In an effort to lure new commercial development, many communities want to make sure that prospective developers and businesses have access to accurate demographic data. However, this can be challenging in areas that are growing rapidly. Understanding this challenge requires a basic understanding about how demographic data is collected.
Data Sources
For much of CDS’ work, external data sources (also called “secondary sources”, as opposed to “primary research”) provide a major component of our research information. Demographic data that describes the characteristics of the residential population in a given area is the most obvious example of this. After all, it would be impractical and (horrendously) expensive for clients to hire CDS to inventory individual residents and gather information on household and personal characteristics for anything more than a city block – and even that would be a challenge. Fortunately, third-party services exist that provide useful counts and estimates for such demographic profiles.
Of course, the most well-known provider of such services is the U.S. Bureau of the Census. Its products are considered the “gold standard” of demographic data, because this agency brings the massive resources of the federal government to bear to its constitutionally-mandated mission. Most famously, its Decennial Census of population and housing attempts to obtain essentially a 100% count of all residents and housing units in the nation. Between each Decennial Census, the Bureau provided annual total population and housing estimates for states, counties, and larger cities, so that ongoing trends could be more easily monitored. The annual estimates do not represent an actual count, but instead are based upon obtainable local data such as new housing permits. They are considered much less accurate than the Decennial Census, and only provide top-line totals in any case.
The American Community Survey
Since the 2000s, the Bureau of the Census has added an annual series of estimates, the American Community Survey (ACS). Certain data that used to be part of the Decennial Census, such as estimates of annual household income, are now provided by the ACS, in addition to standard estimates of population and housing. The ACS is available for standard geographies down to Census block groups. The Bureau generates its ACS data through actual surveys of a sampling of the residential population. However, due to budget limitations, sample sizes are limited. This results in unacceptably large margins of error at smaller geographies. The Bureau compensates for this by taking a multi-year sample for smaller places – hence one will find this data source called the “5-Year ACS” for areas such as block groups and small towns. Larger places still have the “1-Year ACS” available.
So, while the addition of the ACS to the Bureau’s lineup of data releases is helpful for obtaining more current demographic information than the previous Decennial Census, there are still some fairly significant accuracy limitations that users of this data (such as CDS) have to consider. In small areas where change is rapid – suburban areas with massive new suburban growth on formerly rural land, or infill areas with large scale redevelopment and population influx – the 5-Year ACS is unlikely to provide a very true current demographic picture. Compounding this issue is the fact that all Census data (the Decennial Census, the annual population and housing estimates, and the ACS) have a time lag between survey period and actual release to the public. For example, the most current ACS data sets are the 1-Year and 5-Year samples ending in 2014. The 2015 data sets won’t come out until later in the summer.
Recent Example
CDS recently completed a profile of the East Downtown Management District, known officially as the EaDo District. The District currently lacks a strong base of neighborhood-level retail and service businesses, and desires such investment in order to become a more complete urban neighborhood. But in an area like EaDo where population and residential development are growing rapidly and dramatically reshaping the character of the community, CDS faced a challenge in providing a current profile that accurately reflected the size and nature of its population, now and in the near term.
For much of CDS’ work, external data sources (also called “secondary sources”, as opposed to “primary research”) provide a major component of our research information. Demographic data that describes the characteristics of the residential population in a given area is the most obvious example of this. After all, it would be impractical and (horrendously) expensive for clients to hire CDS to inventory individual residents and gather information on household and personal characteristics for anything more than a city block – and even that would be a challenge. Fortunately, third-party services exist that provide useful counts and estimates for such demographic profiles.
Of course, the most well-known provider of such services is the U.S. Bureau of the Census. Its products are considered the “gold standard” of demographic data, because this agency brings the massive resources of the federal government to bear to its constitutionally-mandated mission. Most famously, its Decennial Census of population and housing attempts to obtain essentially a 100% count of all residents and housing units in the nation. Between each Decennial Census, the Bureau provided annual total population and housing estimates for states, counties, and larger cities, so that ongoing trends could be more easily monitored. The annual estimates do not represent an actual count, but instead are based upon obtainable local data such as new housing permits. They are considered much less accurate than the Decennial Census, and only provide top-line totals in any case.
The American Community Survey
Since the 2000s, the Bureau of the Census has added an annual series of estimates, the American Community Survey (ACS). Certain data that used to be part of the Decennial Census, such as estimates of annual household income, are now provided by the ACS, in addition to standard estimates of population and housing. The ACS is available for standard geographies down to Census block groups. The Bureau generates its ACS data through actual surveys of a sampling of the residential population. However, due to budget limitations, sample sizes are limited. This results in unacceptably large margins of error at smaller geographies. The Bureau compensates for this by taking a multi-year sample for smaller places – hence one will find this data source called the “5-Year ACS” for areas such as block groups and small towns. Larger places still have the “1-Year ACS” available.
