The residential development trends in downtown Chicago are undergoing a transformation, as record numbers of new condominium units are completing construction and few new buildings are breaking ground.

Downtown Chicago is nearing the end of a four-year construction boom period, which has resulted in the completion of 18,500 new condominium units, a record number of condominium deliveries for the downtown Chicago market.

Starting in 2006 with 4,200 units completed, an additional 4,800 units were completed in 2007, along with 4,900 units in 2008, and another 4,600 units which will be completed during 2009. Currently, 75 percent of the units being completed in 2008 have already been sold, and 60 percent of the 2009 deliveries are also reported to be under contract.

However, the construction pipeline for new condominium buildings in now suddenly empty after 2009. Only three new downtown buildings totaling less than 500 units have obtained construction loans in 2008 and started construction this year. Thus, there will be little new inventory of condominium units delivered to the market in 2010 and 2011, and likely into 2012.

Because of the weakness in the housing market, developers are postponing or cancelling their plans for potential new projects. During 2008, 11 proposed condominium projects were cancelled, with developers closing their sales centers and refunding deposits to the buyers. With the problems in the housing market along with the financial markets, these projects were not gaining adequate pre-sales in order to obtain construction loans. In addition, developers are finding that construction financing is extremely difficult to obtain with lenders also requiring substantial equity, another hurdle in an already near-impossible scenario.

What does this mean? Certainly, the lack of new condominium product will help the unsold inventory situation, allowing the market to absorb what is currently delivered or delivering within the year. With little new product being developed, buyers will find that their choices will start to thin out.

Currently, prospective buyers have a multitude of new construction housing choices. However, as these units sellout and few new buildings start construction, the new construction alternatives in 2010 and 2011 will be extremely limited, consisting of a lesser number of unsold units along with resale properties. Thus, the most desirable units will have already been purchased, leaving the tougher units in the unsold inventory pool.

With so many potential buyers now putting their own decisions to purchase on hold, we expect to see evidence again of pent-up demand again in the market, once the nation’s economic conditions improve. Yes - it will take a time to work through the current unsold inventory, given the sluggish sales pace seen in 2008. However, once there are some positive signs of the market rebounding, both buyers and developers will move off the sidelines and reenter the housing market arena.

The strongest markets are historically affected least by market downturns and do recover first, and downtown Chicago has certainly proven itself to be one of the strongest housing markets in the metropolitan area.

Gail Lissner, CRE, SRA, is co-author of Appraisal Research Counselors’ quarterly Downtown Chicago Residential Benchmark Report. This in-depth analysis of the downtown Chicago housing market tracks development activity and helps people investing in residential real estate make informed decisions.

Homeowners with roofs over their heads are applauding Congress’ passage of a housing stimulus bill as the most important legislation affecting real estate since President Franklin Delano Roosevelt created the Federal Housing Administration during the Great Depression.

With home prices down 16 percent nationwide from their 2006 peak, and with foreclosures at a record high, lawmakers have been working on the housing bill for months in an effort to help homeowners and bolster the overall market.

The legislation is the centerpiece of Congress’ efforts to bail out as many as 400,000 troubled American homeowners. The law offers affordable, government-backed mortgages to homeowners at risk of foreclosure and strengthens the battered secondary mortgage market agencies Fannie Mae and Freddie Mac with a temporary rescue plan.

“Realtors are in the business of building communities, and our 1.2 million members understand that this legislation will go a long way in helping people buy and keep their homes,” says Dick Gaylord, president of the National Association of Realtors.

The Illinois Association of Realtors say the Housing and Economic Recovery Act of 2008 will help stabilize the Illinois housing market, boost buyer confidence and offer a lifeline to many facing foreclosure.

“This legislation, and particularly the tax credit, will help first-time home buyers who’ve been on the sidelines waiting for the economy to improve to take that important step up to homeownership,” says IAR President Kay Wirth. “The significant provisions of this bill should bring some stability back to the housing market in Illinois and across the country.”

First-time home buyers have until June 30, 2009 to take advantage of the $7,500 tax credit. They also can benefit from the large selection of homes available on the market and affordable mortgage interest rates, Wirth notes.

