Cities were originally built for walking or horses as the only mode of transportation. With the mass production of automobiles in the US between 1900-1915 when the number of US automobiles increased from 8K to 2 million, cars quickly became a dominant mode of transport. Urban planning changed to accommodate this shift. Within cities, roads were no longer built to accommodate bikers or pedestrians except as an afterthought. As a result, suburban commuters spend over one hour per day driving from the house to the office and back to the house. The use of cars in the US dwarves usage of public transit, which was used by only 5% of all US workers in 2019. As much as one-half of a modern American city’s land area is dedicated to streets and roads, parking lots, service stations, driveways, traffic signs, automobile-oriented businesses, car dealerships, and more.

Part of the reason for this is that America’s 20th-century car-centric planning left the country behind, with few viable public transit options outside of dense urban areas. Walkable communities are uncommon in the United States, with many municipalities proving unsafe for pedestrians. Despite the lack of viable alternatives, the demand is there for a different vision of how American cities could look; 60% of Americans desire to live in walkable, pedestrian-focused communities. What’s missing is the initiative to supply that demand.

Culdesac is a company that was founded with the goal of reimagining American cities to be built for people, not cars. Its first neighborhood project is in Tempe, Arizona; if the launch is successful, it will be the first car-free neighborhood built from scratch in the United States. Culdesac’s mission is to reduce congestion, loneliness, traffic fatalities, and address global warming by combining internationally proven urbanism and mobility innovation.

Culdesac was founded in 2018 by Ryan Johnson (CEO) and Jeff Berens (COO). They were roommates at the University of Arizona where they both studied economics and international studies. While in high school, Johnson had worked with his grandfather, a train engineer, to build a website for the first light rail in Phoenix. This was his first exposure to the transportation industry and to entrepreneurship. He was able to visit 60 countries in his time at university due to a scholarship he received, and during his travels, he was inspired by the combination of walkability and great public transportation he observed in international cities.

Prior to founding Culdesac, Johnson was on the founding team of residential real estate company Opendoor and served as VP of Operations. While collecting customer feedback at Opendoor, Johnson noticed users repeatedly asking for “cute neighborhoods” which emphasized proximity, thoughtful architecture, and community. He then reunited with Berens, who had been working for McKinsey in public and social sector practice, and the two decided to start Culdesac.

The two Arizona natives moved operations from San Francisco to Tempe because of its innovation-friendly politicians, proximity to a population center, and climate. While populations in urban cities like San Francisco have declined or seen little growth in recent years, the Phoenix metropolitan area grew by 750K people from 2010 to 2020, passing Boston as the 10th most populous urban area in the US. Johnson and Berens believe that the Sun Belt (southern half of the US) will continue to be a destination as people migrate away from cities. Tempe, a Phoenix suburb with a degree of bike friendliness, embraced Culdesac and permitted them to build apartments without parking spots (illegal in most areas) as long as residents signed contracts to live car-free or not park in surrounding areas. Culdesac participated in the summer 2018 batch of Y Combinator.

Culdesac Tempe, the company’s first planned location, is a 17-acre community built to fit 1K people. Open community space accounts for 55% of the location’s land, including parks, courtyards, retail locations, restaurants, coworking spaces, and more. The neighborhood is meant to satisfy everyday needs and contains 3x more green spaces than a typical development of comparable size.

Culdesac Tempe is split into small pods divided into 761 apartments. Culdesac made these apartments lease-only to shorten the project timeline, but future Culdesac neighborhoods may include the option to buy apartments. The units are situated around courtyards that become the outdoor living rooms and center of the community for Culdesac. The community has a pool, a park, guest suites, a grocery store, and coffee shops.

Source: Opticos Design

Culdesac Tempe was built for easy mobility, community, and reduction of carbon emissions. All streets are car-free because Culdesac believes this is safer, more walkable, and prevents pollution. Roads exist to provide emergency vehicle access when needed. Due to the hot Arizona climate, Culdesac built the streets using pavers instead of traditional asphalt. Pavers reflect less heat and allow rainwater to pass through, replenishing aquifers and decreasing flooding. Paseos (walkways) were designed to resemble Italian and French historic villages.

