Urban Perspective
Wharton's Susan Wachter helps
define what cities need to grow.
Like the flow of traffic in and out of downtown on a
workday, the prospects for America's cities seem to wax
and wane. Pessimism took hold in the 1970s and 1980s
as people moved to the suburbs and urban jobs disappeared.
Optimism later surfaced as young couples began
to gentrify old neighborhoods, sometimes at the expense
of poorer residents. On occasion, a restaurant renaissance
will bloom, and the prospects of cities will seem
bright; at other times, a deteriorating public school
system and block after block of decaying housing can
make for a bleak outlook.
Susan M. Wachter, professor of real estate and finance,
has seen pundits pronounce the death and resurrection
of cities more than a few times. But her view has
remained consistent. She is bullish on urban America.
"It's clear that there is the potential
for new investment in cities," she says.
"There are continuing advantages to the
clustering of firms in cities especially in
knowledge-based sectors and other
fields where in-person contact is key.
Infrastructure, culture, commercial real
estate, both public and private, are heavily
concentrated in cities. I do not think
cities in the future will decline absolutely
in population, although they
undoubtedly will relatively to suburbs.
In fact, recent trends point to urban
recovery."
Wachter's passion is to conduct research
on real estate – on real estate economics,
urban economics, and housing
finance. "I don't think cities have been
dying a natural death. If so, we'd see
cities dying across the world," she says.
"In fact, the global urban problem is too
much growth. In the United States,
there are particular processes at play
weakening cities. The processes are self-generating.
As the middle class leave
cities, the tax base decreases, and taxes
go up. Unfortunately national housing
policy has also contributed to the exit of
the middle class and cities' decline. But
this can be reversed."
Wachter is perhaps best known for
her pioneering research on housing affordability.
In addition to her work in
this area, she has numerous publications
on house price dynamics, land regulation,
community reinvestment, and urban
growth patterns. She also has done
research on mortgage markets and major
secondary mortgage market institutions,
Fannie and Freddie.
A member of Wharton's finance
department for many years, Wachter
helped establish the real estate department
with Professors Peter D.
Linneman and Joseph Gyourko in
1994. The department has six primary
faculty members; five other Penn faculty
members hold secondary appointments
and play important roles in
teaching and research. U.S. News and
World Report has consistently ranked
the department first among real estate
departments in the nation.
"Working with Joe and Peter to set
up this department was important for
the fields of urban and real estate economics,"
says Wachter, who served as
chairperson of the department from
1997 to 2000. "It's unusual that urban
issues and real estate economics are
found together in an academic setting.
The department and Wharton's Samuel
Zell and Robert Lurie Real Estate
Center combine public and private market
research. We're an example for
European and U.S. business schools,
which have looked to us as a model as
they establish real estate programs. This
is a delightful time to be at Wharton.
Not many people get a chance to be
part of a department's birth and help
it grow."
Wachter's work extends beyond
academia and has brought Wharton
expertise to play in the business and policy
arena. This includes creating of a
Geographical Information Systems
(GIS) facility that employs state-of-the-art
modeling technology to analyze
commercial and residential real estate
development and price appreciation
patterns in cities.
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