Under the legislation, the FHA will be allowed to insure up to $300 billion in new 30-year, fixed-rate mortgages for at-risk borrowers in owner-occupied homes if their lenders agree to write down loan balances to 90 percent of the home’s current appraised value.

The law will permanently increase the cap on the size of mortgages guaranteed by Fannie Mae and Freddie Mac to a maximum of $625,500 from $417,000. The FHA maximum loan limits for high-cost areas would also increase to a maximum of $625,500. Higher loan limits will make it easier for borrowers to get mortgages, because those mortgages are more likely to be traded if they are considered conforming.

The new law eliminates a program that has allowed sellers to provide down-payment assistance for FHA loans. The law would also increase the down-payment requirement for borrowers getting FHA loans to 3.5 percent from 3 percent.

The law also gives states $4 billion to buy up and rehabilitate foreclosed properties.

Ironically, some of the biggest cheers came from the rental-apartment sector of the real-estate industry because the legislation limits several homeownership incentives and balances new home-buying incentives with expanded rental housing perks.

Two apartment advocates — the National Multi-Housing Council and the National Apartment Association — applauded the banning of seller-financed down-payment programs, the boost in the minimum down payment for FHA-insured loans, and limiting the tax credit for first-time home buyers to one year. The credit is only available to households below certain income levels, and it must be repaid.

The law also expands and improves the Low-Income Housing Tax Credit program and temporarily increases the tax-exempt private-activity bond cap for multi-family and mortgage-revenue bonds by $11 billion for 2008.

Real-estate columnist and media consultant Don DeBat has written about Chicago-area housing and mortgage markets since 1968. He is chief executive officer of DeBat Media.

When most people shop for a home, their minds are on financing and floor plans, not the details of their daily commute. They’ll look up the local school system’s report card, but they probably won’t test drive the area roads at rush hour. Many will value a garage or indoor parking spot, but never consider that the bottom-line cost of their new home includes what they’ll spend driving to and from work, the grocery store, and soccer practice every year.

The reality is each rush-hour driver in Chicagoland loses nearly $1,700 a year while sitting in traffic, according to a new report from the nonprofit Metropolitan Planning Council. Rising gas prices snag the headlines, but wasted time accounts for almost $1,600 of the price tag.

Homeowners who look beyond the picket fence – and down their driveway – can see growing gridlock means more time, fuel and, ultimately, money out of their pockets. For the first time in modern society, transportation and housing are neck-and-neck for the top two household expenses.

As would-be buyers add up the true tab for their dream home – including the cost of getting to and from it – these startling numbers are increasingly difficult to ignore.

So are the intangible costs associated with congestion across the region, where drivers waste 66 extra minutes each week in traffic jams. What would you do with an extra hour each week?

Maybe you’d make your doctor happy and get some exercise – tough to do behind the wheel. (Exercising your finger muscles does not count.)

Perhaps you’d spend more time helping your kid with that pesky math homework: If a car traveling at 45 miles per hour leaves Point A at 7 a.m., when it will arrive at its destination 30 miles away?

If you weren’t so busy fighting traffic, maybe you’d have time to volunteer in the community – or, even closer to home, fix the leaky faucet in the kitchen.

This is the stuff of life, difficult to measure in dollars and cents, but important no matter where we call home.

High gas prices have led to sharp declines in the value of homes in distant suburbs, while homes in inner-ring suburbs and city neighborhoods have fared much better, according to a recent report from CEOs for Cities. In response, consumers are demanding the housing market supply more homes in pedestrian-friendly, bike-friendly neighborhoods near transit.

Meanwhile, Web tools, such as the Center for Neighborhood Technology’s Housing & Transportation Affordability Index, are popping up to help homebuyers make educated choices about where they live based on both the value of their home and transportation costs.

Individuals and communities can make a difference not only through their housing investments, but also by encouraging their local, state and federal representatives to vote for policies that support more affordable homes near job centers and transit, and accessible neighborhood streets that include a mix of shops, public spaces, bike lanes and inviting sidewalks.