Source: Culdesac

Because residents must sign a contract that they will not park a car within a quarter mile of the neighborhood, the North edge of Culdesac Tempe runs across the light rail which transports residents to downtown Tempe, 2.5 miles away. Each resident receives $3K per year in mobility benefits, which can be used for ridesharing services, rentable scooters, or the Arizona Valley Metro. Residents receive 15% off all Lyfts, free rides on the metro, and access to Bird scooters. Lastly, there are 1K bike racks and access to on-site EV carsharing, scooter parking, and pick-up zones.

Source: Culdesac

Customer

Culdesac neighborhoods are not marketed to any specific demographic, but certain groups tend to align well with the walkable neighborhood mission. Two demographics, in particular, are likely to be a good fit:

• Young professionals: Professionals looking for an urban experience without having to pay high rent prices, especially those with remote jobs and without families, are likely to find Culdesac’s carless community attractive. Born between 1981 and 1996, 62% of millennials have expressed a desire to live in walkable areas.

• The Silent Generation: With its youngest members in their mid-70s, the Silent Generation was born between 1928 and 1945. Around 55% of people in this demographic want to live in walkable neighborhoods, and Arizona has a large and increasing elderly population.

Market Size

While car-free cities exist in the US, many are private, far from society, or relatively expensive. Additionally, none were made with the same vision as Culdesac, which is built to allow residents to meet their daily needs without the use of a car.

Culdesac points out that 52% of Americans want to live in walkable neighborhoods, but only 8% do — representing a large gap in the market between supply and demand. Walkable neighborhoods cover less than 0.1% of US land, and Culdesac believes the market is therefore wide open. Americans living in large, metropolitan areas pay a 35% premium for walkable real estate (41% if they are renting), which indicates the potential for value capture for a solution like Culdesac’s.

After Tempe, Culdesac plans to break ground in at least five new locations: Denver, Washington, Dallas, Atlanta, and Raleigh, North Carolina. All locations (besides Raleigh, North Carolina) are close to rail lines, but each will be 3x larger than the Tempe location. CEO Ryan Johnson hopes to build neighborhoods for 10K residents and eventually build a full car-free city.

The total value of US residential real estate was $45.3 trillion at the end of 2022. Although it’s unlikely to capture a substantial about of this in the near term, if Culdesac is able to successfully scale, considering the degree of reported demand for walkable neighborhoods it may one day be able to address a substantial slice of one of the largest markets in the US.

From Culdesac’s perspective, if walkable mini-cities see success early on, municipalities and cities without such neighborhoods may openly welcome more in the future. If more cities join, new infrastructure will be built for bikes, pedestrians, and public transit instead of cars, benefitting Culdesac residents and preparing land for additional neighborhoods. Ryan Johnson believes there is no supply shortage for land to build these communities, and as such, “competing” startup cities or carless communities may initially be positive-sum competitors.

Bluetech Park, located outside Las Vegas, is building a “$7.5 billion energy-efficient mini-city” with “net-zero buildings, artificial intelligence, robotics, and renewable energy sources.” The project is focused on achieving net-zero carbon emissions and occupies a large 210-acre plot of land secured in 2019.

Source: Sunday World

On Roatán in Honduras, Próspera broke ground on a sustainable, car-free development in 2020, and though little news has been released, residents can now reserve their spot awaiting completion.

Before building in Tempe, Culdesac raised $200 million in real estate capital to finance the project. Culdesac hopes to launch in mid-2023 after finishing in Tempe and repeat this process elsewhere. The target locations are small subdivisions within biking distance from a metropolitan area where people can work and socialize. In Culdesac Tempe, monthly rent for a studio apartment costs about $1K and increases to about $2.2K for a 3-bedroom unit.

Because the Tempe location has not yet been completed, it is hard to determine the potential success of Culdesac’s model. For updates, Culdesac’s YouTube posts videos monthly to show how Culdesac Tempe has progressed in preparation for the mid-2023 opening. As of March 2023, Culdesac Tempe is still under construction.

