Financing New Urbanism projects: Obstacles and solutions

Abstract

A survey of 23 industry practitioners from the development and finance fields yields a number of important conclusions regarding the financing of New Urbanism projects. First, these projects are perceived as generally riskier than typical real estate projects; their multiple‐use nature is the basis ofthat perception. For urban infill projects, the perceived risk is low, while for suburban projects, the perceived risk is high. The relatively high perceived risk for most New Urbanism projects imposes relatively high required rates of return, which in turn require these projects to generate cash flow quickly to be financially attractive to investors. In addition, the development of multiple uses—or multiple product types—in a single project is viewed as inherently more difficult to evaluate and implement. Financiers consequently favor larger, more experienced developers for multiple‐use projects in general and New Urbanism projects in particular.