To learn more about these policies and practices, visit Metropolitan Planning Council’s Web site.

Peter Skosey is vice president of external relations for the Metropolitan Planning Council, a nonprofit civic group that advocates sustainable urban development policies.

With “Operation Malicious Mortgage” in full swing, predatory lenders are now focused in the crosshairs of the Department of Justice and the Federal Bureau of Investigation, government sources say.

The national investigation of mortgage-fraud schemes – the culmination of substantial coordinated efforts in recent months to identify, arrest and prosecute mortgage fraud violators throughout the United States – so far has led to charges being filed against more than 400 defendants.

The FBI estimates that about $1 billion in losses were inflicted by the mortgage fraud schemes employed in these cases.

Locally, Illinois Attorney General Lisa Madigan is suing mortgage lender Countrywide Financial for fraud. The civil lawsuit, filed in Cook County Circuit Court, alleges that Countrywide violated the state’s consumer protection statues by making unaffordable loans and failing to give adequate disclosures to borrowers.

So those greedy predatory lenders – the jackals who caused much of the sub-prime mortgage crisis in Cook County and across the nation – caused thousands of foreclosures and helped create the current real estate recession. Many may soon pay for their actions.

With the real-estate market left in ashes, experts say it may take years for some city neighborhoods and suburbs to recover. But what protection do borrowers have against a future wave of mortgage fraud?

Hopefully, a new Illinois law may help. Under the Anti-Predatory Lending Database pilot program, borrowers applying for a mortgage on one- to four-unit, owner-occupied, residential property in Cook County will be assisted in understanding the terms and conditions of their loan.

“Every mortgage recorded on or after July 1, 2008, in Cook County must have either a Certificate of Mortgage Compliance or a Certificate of Mortgage Exemption attached to it,” said attorney Arden K. Miner, senior manager of underwriting and escrow for Attorney’s Title Guaranty Fund. “The mortgage will not be recordable without the certificate.”

The purpose of the program is to reduce predatory lending practices by assisting the borrower in understanding the terms and conditions of the loan for which he or she has applied. The law, which does not apply to loans on property outside of Cook County, does not prohibit any type of loan, such as adjustable-rate mortgages, or ARMs.

Non-owner occupied property, commercial real estate, residential property containing more than four units and government property is exempt from the law.

As part of the program, mandatory housing counseling by a Department of Housing and Urban Development-certified agency is required in a purchase transaction involving first-time home buyers, or if the borrower is refinancing a primary residence.

Borrower counseling also is required if the mortgage permits interest-only payments, if the loan may result in negative amortization, or the total points and fees payable by the borrower at or before the closing exceed 5 percent of the loan amount.

Counseling also is required if the loan is an ARM which allows adjustments of the interest rate in the first three years, or if the loan includes a prepayment penalty. If counseling is required, the borrower will be notified and given a list of all participating counseling agencies.

Mortgage closers and title companies will generate the certificate of compliance or exemption at closing and be required to enter the information into an online database maintained by the Department of Financial and Professional Regulation.

At the closing, the $200 fee for a Certificate of Mortgage Compliance or the $100 fee for a Certificate of Mortgage Exemption will be split equally between the title company and ether the independent closer or the member closing firm and added to title insurance charges.

Real estate columnist and media consultant Don DeBat has written about Chicago-area housing and mortgage markets since 1968. He is chief executive officer of DeBat Media.

The forecast for summer house-hunting in the Chicago area is pretty clear: The market has some of the best selection of well-priced, new and resale homes and condo choices in years.

The only clouds on the horizon are the threat of higher mortgage rates for luxury home buyers and those who wait to buy, and tougher loan qualification standards for everyone, experts say.

After about eight months of relatively stable, 6-percent home-loan rates, benchmark average 30-year fixed mortgages jumped to 6.32 percent in mid-June from 6.09 percent a week earlier, according to Freddie Mac’s Primary Mortgage Market Survey.

Last year at this time, 30-year fixed mortgages averaged 6.74 percent. The last time the benchmark-loan rate was higher was the week ending Oct. 25, 2007, when it averaged 6.33 percent.

