Olmsted’s Ideals Can Help Solve Our Real Estate Mess

By Michael G. Messner

More than 150 years ago, America’s greatest landscape architect, Frederick Law Olmsted, created Central Park and changed New York City forever. He went on to transform dozens more cities, leaving a priceless legacy of vibrant, beautiful cityscapes. And, in the process, he increased property values.

Olmsted discovered this himself when he tracked the value of land around Central Park and found the city’s $13 million investment had led to an astounding $209 million increase in just 17 years. The architect recognized then what many planners still fail to grasp: parks and managed green space are vital pieces of urban infrastructure that not only improve the quality of life for millions of residents but drive economic growth.

Today we must act to again transform our cities. The commercial real estate binge of the past decade has left some 1.4 billon square feet of empty stores, vacant office space and unused parking lots. Residential real estate is a massive problem as well. The distressed property is a drag on our communities and our national economy. It also threatens to topple even more banks that hold mortgages on these “toxic assets.” Most smaller banks have more than half their assets in real estate loans, tying up cash that could otherwise be lent to small businesses.

We need a solution that can move these toxic assets off the banks’ books, reduce the surplus of commercial space and create new jobs, all while revitalizing our cities. This brings us back to Olmsted.

Olmsted designed transformative parks, campuses, and greenways; his firm completed an amazing 6,000 commissions and launched a green wave that spread throughout 19th century America. A green wave today could help us solve the 21st Century real estate mess.

We don’t have the luxury of vacant land that Olmsted often started with; rather we must bulldoze the underperforming and underutilized property, put people to work creating parks on some of the land and land bank the remainder until the economy recovers.

Beginning with Atlanta, Georgia Tech is researching what is needed “on the ground” to accomplish this in 12 major cities. The project is known as Red Fields to Green Fields (www.redfieldstogreenfields.org).

Under this plan, some of the abandoned and underutilized property would be acquired by a parks agency or public-private partnerships, which would then begin demolition, park design and construction, putting people to work immediately. More jobs would come as the improved areas attract new development. Georgia Tech has found that nationally such a program would create hundreds of thousands of new jobs and stabilize property values, as it creates cleaner, greener cities.

This would not be the first time that property has been bulldozed for economic gain. The railroads, which had many miles of underused track to maintain, pulled up 55 percent of their track in the past 60 years to increase profitability, and built 19,000 miles of rails-to-trails, linear parks. Pittsburgh, realizing the steel industry was never coming back, tore down the riverfront steel mills and replaced them with an attractive mix of parks and office space. In Michigan, Flint and Detroit are finding ways to “bank” land as open space.

The federal government has an important role to play in this effort. Rather than backstop bad real estate paper through the banking system, the Fed and Treasury could help finance acquisition of excess commercial real estate through a land bank fund. Instead of buying mortgage-backed securities, why couldn’t our Fed buy “land-backed securities,” excess developed real estate to be held as green space, investing in America’s land banks? With the right financing structure, philanthropic entrepreneurs could use leverage to remake America just as some of our bad developers used easy bank financing to help create the excesses.

Acquisition money could also come from new tax incentives that encourage banks and landlords to donate land, and wealthy individuals and corporations to buy conservation tax credits. Georgia Tech’s analysis has also shown the monies needed for a nationwide program would be a tiny fraction of current real estate support programs, such as the quantitative easing or the Fed’s recent purchase of $1.5 trillion of mortgages.

The latest stimulus package did much to protect jobs, but little to stimulate the economy with transformational investments. The stimulus projects changed little about our country. Converting underused commercial real estate to green space and ”banked” land would be transformational. It would create jobs, strengthen the banking system to encourage new lending, and stabilize property values so continuing real estate owners would be ready to spend again. Most importantly, lush, new parks would enhance neighborhoods across the country. This plan can both start an Olmsted-inspired green wave and clean up our country’s real estate mess.

Michael G. Messner is a Wall Street investment fund manager. He and his wife, Jenny, funded the documentary The Olmsted Legacy, to be shown on WHUT channel 32 at 8 pm Sunday, Jan. 2 and are funding the Red Fields to Green Fields research at Georgia Tech.