A pre-housing-bust development near Las Vegas has a street layout that impedes foot and bicycle traffic.
Credit: Cameron Davidson, Getty Images

A house outside the city has long been part of the American dream. But that is changing -- part of a profound transformation described in a new book by Fortune's Leigh Gallagher.

By Leigh Gallagher
July 8, 2013

When the United States suffered its epic housing bust, no part of the country felt the agony more than the suburbs. Of course, suburbia and its farthest reaches (known as exurbia) were where the most egregious homebuilding excesses took place. Once things fell apart, they became ground zero for foreclosures and short sales, leaving what some writers described, in near-apocalyptic terms, as “zombie subdivisions.” In truth, the housing bust only accelerated a tectonic shift: The near-universal yearning for a spacious house in the suburbs — a central element of the American dream — is receding. So argues Leigh Gallagher, an assistant managing editor at Fortune, in a new book, The End of the Suburbs: Where the American Dream Is Moving. Gallagher uncovers this epochal shift and describes the many reasons behind it. She chronicles the growing distaste for long commutes and sprawling development that have sent families back to more urban areas; the demographic changes that have led to a dramatic decline in the number of suburban households with young children; and a litany of other shifts, including surprising reversals in suburban and urban housing, poverty, and crime. For every generation after World War II until now, population flowed from the city to the suburbs. Today, as this excerpt from Gallagher’s book demonstrates, a tide that long seemed inexorable has begun to reverse:

Diane Roseman and her husband, Steven Spitz, had lived all over the world by the time they decided to settle in Westborough, Mass., in 2002. Roseman grew up in the suburbs of Morris County, N.J. She and Spitz had their first child while living in Southern California and then moved to Jerusalem. By the time they returned to the U.S. — Spitz, a computer engineer, had been transferred to the Boston area — they had three children under 5 years old, and Roseman coveted the space and ease of life the suburbs would provide. “I wanted the minivan and the big house,” she says. “I wanted to try the whole American dream.”

They looked at Newton, a wealthy, older suburb, but prices were high, so they started looking farther out. “You get into this mindset that if I’m spending $500,000, I should get a big house. It shouldn’t be a little house,” she says. In Westborough, a suburb some 30 miles west of Boston, they found a 3,000-square-foot center-hall colonial built in 1985 in a subdivision that was brimming with other young families. The schools were excellent. It was all going to be great. Their fourth child, a girl named Ella, was born three weeks after they moved in.

It didn’t take Roseman long to realize the life she’d signed up for was not the one she wanted. She missed being surrounded by people of a wide mix of ages and life stages; most people in her neighborhood were couples in their thirties to fifties raising children. She didn’t realize how much work would go into keeping up the house; her husband spent almost every weekend shoveling snow or taking care of the lawn. And she had no idea how much time she would be spending in her car. Roseman says she would spend the hours from 3 to 6 p.m. each day shuttling her children to and from swimming, chess, ballet, Hebrew school, jazz, soccer, music lessons, and more. “I’m in my car from morning till night,” she said at the time. “My car knows the way to gymnastics.”

Of all the complaints about modern, postwar American suburbs, most can be traced to the suburbs’ relationship with the car. The history of the suburbs has been largely dependent on the automobile — not just because people need cars to commute but because the very design of the suburbs, in which millions of houses are spread out at low densities across the country, doesn’t lend itself to any other type of transportation. Postwar suburbs were designed with cars as their first priority, and that in turn has led to a number of complicated, unintended consequences.

Because Roseman’s neighborhood was a self-contained subdivision on a closed-off loop, for instance, the loop itself was safe, but since it terminated in a fast-moving bigger road — suburban street systems typically work on a “hierarchical” system, whereby residential streets flow into faster-moving “collector” roads, which in turn flow into bigger still “arterial” roads — neither she nor her children could leave the subdivision on foot or bicycle. Once their street fed into the larger road, the cars went too fast. “[My kids] couldn’t ride their bikes to the library or anything,” she says.