However, buyers of luxury homes in the Chicago area should expect to pay more. In early June, most lenders were charging 7.5 percent to 7.75 percent on 30-year fixed jumbo mortgages, those larger than $417,000.

Experts say Freddie Mac and Fannie Mae’s reluctance to boost the jumbo-loan limit on mortgages they buy in Chicago to the $729,750 now allowed in other high-cost areas such as sections of California, Arizona, Colorado, Florida and the East Coast likely will have a slowing effect on the market for luxury homes.

Some luxury home buyers are side-stepping the low jumbo mortgage limit here by opting for a higher down payment and taking out two loans, one for $417,000 and a second for a line of floating credit for the balance.

“Mortgage rates jumped after a number of Federal Reserve Board officials expressed concern over a threat of inflation,” said Frank Nothaft, Freddie Mac vice president and chief economist. Some analysts believe the Fed will raise rates more aggressively over the year than previously thought, he said.

Interest charges on 15-year fixed mortgages also jumped to an average of 5.93 percent from 5.65 percent a week earlier. However, year ago at this time, the 15-year loans averaged 6.43 percent. In late October 2007 they declined to an average of 5.99 percent.

Meanwhile, one-year Treasury-indexed ARMs inched up to an average of 5.09 percent in mid-June from 5.06 percent a week earlier. At this time last year, the one-year ARM averaged 5.75 percent.

Not only are mortgage rates higher, but in the wake of the sub-prime loan shakeup, about 60 percent of domestic loan officers toughened standards on prime mortgages, according to a new Fed survey.

Analysts also are worried about a glut of unsold homes nationwide. However, serious house hunters who have a good credit score should look at the summer market as cherry-picking time.

Another positive sign is passage of housing bills by Congress that gives the Federal Housing Administration $300 billion in new lending authority and relaxes the standards to provide government-insured, fixed-rate mortgages to debit-ridden homeowners.

The legislation also gives states $10 billion in tax-free municipal bond authority for loans to first-time home buyers, construction of affordable rental housing and refinancing mortgages.

Real-estate columnist and media consultant Don DeBat has written about Chicago area housing and mortgage markets since 1968. He is chief executive officer of DeBat Media.

Buyers are continuing to wait on the sidelines so far in 2008, although there are some very enticing opportunities for buyers with good credit. A decrease in the number of potential buyers actively shopping the market along with attractive interest rates and a record number of building completions this year will provide some excellent buying opportunities. However, with the uncertainty in the financial markets and slower resale market, many buyers are taking a “wait and see” attitude and deferring purchase decisions.

As reflected in our weekly survey of new-construction condominium developments located throughout the city of Chicago, fewer potential buyers are visiting sales offices in 2008 and even fewer are deciding to purchase. Overall, the number of potential buyers visiting new condominium developments each week in 2008 to date has declined 25 percent from the first half of 2007, with sales volume down more than 65 percent from the first half of 2007. Thus, while a smaller number of potential buyers are looking at their alternatives in the market, even fewer are ready to commit to a purchase.

The large drop-off in sales volume and potential buyer traffic occurred in August of last year, coinciding with the public awareness of the turmoil in the sub-prime and credit markets. At this point, market activity has not yet returned to its pre-August 2007 levels.

In 2008 and 2009, developers will complete construction on a record number of downtown Chicago condominium buildings, many of which started their marketing programs during the robust market conditions of 2005 and early 2006. While a total of 10,000 units are projected for completion in 2008 and 2009, 70 percent of the 2008 units and 55 percent of the 2009 units are already under contract to individual owners. Thus, the focus of the developers with 2008 building completions is to sell the inventory that is not yet under contract.

While slower sales velocities are affecting the ability of developers to sell out their projects, it is also affecting the pipeline of new potential condominium developments. As a result, only one new condominium project in downtown Chicago has started a marketing program to date during 2008, and no other major announcements are expected. The lone addition to the downtown market in 2008 is the highest-profile project in Chicago, the 1,194-unit Chicago Spire, which is being marketed both locally and internationally. In contrast, during the first half of 2007, 13 projects in downtown Chicago had already started marketing programs, although four of these proposed projects have already been canceled after a slow initial start.

