Urban economic theory suggests that transit can have a direct impact on land values, land use, and urban form in certain circumstances, particularly when it provides significant accessibility benefits. However, we would expect that the direct land value impacts of many modern U.S. transit investments would be rather small because they confer marginal accessibility benefits in our auto-dominated cities. Further, Giuliano (2004) suggests that the incremental accessibility and corresponding direct land value impacts are likely to be insufficient to influence real estate development. Yet, we see real estate development and tremendous urban transformations around transit improvements all the time. How is this possible in Dallas and Denver and all the other auto-oriented cities where there are great examples of transit-oriented development?
Well, the indirect impacts of transit on land values can be substantial and can profoundly influence urban form around transit.
“Today, rail facilities are admittedly less effective in shaping land use patterns and guiding locational decisions than in the pre-automobile era. This is because in a modern metropolitan area, served by a dense network of high-speed freeways, rail transit can only marginally increase regional accessibility or improve mobility. But the experience of Canadian cities and evidence now emerging from certain U.S. cities suggests that even today rail transit can have a strong influence on the location, intensity and timing of new development, especially when it is supported by positive development incentives and coordinated land use/transportation planning” (Orski 1980, p. 200).
Transit improvements have had major impacts on land use policies and, therefore, urban form. Though there are many other "flavors" of land use controls, regulations of land use type and bulk are most often articulated in municipal and county zoning codes. Relaxing zoning regulations, including height limits, parking requirements, or use restrictions, can unleash supply to meet demand in strong markets. Such has been the case many times around transit.
For example, Webber (1976) cited the growth of downtown San Francisco office real estate as one of few urban form impacts of the original BART system. He lamented that the BART investment in downtown had merely justified the relaxation of development constraints, allowing the development community to satisfy the extreme demand for San Francisco office space that existed with or without transit services. Weber's disappointment in BART's direct impacts on the Bay Area's overall real estate market overshadowed his finding that BART had critically influenced local politics and allowed development to occur that would have otherwise been stifled.
“Experience indicates that major transit improvements often act as catalysts in the process of land use change, coalescing support for previously contentious policy changes. […] This indirect influence may in fact be one of rapid transit’s most powerful means of generating land use impacts” (Knight 1980, p. 10).
In addition to land use policy changes, transit improvements can spur public and private investments in placemaking, environmental cleanup, social services, and other community benefits. Also, transit investments might spur governments to provide targeted real estate development subsidies that can make transit-served locations that qualify for the funding more attractive investments. In turn, these transit-induced public actions inform the value of transit-served properties.
Additionally, transit improvements can indirectly impact land values and real estate development through an array of other pathways. Researchers have identified a panoply of critical factors that influence land densification around transit and any one of them could theoretically be modified in response to a transit investment. For example, Cervero (1987) suggested that hospitable station area environments, unwavering political support, and the existence of pro-development zoning, taxation, and land use policies were all influential in the delivery of transit-oriented development. Each could be influenced by a transit investment and any transit-induced modification to these precursors of greater land utilization would have a direct influence on the market value of transit-adjacent land.
Put another way, transit can act as a Trojan horse for supportive policies that allow market forces to deliver high-density development relatively independent of transit services (Chatman 2013). In fact, when local zoning policies are adjusted to promote development around new transit investments, the policy changes can inform land values and urban development even when transit projects subsequently stall or are abandoned (Giuliano and Agarwal 2010).
While some might argue that transit investment is an inefficient way of modifying local policies, in many cases it is only such a bold transportation investment that can reduce a community's fear of density-induced gridlock, imbue confidence in local politicians, and address other concerns that act as political third rails for enabling dense urban development. In addition, in case we might have forgotten, there's always the mobility and accessibility benefits of transit improvements!
Cervero, Robert. 1987. “Transportation and Urban Development: Perspectives for the Nineties.” Working Paper No. 470. Berkeley, CA: Institute of Urban and Regional Development.
Chatman, Daniel G. 2013. “Does TOD Need the T?: On the Importance of Factors Other Than Rail Access.” Journal of the American Planning Association 79 (1): 17–31.
Giuliano, Genevieve. 2004. “Land Use Impacts of Transportation Investments: Highway and Transit.” In The Geography of Urban Transportation, Third Edition, Third Edition. The Guilford Press.
Giuliano, Genevieve, and Ajay Agarwal. 2010. “Public Transit as a Metropolitan Growth and Development Strategy.” In Urban and Regional Policy and Its Effects. Washington, D.C.: Brookings Institution Press,.
Knight, Robert L. 1980. “Transit’s Land Use Impacts: Evidence and a Change of Perspective.” In New Urban Rail Transit: How Can Its Development and Growth-Shaping Potential Be Realized. Vol. 96th Congress, First Session. 96-7. Washington, D.C.: U.S. Government Printing Office.
Orski, C. Kenneth. 1980. “The Federal Rail Transit Policy: Principles and Practice.” In New Urban Rail Transit: How Can Its Development and Growth-Shaping Potential Be Realized. Vol. 96th Congress, First Session. 96-7. Washington, D.C.: U.S. Government Printing Office.
Webber, Melvin. 1976. “The BART Experience: What Have We Learned?” The Public Interest, no. Fall: p. 79–108.
Ian Carlton is a transportation and land use expert specializing in transit-oriented development (TOD). He helps clients - including transit agencies, planning departments, and landowners - optimize real estate development around transit.
Special thanks to Burt Gregory at Mithun for permission to use the Portland Streetcar image above.