations to weather increasing rents and stay downtown; low-income families are least able to adapt, which may reduce the number of housing opportunities available to them in downtown over time.

The slackening of suburban housing markets in the face of waning demand among millennials was another concern expressed by our interviewees. Yet, suburban tract home developers are adapting buildings styles from downtown Phoenix and Houston to smaller suburban downtowns, such as Glendale, Gilbert, Chandler, Mesa, Tempe, and Peoria in the Phoenix region and Stafford, Sugar Land, Pearland, CityCentre, and The Woodlands in the Houston region, which may continue to attract millennials to these places.

Planning for Housing Diversity and Innovation

The current expressions and impacts of millennials’ downtown migration have implications for the future of the Phoenix and Houston regions. There is a looming mismatch between the housing being built downtown and millennials’ future housing needs. Millennials’ current housing—designed mostly for people without children—will be insufficient as they start families. It is important to plan for more diverse housing and family-friendly amenities, so that downtowns are able to retain their social diversity and investment over time. Suburban communities also need to consider how to increase walkability, access to public transit, and their sense of place to capture millennial interests and investment. Phoenix and Houston have prominent examples of mixed-use, higher density development in their suburbs, but low-density single-family tract homes continue to dominate.

Even greater innovation in housing is on the horizon in downtown Phoenix and Houston, as developers compete to attract millennials. For example, a development in progress in downtown Phoenix in 2016 planned to recycle greywater, have its own ride share program, and grow plants on the building walls. These innovations may help to further distinguish downtown Phoenix and Houston as unique destinations to live, work, and play. However, developers’ ability to innovate is shaped by local regulations, such as minimum parking requirements. It is critical for planners to periodically revisit their regulations in conversation with downtown developers and residents to cultivate a space to allow for continued innovation.