Louisville’s historic reversal in downtown real estate

By John Gilderbloom and Matt Hanka

What’s going on in older urban neighborhoods near downtown is a historic reversal in past real estate trends. Our research shows that certain neighborhoods between 2000 and 2006 have experienced price increases of 100% and even 200%, while other neighborhoods farther way from downtown have declined or remain stagnant.

We show that 8 of the 10 highest property value increases are located within the Watterson Expressway, while the ten neighborhoods with the lowest increases lie outside the Watterson and even a few outside the Gene Snyder Freeway.   Why are property values soaring in neighborhoods near the center of the city?

One reason is that downtown older neighborhoods have become places of creating affordable home ownership opportunities.  In the mid 1990s, innovative and bold partnerships with the University of Louisville, churches, non-profits and the city helped build hundreds of two and three bedroom shotgun homes with a mortgage payment of $400 a month (the starting price was around $50,000).  A married couple with good credit and even working at minimum wage job could afford these payments.  These homeowners are paying half the amount of what a renter would pay today and have seen their housing investment increase by $100,000. For those who bought these homes, they will remain permanently affordable if they are not sold.

Another reason is consumers are paying twice as much at the pump for gasoline. Folks are tired of long commutes from home to work.

People want to do something about global warming by choosing to reduce carbon dioxide emissions by driving less and reducing the greenhouse effect. People also desire for a more active lifestyle, where people have an opportunity to walk or ride a bike to work.

This “green” lifestyle choice is not only better for the environment, but it has the added benefits of making people healthier. For example, in Amsterdam, the lifespan of a person walking or riding a bike to work is 2 ½ to 4 years longer than those who don’t and health care costs are substantially reduced. Another reason for the shift is the “back to the city” movement, where people are finding affordable, historic housing in edgy neighborhoods near downtown. This makes living in a historic property more attractive, and also a greener and more sustainable way to live.

Not all downtown neighborhoods are experiencing an increase in property values. Race does not explain it, since the best performing neighborhoods are integrated or minority dominated neighborhoods.

While Russell has the second highest increase in property values, it was Sam Watkins, longtime head of the Louisville Central Community Center, who had the wisdom to embrace opportunities provided by the University of Louisville Center for Sustainable Urban Neighborhoods (SUN), local, state, and federal government, developers, foundations and banks wanting to make history. Also, key was the civil rights community who protested in front of “drug houses” that eventually shut them down. Downtown neighborhoods that are not performing well are without sound leadership, or so abrasive that it frightens away potential partners.

Many of these downtown neighborhoods are within walking and biking distance of numerous positive amenities such as Fourth Street Live, Kentucky Center for the Arts, Louisville Slugger Field, quality restaurants, and beautiful historic buildings that date back before the Civil War. The new downtown arena, a modern art museum, and expansion of Waterfront Park, will also encourage more people to move closer to downtown.

However, folks are looking for amenities within their neighborhoods as well. Old Louisville, Russell, and Phoenix Hill have a healthy mixture of residences and businesses that makes walking more attractive than driving a car. These neighborhoods represent a new urbanism that is in high demand. 

These older neighborhoods should continue to improve if they take the following actions. First, convert the oppressive and unnecessary one-way streets into two-way streets. Traffic calming makes neighborhoods more family friendly. It also means less crime, speeding, and anonymity in the neighborhood. It also will lead to higher property values. Second, we need bike lanes in these neighborhoods for safer commutes from work to home. Third, restaurants, pubs, antique stores, art galleries, and other cultural activities need to be embraced, and not hindered, by neighborhood “activists”. Fourth, stronger historic preservation ordinances are needed, so that nine-foot hand carved wooden front doors are not replaced by Home Depot artificial plastic bathroom doors. Fifth, the University of Louisville needs to renew its commitment of an urban mission that was once championed by former President Donald Swain. The university needs to lead and not sit on the sidelines by passing up millions of dollars in grant opportunities that encourage private-public partnerships.

Being in Louisville is like living in a “Back to the Future” experience. What is currently happening here in downtown Louisville happened in San Francisco, Boston, Washington, DC, New York, Chicago, Paris and Amsterdam twenty to thirty years ago. The future is downtown which means our neighborhoods will become more diverse racially and economically and become a little greener too.

John I. Gilderbloom and Matt Hanka are at the University of Louisville, Center for Sustainable Urban NEIghborhoods: www.louisville.edu/org/sun