Roseman had expected her kids to run around outside and play in the subdivision. She says she “had this dream of kids walking up and down the street and knocking on doors.” That turned out not to be the case. Indeed, because of the lack of serendipitous interaction this kind of residential design fosters, children in many suburbs today tend to play according to a rigorous schedule of coordinated playdates and activities. “Everyone has a play set, but you don’t have access to that play set unless you arrange a playdate,” she says. Of course, some of this is due to a shift in parenting style over the years and to our playdate-centric culture, which is thriving in cities as well. But many people lament the lack of free play or impromptu encounters — whether between adults or children — in today’s suburbs, especially compared with older suburbs that many of these parents themselves grew up in.

Whether it’s because everything is so far apart or because it’s not possible for safety reasons or because it’s just not fun, suburban residents, relatively speaking, don’t walk much. Studies using pedometers have found the average American takes a little over 5,100 steps a day, compared with 9,700 steps for Australians, 7,200 steps for the Japanese, and 9,650 for the Swiss. In large part, this is because America is so much more suburban than those countries. In the U.S., roughly half of all trips taken by car are three miles or less. When it comes to trips under one mile, research by Harvard economist Edward Glaeser has found that in areas of sprawl, Americans hop in their cars 78% of the time.

This has taken a toll on our health. You don’t need to be a rocket scientist to deduce that more time in cars means we are less active. Research has been piling up that establishes a link between the spread of sprawl and the rise of obesity in the U.S. Children, for instance, are four times as likely to walk to schools that were built before 1983, when most students arrived by foot, than after, when schools started to be built farther away from town and were designed to meet the needs of students arriving by car. Says Dr. Richard Jackson, a pediatrician and chair of Environmental and Health Sciences at UCLA, who has tracked the impact of sprawl on public health: “We have built America in a way that is fundamentally unhealthy.”

In newer suburbs, people often decline to walk even when they can. One of the tipping points in Roseman’s Westborough experience came when she suggested that the parents in the neighborhood start walking the children to school, which was about a third of a mile away and accessible through a wooded path. The route entailed an extended walk through an isolated area, so it wasn’t ideal, but Roseman suggested that the parents could take turns accompanying the kids each morning. “Nobody would do it,” she says.

In the end, Roseman and her husband decided that the car-dependent, subdivision lifestyle wasn’t for them. After six years in Westborough, they sold their house and moved their family to an attached row house in Cambridge.

Roseman is not alone — she is at the forefront of a trend that is revolutionizing our housing market, our lives, and the fundamental social equation that has guided our nation. According to analyses of census data, from 2010 to 2011 the largest American cities grew at a faster rate than their surrounding suburbs for the first time in more than 90 years; more recent data now show that from 2011 to 2012, that trend continued at an even faster pace. To some degree this is a reaction to the recent housing crisis, which saw so much overexpansion, especially in the suburbs and exurbs. But it’s also the first time since the adoption of the automobile that cities grew faster than suburbs.

At the same time, big U.S. cities are in the middle of a renaissance. Many downtown populations grew at double- digit rates from 2000 to 2010. Cities that were once left to deteriorate now have so many waterfront marinas, multiplexes, loft apartment buildings, convention centers, and sidewalk cafés that they more closely resemble amusement parks than the dangerous places they used to be. In cities from Washington, D.C., to Boston to St. Louis, developers have turned once gritty neighborhoods into some of the most desirable new enclaves in town.

Retailers are charging into cities too. Wal-Mart and Target are developing new formats designed for more urban areas. Whole Foods, that emblem of yuppification, is opening in Harlem. Company headquarters ranging from United Airlines to Hillshire Brands to online shoe retailer Zappos are moving from suburban office parks to urban downtowns, while in Silicon Valley, many of the hottest tech startups are forgoing the Valley itself and opening in San Francisco. Even sports stadium construction these days is going urban: Of an informal survey of 23 ballparks built since 1990, all but two can generally be described as “urban,” with most built in a city’s downtown area. Perhaps the most symbolic urban push comes from homebuilder Toll Brothers: The longtime creator of suburban mega-homes is now putting up luxury condos in places like Manhattan and the hippest neighborhoods in Brooklyn.

This doesn’t mean everyone is rushing into big-city skyscrapers and all suburbs are going to vanish. We are a suburban country, and there are millions of people for whom life in a city is anathema. But like Roseman, many in suburbia are looking for other options. Along with the urban renaissance, the other dominant housing trend is the boom in demand for more walkable, urban residential communities even within suburbia.