So, while the addition of the ACS to the Bureau’s lineup of data releases is helpful for obtaining more current demographic information than the previous Decennial Census, there are still some fairly significant accuracy limitations that users of this data (such as CDS) have to consider. In small areas where change is rapid – suburban areas with massive new suburban growth on formerly rural land, or infill areas with large scale redevelopment and population influx – the 5-Year ACS is unlikely to provide a very true current demographic picture. Compounding this issue is the fact that all Census data (the Decennial Census, the annual population and housing estimates, and the ACS) have a time lag between survey period and actual release to the public. For example, the most current ACS data sets are the 1-Year and 5-Year samples ending in 2014. The 2015 data sets won’t come out until later in the summer.
Recent Example
CDS recently completed a profile of the East Downtown Management District, known officially as the EaDo District. The District currently lacks a strong base of neighborhood-level retail and service businesses, and desires such investment in order to become a more complete urban neighborhood. But in an area like EaDo where population and residential development are growing rapidly and dramatically reshaping the character of the community, CDS faced a challenge in providing a current profile that accurately reflected the size and nature of its population, now and in the near term.
In EaDo, developers have been converting former industrial and commercial land to residential uses, especially townhomes (but also multifamily apartments and condominiums), at a fast pace over the last several years. Prior to this spate of (re)development, the residential population in the District was quite low, and of very limited economic means. Available demographic information from the Census (and private demographic services which base their information primarily upon Census data) for the EaDo District, because of the limitations described above, was clearly not reflective of the actual demographic characteristics as they are today.
CDS tackled this problem by examining the nature and pricing of the new residential development occurring in EaDo, plus thoroughly accounting for the quantity of the residential units there today and in the near future, based on announced development plans. We then looked for a more thoroughly developed urban neighborhood whose demographic characteristics should be similar (based on home price, type and urban location) to EaDo’s and where such development has been established just long enough to have a more accurate demographic depiction in the available Census data. We chose the neighborhoods off Washington Avenue, which have redeveloped from original single family detached housing with a lower-income population to denser, more upscale townhomes and occasional multifamily since the early 2000s. We then applied the household demographic characteristics from that area to the households and population estimated by our aforementioned housing assessment.
The result? CDS estimates that based on recent and currently active development, EaDo has approximately 5,600 residents (up from less than 3,000 in 2010) in over 2,800 households. Its median annual household income is estimated to be nearly $98,000, far above the Houston regional median of approximately $62,000. Two-thirds of adults age 25 or older have completed a bachelor’s degree or higher, compared to only 30% for the region. In other words, this is a neighborhood that deserves to be on the radar of potential businesses that seek growing urban neighborhoods with disposable income.
You can download the recent CDS report on EaDo here. Or, contact the District directly via its website, eadohouston.com .
CDS tackled this problem by examining the nature and pricing of the new residential development occurring in EaDo, plus thoroughly accounting for the quantity of the residential units there today and in the near future, based on announced development plans. We then looked for a more thoroughly developed urban neighborhood whose demographic characteristics should be similar (based on home price, type and urban location) to EaDo’s and where such development has been established just long enough to have a more accurate demographic depiction in the available Census data. We chose the neighborhoods off Washington Avenue, which have redeveloped from original single family detached housing with a lower-income population to denser, more upscale townhomes and occasional multifamily since the early 2000s. We then applied the household demographic characteristics from that area to the households and population estimated by our aforementioned housing assessment.
The result? CDS estimates that based on recent and currently active development, EaDo has approximately 5,600 residents (up from less than 3,000 in 2010) in over 2,800 households. Its median annual household income is estimated to be nearly $98,000, far above the Houston regional median of approximately $62,000. Two-thirds of adults age 25 or older have completed a bachelor’s degree or higher, compared to only 30% for the region. In other words, this is a neighborhood that deserves to be on the radar of potential businesses that seek growing urban neighborhoods with disposable income.
You can download the recent CDS report on EaDo here. Or, contact the District directly via its website, eadohouston.com .
About the Author: Steve Spillette is President of CDS Community Development Strategies and has performed a variety of market studies and financial pro-forma analyses for both private and public clients. Mr. Spillette has several years of experience in retail market analysis and multiple degrees related to real estate and planning--including an MBA from Texas A&M University.
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