During the remainder of 2008 and into 2009, we expect that developers will continue to market their units in ongoing projects and will hold off announcements of new projects until market conditions strengthen. Thus, while 2008 and 2009 will have large numbers of units being completed, there will be little ground-breaking occurring during this period, which means that there will be few completions of buildings in 2010 and into 2011.

With the downturn in sales activity in the condo market, we are seeing condominium developers looking at other development opportunities, with many contemplating rental development. Already, 2008 and 2009 will be at record levels for rental unit completions, with more than 4,000 new rental units being completed in downtown Chicago within this two year period. We are also tracking a large pipeline of potential rental developments being proposed, although we expect that few of these proposed developments will actually break ground due to the limited sources of equity and debt in the market.

The “shadow” rental market will also continue to offer additional rental competition, as individual condo unit owners offer their units for rent, continuing a trend that has been present in the downtown Chicago market for the past 30 years.

Gail Lissner, CRE, SRA, is co-author of Appraisal Research Counselors’ quarterly Downtown Chicago Residential Benchmark Report. This in-depth analysis of the downtown Chicago housing market tracks development activity and helps people investing in residential real estate make informed decisions.

Recently, Mayor Richard Daley and the Chicago Transit Authority made news by accepting a $153 million grant from the US Department of Transportation to relieve traffic congestion. The city plans to use the funds to develop a bus rapid transit system and implement "peak period pricing" for parking in the Loop.

This should come as welcome news to anyone who wants easier access to downtown attractions and developers seeking new prospects in untapped city markets.

Bus rapid transit is not your grandfather’s bus service – or your current service, for that matter. A key difference is that bus rapid transit systems have fixed stations, like ‘L’ and Metra stations, which attract new storefronts, increase the land value around stations, and bring new life to the streets and neighborhoods along planned routes. In Cleveland, Ohio, investment in the Healthline, a 6.7-mile bus rapid transit system, sparked 7.9 milion square feet of new commercial development and some 9,000 jobs.

Among urban home buyers, access to transit is among the top selling points. Bus rapid transit improves the reliability of mass transit by 25 to 30 percent and is also faster than buses, thanks to its dedicated lanes and signal priority. Some 5,400 new residential units have developed along Cleveland’s Healthline, a testament to transit’s draw.

It may seem counterintuitive that bus rapid transit will relieve traffic congestion when, by design, it brings new development to communities. Indeed, communities thrive when a certain level of congestion exists; bustling streets and sidewalks are a sign that a community has much to offer. On the other hand, bumper-to-bumper traffic, shoulder-to-shoulder pedestrians, and overcrowded buses and ‘L’ trains gum up the works. Bus rapid transit can help strike the delicate balance between too much and too little traffic by attracting new development while giving people faster, more convenient options for getting to, from and around their neighborhood.

Even for Chicagoans who won’t use bus rapid transit to get around, the system has benefits. Despite well-intentioned but miserably failed attempts to pave our way out of congestion, Chicagoans and visitors to our city have been living a traffic nightmare for years. The city recognizes the need to try a different approach, and fast. Bus rapid transit fits that bill: It is three times faster and eight times cheaper to build than a new rail network, but will take comparable numbers of people off the roads.

It’s getting results in cities in the U.S. and across the globe. Bogotá, Colombia, has an extensive system that moves 1.3 million people per day. Paris Mayor Bertrand Delanoe has eliminated parking lanes to make way for Le Mobilien, the French equivalent. Since taking office on his platform to reduce congestion by 40 percent, Delanoe increased transit use by 5.5 percent in just five years, while decreasing private auto use by 20 percent. Can’t be done in the U.S., you say? Think again. Los Angeles’ has the Orange Line, Boston, Mass. has the Silver Line, and Miami, Fla. has the South Miami Dade Busway, just to name a few.

