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Assistant Professor Suzanne Lanyi Charles' research on residential redevelopment cited in Crain's Chicago Business

Assistant Professor of Urban Planning Suzanne Lanyi Charles' research was sited in an article, "Teardowns make a comeback in Chicago's suburbs," published in Crain's Chicago Business on April 4, 2011. The findings reported come from a working paper on residential redevelopment that Charles wrote for the Joint Center for Housing Studies at Harvard University.

Full article below.

From chicagobusiness.com

Teardowns make a comeback in Chicago's suburbs
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By: Andrew Schroedter April 04, 2011

As the broader housing market struggles to emerge from a three-year slump, activity is ramping up in the one segment everyone loves to hate: teardowns.

From Winnetka to Western Springs, construction of McMansions on sites that once had much smaller houses is on the rise, to the consternation of neighbors and the delight of developers. Much of the new development is in suburbs that already have seen their quiet side streets turned into construction zones during the last decade, such as Winnetka, the teardown capital of Cook County.

Nearly 8% of the residential parcels in the tony North Shore suburb were reconstructed between 2000 and 2010, according to a study by Harvard University's Joint Center for Housing Studies. Posh nearby hamlets such as Wilmette, Kenilworth and Glencoe also saw ample shares.

Affluent Western Springs, where nearly 6.7% of the parcels were teardowns, ranks second in the category, the study found. Yet, surprisingly, middle-income villages like Norridge, Countryside and Morton Grove are not immune, a sign that high neighborhood home values alone don't determine whether a parcel will be redeveloped.

Take a closer look at the suburbs' teardown situation.

The trend reflects a slight rebound in the new-home market, which remains trapped in its deepest funk in decades. The steep decline in home prices is helping developers, who are able to buy existing homes for much less than they would have paid when the market was peaking in 2006. As a result, it's easier to sell the new monster homes for triple the cost of the site, a common industry rule of thumb for profitability.

But that's little comfort to neighbors or preservationists, who detest the cartoonish size and ostentatious appearance of some of the new houses.

"One of the benefits to the downturn is that teardowns have slowed," says James Peters, president of the non-profit preservation group Landmarks Illinois. "That's the issue with the economy improving: They want to pick up where they left off."

Homebuilder Desmond Donnellan is putting the finishing touches on a Winnetka house that, at 7,500 square feet, is more than twice the size of the 1950s-era split-level home it replaced.

The nearly $2.9-million asking price is substantially less than it would have been when the market was hot, says Mr. Donnellan, president of Gurnee-based Donnellan Builders Inc.

He says he can make up for the lower sales price because he paid just $965,000 for the site, a half-block from Lake Michigan. He estimates it would have cost $1.6 million three years ago.

Even though prices of existing homes throughout the Chicago area are at their lowest since 2001, some suburban officials say they are starting to see a resurgence in teardowns. Still, the number of projects remains well below the peak during the last decade.

Winnetka officials expect about 25 projects this year, compared with 19 in 2010 and 16 in 2009; in 2004, it had 59. In west suburban La Grange, officials predict up to 10 homes will be torn down, vs. five in 2010. The development trend peaked in 2005, with 38 teardowns.

Developers "smell an opportunity, but sales are hard to come by," says Tracy Cross, president of Schaumburg-based residential consulting firm Tracy Cross & Associates Inc.

The Harvard study was conducted by Suzanne Lanyi Charles, an urban planning professor at the University of Michigan who examined residential parcels that were rebuilt with new homes in suburban Cook County.

Just 3,924 sites, or 0.7% of the 560,310 residential parcels included in the study, were redeveloped with larger houses during the last decade.

Ms. Charles compared the teardown sites to sites that weren't rebuilt, using a statistical analysis that weighed 20 factors, including location, racial composition of the neighborhood and standardized test scores. She supplemented the study by providing Crain's with a ranking of all 128 Cook County suburbs, both by the number of teardowns and by the percentage of parcels redeveloped. For suburbs that straddle the county line, such as Hinsdale, which has been a battleground over teardowns, only the Cook County portion was included.

Among the study's findings:

  • The cheaper a house is compared to its neighbors, the more likely it will be torn down, a factor that is more important than the overall median home value of the area.
  • Teardown developments are less likely in suburbs where African-Americans or Hispanics are in the majority, even taking into account other factors, such as home values and public schools.

Wilmette resident Bonita Sendelbach has already seen one next-door neighbor's house torn down and replaced with a structure more than three times the size of her home. On the other side, construction on another new home has begun. "The whole house shakes," she says.

Suburban officials say they are better prepared for the next round of teardowns, with ordinances and regulations that limit the hours and noise levels of construction.

That may not be enough for residents like Bonita Sendelbach, 74, of Wilmette, where nearly 4.3% of the residential parcels have been redeveloped.

On one side of her modest, 1,235-square-foot home on Gregory Street, a new house was built in 2009. The 4,064-square-foot house sold for $1.4 million. On the other side, another is under construction. "The whole house shakes," she says.

Some residents dislike the gaudy architecture of the new houses, but Mr. Donnellan, the developer, says buyers love them. "A lot of people with money want a brand new home," he says.

Suburban residents have little appetite to change the zoning of their neighborhoods to prevent the bigger homes. "They like to keep property rights," says Patrick Benjamin, La Grange's community development director.

Now, teardown developers are likely to start swarming close-in suburbs such as Skokie or Lincolnwood, moving away from the North Shore, Ms. Charles predicts.

"There aren't many prime teardown candidates left in North Shore towns like Wilmette, Winnetka and Kenilworth," she says.

For complete coverage of Chicago-area real estate, visit ChicagoRealEstateDaily.com

© 2011 by Crain Communications Inc.

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