Source: LinkedIn

As of 2023, John Zimmer, co-founder and president of Lyft, and Megan Meyer Toolson, Chief Customer Officer of Opendoor, have joined Culdesac’s board. The team has grown from 30 people at the beginning of 2020 to around 60 employees as of 2023.

In January 2022, Culdesac raised $30 million as a Series A led by Khosla Ventures to increase hiring and continue progress on Culdesac Tempe. Other notable investors across Culdesac’s funding rounds include Founders Fund, LENx (Lennar's venture investing arm), Byers Capital, Zigg Capital, Initialized Capital, and Bessemer Venture Partners. The company has raised a total of $40 million in funding between its seed and Series A rounds.

Partnerships with Local Governments

As people move to more walkable cities, they are likely to favor cities with great public transit and, more importantly, neighborhoods with easy access to public transit. Culdesac can open new markets and secure favorable real estate for walkable neighborhoods by building relationships with local governments. If Culdesac Tempe successfully attracts residents, other cities may be interested in partnering with Culdesac to build their own walkable neighborhoods. Through such municipal partnerships, Culdesac may gain access to various resources, such as funding, grants, and technical assistance, to help them build and maintain their car-free neighborhood. Local governments could also provide regulatory support to Culdesac by creating favorable zoning and land use policies that support car-free neighborhoods and sustainable transportation options.

Positive Branding for Walkable Cities

Most walkable neighborhoods are too expensive for the average American. As of January 2023, there were only six markets, primarily in older cities with established walkable neighborhoods, where it was found that living in walkable urban places was more affordable than car-centric suburban areas. These markets included Baltimore, Cincinnati, Cleveland, Detroit, St. Louis, and Philadelphia. However, these cities have experienced significant economic challenges, including job loss and gun violence, making them largely unattractive for many people including Culdesac’s target customers.

Return-to-Office

As the COVID-19 pandemic work-from-home mandates end, workers may be forced back to large cities where many companies are headquartered. In a series of 2023 surveys, it was found that nearly 90% of workers want to work in a flexible or remote environment, but 50% of leaders are demanding employees start coming into the office again, indicating that the daily commute will remain a part of US life. Culdesac’s value proposition depends on buying land where people can work and live without a car, which is not practical in areas like San Francisco and New York. Culdesac's addressable market may decrease if even more employers require employees to return to the office.

Consumer Interest

While consumer desire for sustainability seems strong, the argument continues over whether consumers are willing to make life changes to achieve more sustainable outcomes. Culdesac claims that 52% of Americans want to live in walkable cities but don’t due to uncontrollable factors like high costs, but the high friction imposed by big life changes like moving may also contribute. A car-free lifestyle may also remain a tough sell to the American consumer — J.H. Crawford, Author of Carfee Cities, said, “If you propose [living car free] to the average American, the response is: if you take my car away from me, I will die.” During the pandemic, surveys showed a housing shift to large homes in remote areas with space to build at lower costs. Culdesac is proposing a new way of life, which it believes is better, but which may have arrived before a critical mass of demand emerges.

Regulatory & Funding Hurdles

Culdesac requires large amounts of real estate capital from investors and special permission from cities to build neighborhoods. Culdesac Tempe raised $200 million in real estate capital to finance the project. A successful first year is essential as future investors base investment decisions on the ROI from Culdesac Tempe.

From a regulatory perspective, most big cities have laws requiring apartments to provide some pre-determined ratio of parking spots to residents before approving the project. In Tempe, Culdesac was granted special permission to remove all parking from blueprints, agreeing that no residents would park near the neighborhood. Other cities may not grant such permission, complicating plans for Culdesac. Regulatory challenges pose a key obstacle to scaling Culdesac’s model, but the company’s regulatory prowess may also prove to be a competitive advantage in the long run.

Culdesac is operating in a largely untouched market with few competitors. As of 2023, Culdesac Tempe is scheduled to launch within the same year, and investors, residents, and others will gain a better insight into the company's future plans. The Culdesac team believes that living car-free provides a higher quality of life than many Americans already desire. Future success is largely dependent on whether this bears out once the product has hit the market and whether enough Americans are truly willing to get rid of their personal vehicles in exchange for the potential of a stronger community, less environmental impact, and reduced traffic.