The city’s congestion relief plan utilizes basic economics. Demand for our roadways is increasing, and they are in limited supply. Bus rapid transit, coupled with a small increase in parking rates, is a smart way to manage demand for this scarce resource. If just a few people choose to move by transit instead of drive during the peak hours, everyone will benefit.

Places that are successfully fighting traffic have one thing in common: They’re striking a balance between too much and too little traffic by trying new, cost-effective approaches to give people better options for getting around. Chicago’s plan is a smart, resourceful and essential first step to making Chicago more livable for generations to come.

Peter Skosey is vice president of external relations for the Metropolitan Planning Council, a nonprofit civic group that advocates sustainable urban development policies.

Foreign investment and financing dollars from countries such as Ireland, Germany, China and Kuwait may be the muscle that pulls Chicago’s new-construction condominium market out of its slump, experts say.

“Several downtown condominium developments currently in the pre-construction marketing stage are finding a smaller pool of lenders interested in financing their projects,” says appraiser Gail Lissner, vice president of Appraisal Research Counselors.

“Equity requirements along with pre-sale requirements are reported increasing, as the mood in the lending community and its appetite for risk has undergone adjustments this year,” she says.

However, several other Chicago condo projects are moving forward thanks to foreign backing or money from overseas.

Backed by Irish developers, Lexington Park Condominiums, a 35-story new-construction high-rise development on the northeast corner of Michigan Avenue and Cermak Road in the South Loop, appears to be on a sales and construction roll.

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Despite the gloomy national survey reports on falling property values that show lower home prices in 77 markets, prices of residences rose in 73 markets countrywide. And Chicago was one of the good real-estate news stories of 2007.

Yes, fewer homes and condos were sold here last year than in 2007, but prices – especially in high demand North Side neighborhoods – rose, in some cases substantially, according to David Hanna, president-elect of the Chicago Association of Realtors.

Overall, the median price of condominiums in the city rose a solid 5.8 percent in 2007, although the number of units sold fell 10.4 percent. Meanwhile, the median price of single-family homes eked out a thin one-half of 1 percentage point rise, while the number of units sold fell 24 percent.

So what neighborhoods were the big winners in 2007? Surprisingly, the Loop, a relatively expensive neighborhood, led the condo-price appreciation downtown with an impressive 42 percent median gain to $397,250 for the 1,046 units sold.

In 2008, two successful Loop projects – 235 Van Buren, a new-construction project by CMK Development, and 200 North Dearborn, a conversion by American Invsco – should continue to lead the downtown boom, experts say. The two projects, one in the Financial District, the other near the Theatre District, accounted for nearly 550 sales last year.

Other hot city neighborhoods that posted rising condo prices last year include: quiet Montclare on the Far Northwest Side with a gain of 29.8 percent to a median price of $235,000 on 41 units sold; emerging Kenwood on the Mid-South Side with an increase of 24.40 percent to $279,900 on 198 units sold, and leafy Forest Glen with a 23.7 percent gain to $365,000 on 13 units sold.

High-priced North Side neighborhoods posted solid gains in 2007, according to CAR, and the market on the emerging Near West Side also was strong. Highlights include:

• Gold Coast and Near North Side. Condominium values appreciated a solid 9.53 percent, posting a median price of $392,000 for 3,131 units sold, while median single-family home values rose 2.57 percent to $1.995 million on 36 sales.
• Lincoln Park. Median condo prices rose 7.6 percent to $413,400 on 1,447 units sold, while home prices rose 4.1 percent to $1.5 million on 183 sales.
• Lakeview. Condo values increased 5.5 percent to a median price of $333,400 on 2,331 units sold, while home prices rose 11.11 percent to $1.15 million on 129 sales.
• Near West Side. Median condo prices rose 7.1 percent to $326,582 on 1,575 units sold, while home prices rose a hefty 32.4 percent to $450,000 on 47 sales.
• North Center. Condo values inched ahead 1.7 percent to a median price of $380,000 on 495 units sold, while home prices rose 4.86 percent to $849,500 on 192 sales. Belle Plaine Commons, an affordable 92-unit condo development targeted to buyers age 55 and older, posted strong sales in 2007, according to Rena Appel of North Center Associates, the developer.
• Lincoln Square. Median condo prices rose 9 percent to $280,450 on 574 units sold, while home prices declined 3.4 percent to $625,000 on 103 sales. “The restaurant, retail and nightlife attractions of this neighborhood have sparked demand for condos along Lincoln Avenue,” said developer Richard Lettvin, who is marketing the Lincoln Crossing development.
• Albany Park. Condo values rose 5.7 percent to a median price of $222,500 on 247 units sold, while home prices skyrocketed 25.9 percent to $480,000 on 91 sales. “A strong condo-conversion market exists in the neighborhood for renovated units in walk-up buildings,” said Charles Huzenis of Jameson Realty Group.
• Logan Square. Median condo prices slipped 0.8 of 1 percentage point to $305,000 on 653 units sold, however home prices posted a solid 12.3 percent gain to $677,500 on 162 sales.

