Access is valuable. In metro regions effective passenger transportation is a critical ingredient of continued competitiveness and quality of life. Due to a range of economic and political factors, rail transportation is expanding as a mode for moving freight and people alike.
Shared experience of regions in the U.S. and internationally suggests that rail transit infrastructure endows nearby property with a substantial value premium. Economist Joe Cortright analyzed 94,000 home sales in 15 metropolitan U.S. markets, and found that homes located within walking distance to varied amenities are valued more highly in the marketplace than comparable property situated elsewhere. Examining two neighborhoods in Charlotte, North Carolina, Cortright identified that a typical home in the Wilmore demands a premium of $34,000 or 12% of median value, compared to much less pedestrian-accessible Ashley Park. The experience of other metro areas including Jacksonville, Chicago, Sacramento and Austin reflect premium levels of $10,000 or more for homes of median value in neighborhoods with high levels of non-auto access.
Early evidence of light rail transit (LRT) lines in this region is consistent with Cortright’s findings. The University of Minnesota’s Center for Transportation Studies released preliminary results of a second-phase study of property appreciation near the Hiawatha LRT Line in Minneapolis. The process, using residential sale data, has found positive impacts of roughly 25% on single- and multi-family housing located near station areas. Candidly, the Hiawatha Line has been a success in terms of ridership but isn’t particularly effective in stitching neighborhoods together with downtown. If effects are favorable here, they will be so for coming lines that connect Saint Paul and Minneapolis, and Minneapolis’ downtown to its south side and suburbs beyond.
It’s not just residential property values that are influenced by accessibility. Analyses undertaken for the Urban Land Institute and the National Association of Realtors found a 23% premium in California’s Santa Clara County land values within ¼ mile of light rail transit stops. Another study of the San Diego LRT system found land value premiums as high as 72-91% for commercial land located near station areas on particular lines; the same study found that commercial land on other lines was discounted by the presence of the LRT stations. A 2007 study of the dense network of Dutch rail stations concluded that commercial property within ¼ mile of a rail station exhibited a land-value premium of over 12%.
Recently, Donjek was hired by a client in the Southeast U.S. to explore national models for financing development adjacent to LRT investments. We focused on multiple tools used to great effect nationally:
- Transportation Development/Improvement Districts (TDDs, TIDs)
- Special Assessment Districts (SADs)
- Tax Increment Financing (TIF) / Project Development Financing Districts
- Tax Abatement
- Joint Development
- Transportation Utility Fees (TUFs)
- Air Rights, Grants and Loans
Each region is distinct in its history, its disposition about public/private partnerships, its attitudes toward transit, and how high-impact regional decisions are formulated and implemented. These tools are applicable in degrees depending on these and other factors.
LRT and fixed-rail transit infrastructure doesn’t belong everywhere. And as the Federal Transit Administration has made clear in the last week, the federal government doesn’t intend to build systems that can’t be supported by ridership in the long term.
One key element to making transit work – for the environmental and fiscal health of the country and its communities – is concentrating development and redevelopment potential where it will be most accessible. These public finance tools can be part of that equation.