Nearly every major homebuilder these days is working on some effort to effectively urbanize the suburbs. There are an estimated 400 “city replicas” already built or going up in suburban America, ranging from small-scale walkable residential villages to giant, ambitious “lifestyle centers” that combine retail, apartments, restaurants, and sometimes high-rise apartment buildings. Many of the biggest homebuilders are involved: In Glenview, Ill., a North Shore suburb of Chicago, Pulte Homes is building the Glen, a master-planned community of several hundred townhouses built around a town center with a movie theater, spa, comedy club, pub, and coffee shop. (You can “leave the car keys at home,” the website says.) Not far away, Pulte also has Arlington Crossings, a community of 66 stately-looking townhouses from 1,400 to 1,700 square feet. “We’re seeing more of a demand for the evolution of suburbia and a desire for community centers where walking areas and retail areas are more accessible,” says Deborah Meyer, the company’s chief marketing officer, “where you don’t have to get on a highway to get a cup of coffee.”

Indeed, many of these efforts are being led by former builders of conventional subdivisions. Take John McLinden, a gregarious Chicago native and a veteran conventional builder. In 2010, in the depths of the housing crisis, he came across an opportunity in his native Libertyville, Ill., a suburb 35 miles north of Chicago. An upscale townhouse community on a desirable parcel of land mere steps from the town’s main street had fallen on hard times; just five of a planned 31 town homes had been built before the developer went belly-up.

McLinden had recently seen Seaside, Fla., a development that attracted wide notice for its appealingly old-fashioned sensibility. He had connected with the “romance” of its downtown, its front porches, and its narrow streets. He thought this could be the way of the future and saw particular potential in the Libertyville parcel’s location steps from the bustling main street. He bid on the land and won — and began turning School Street into a row of 26 Arts and Crafts-style bungalows nestled up against one another, each with its own wide front porch. He turned the eponymous historic schoolhouse on the property into 15 open-plan, loft-style condos.

McLinden started marketing the idea, talking up the accessibility of Libertyville’s main street and the coziness of the community he envisioned, where neighbors could get to know one another, hang out on their front porches, and walk less than 500 feet for errands and entertainment. Within a few weeks, with little to show people other than rough sketches, he had buyers lined up. “Off of squiggly drawings, I got six hard contracts with 20% down for something that had never been done in the suburbs,” says McLinden. “And we did it in the midst of a housing crisis.” Within 18 months he had sold all the homes.

McLinden is now setting his sights on a second, bigger development in Libertyville, as well as a separate project in nearby Skokie, Ill. When I sat down with him at the National Association of Home Builders’ convention in early 2012, when the rest of the attendees were still morose about the housing market, his enthusiasm was contagious. “It’s city living in the suburbs,” he said eagerly, sitting so far on the edge of his seat he was almost falling off. “This is the way the world’s going, even if no one knows it yet.”

For Diane Roseman, moving to Cambridge wasn’t easy. She and her husband got a deal on a fixer-upper, but they still had to spend more than what they were able to sell their Westborough house for. But her family is thrilled. Her children walk to school. Her husband works for Google and can choose between a 10-minute walk or a three-minute bike ride to work. “He’s so happy,” she says. Everything the family needs is accessible by foot, bicycle, or public transit. They have a “postage stamp” backyard, Roseman says, but her husband is free from spending weekends maintaining a big lawn. And if they want to play outside, her kids walk across the street to the park.

When I first connected with Roseman, she happened to answer the phone while she was in her car, driving her kids to a museum. She apologized profusely for even being in it. “It’s a rare day that I take the car,” she insisted. And yet despite the headache of buying, then selling their suburban home and relocating four children to new schools, Roseman doesn’t regret her experience in Westborough. In fact, she thinks it made her more appreciative of her situation now. “In some ways I wish we never had that suburban interlude,” she says. “But I think I always would have wondered.”

Excerpted from The End of the Suburbs: Where the American Dream Is Moving, to be published in August 2013 by Portfolio, a member of Penguin Group (USA), Copyright © 2013 by Leigh Gallagher.

This story is from the July 22, 2013 issue of Fortune.

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