Real estate columnist and media consultant Don DeBat has written about Chicago-area housing and mortgage markets since 1968. He is chief executive officer of DeBat Media.

In 2005, Dave Marcucci of Mississauga, a city in Ontario, Canada, decided his neighborhood needed a change. After surveying his block, he noticed there was no place for people to gather. His big corner lot seemed as good a location as any, so Marcucci dismantled part of his fence, did some simple landscaping, and put in a bench.

The change in Marcucci’s neighborhood was quick and remarkable. Almost immediately, people began congregating around the bench. Neighbors stopped and chatted with each other, kids sat on the bench in the morning as they waited for the bus, and older people rested on the bench during their evening walks.

The simple act of providing people with somewhere to rest and mingle with their neighbors ignited a feeling of community among the residents, according to Jay Walljasper, who told this true story in The Great Neighborhood Book and recounted it for a Chicago audience at a recent event. Marcucci was partly inspired by the idea of place-making, said Walljasper, who is also a senior fellow at Project for Public Spaces, a nonprofit based in New York that works to create and maintain public spaces.

Place-making is the concept of designing public spaces around the way people want to use them. Place-making requires working with local residents to ensure shared spaces have the four key attributes of successful places: a variety of uses, a distinct image and sense of comfort, easy accessibility, and a means of encouraging social interaction. As simple as Marcucci’s bench or as complex as a town square, anywhere can become a great place if it builds on these four components.

Place-making can have positive ripple effects for home owners beyond the specific space. Public gathering spaces give people the chance to interact, which fosters a sense of community, deters crime, and encourages volunteerism and cultural activities. Involving residents in creating a public space sets off a virtuous cycle; people tend to feel a personal investment in the space and are more likely to help sustain or improve the area. For homeowners, this virtuous cycle translates into a more attractive neighborhood.

The Lyndale neighborhood of Minneapolis, Minn., is an example of how place-making can create tangible benefits for home owners, according to Walljasper. Once a crime-ridden area avoided by prospective home owners, Lyndale now is one of Minnesota’s most popular communities. This change is due largely to a group of neighbors who came together to form the Lyndale Walkers. Fed up with crime in their area, the Lyndale Walkers started strolling up and down the streets as pairs or in groups to reclaim their neighborhood. Their intent was not to stop crime in action, but rather to send a message that the streets and sidewalks belong to all residents. Eventually, the crime rate in Lyndale fell, and the neighborhood became an attractive place to live.

Marcucci and the Lyndale Walkers are proof that it often only takes one or two people to set the virtuous cycle in motion. According to Walljasper, after a few months of people congregating on Marcucci’s bench, some of his neighbors put in benches on their own lawns. In Minneapolis, several other neighborhoods were inspired by the Lyndale Walkers and formed similar coalitions.

Ultimately, that’s what place-making is all about: encouraging local residents to create public spaces where people feel safe, happy, and a sense of belonging, all of which can start with a single good idea. Or, as Walljasper put it, “You’ll be surprised what can be accomplished if you’re willing to think big about your little place in the world.”

Peter Skosey is vice president of external relations for the Metropolitan Planning Council, a nonprofit civic group that advocates for sustainable urban development policies.