Happy holidays! I was catching up on blog posts and came across some inspiring content. For one, I was reminded that requiring transit access as a prerequisite for new real estate development in a city is one way to promote transit value capture.

According to a recent CityLab post, new housing developed in Copenhagen, Denmark is required to within 500 meters of a transit stop and this policy has led to a dramatic result in a recent mixed-use real estate project: a bike and pedestrian bridge hundreds of feet in the sky. Let's get more down to earth and consider what this sort of policy could mean for real estate developers in the United States and what it could mean for transit value capture.

Imagine your town implemented a city-wide policy that predicated approvals for any new housing, retail, or office development based on its proximity to transit service, perhaps a reasonable 1/2-mile walking distance from a bus stop or rail station (see the walkshed image above for an example of a reasonable walk from the proposed Rainier Station in Seattle). Based on the policy, your building permits for a  new suburban-style office complex wouldn't be approved if your property was 3,000 feet from the nearest bus stop.

Because of a transit proximity policy, developers have to think about transit. That's not always the case in the United States (and parts of many other countries as well). U.S. developers often all but ignore transit as an access mode to their projects because transit access (or a lack of transit) does not impact the average U.S. real estate investment's viability.

A second impact that such a policy would have on real estate development is that developers would have to know where transit access points are located and weigh their options if one is not within a reasonable walk. When they are considering developing sites, developers could:

1. Avoid buying properties that are far from transit
2. Buy properties far from transit but not build anything until proximate transit services are delivered by others
3. Buy property far from transit and fund additional/new transit service to the land
4. Buy property within a reasonable distance of transit as the crow flies but that is not currently within reasonable walking distance and provide new points of access

In two of the instances above (#3 and #4), transit providers stand to benefit from developer-funded actions... transit value capture.

Regarding #3, you can imagine developers funding shuttles or route extensions to add new access to their otherwise inaccessible projects. For this to be viable, real estate projects likely need to be close enough to existing services to incur the smallest possible marginal transit linkage costs, projects need to be dense enough to require the least transit investment within the new development (funding one additional stop is cheaper than funding several stops in a sprawling development), and projects need to be valuable/profitable enough to support the cost of the new transit links and nodes. In some cases, projects may be profitable enough (read: big enough) to support all new services such that they're not constrained by the existing scale and scope of nearby transit services (hopefully the policy is nuanced enough so that you cannot extend an infrequent bus line one stop to get approvals for a 10,000,000 square foot office park).

The economics of these transit enhancements begin to sound a lot like the costs for other critical infrastructure. Developers face similar linkage and capacity dynamics as they consider roadway, water, electrical, and sewer access for their new developments. Value capture funds most utility service extensions (developers pay for internal roads, water lines, and sewer extensions and sometimes have to pay for offsite roadway expansions, new sewer treatment plants, new fire stations, etc.) and treating transit as a required utility could lead to many more instances of transit value capture.

When it comes to #4 above, you can imagine developers buying properties that are close to existing transit stop as the crow flies but not close enough to be within a reasonable walking distance. When purchasing such properties, developers could also underwrite the cost of making offsite investments that provide more direct access to transit and allow them to build on a property that would, according to the transit accessibility policy, be undevelopable. For example, developers might fund a bike and pedestrian overpass to connect their site to an existing transit stop. They might purchase a few additional properties to cut new roadways or pathways through mega-blocks that stand between their property and the existing transit service.

Such is the case in Copenhagen where a developer has proposed a bike lane in the sky. The developers hope to build two massive projects on either side of a waterway. Though the buildings are only a few hundred feet apart, one side of the waterway is close to an existing transit stop and the other is a much longer walk from decent transit access. Rather than fund new transit service to the far side of the waterway, their proposed solution is to build a massive skybridge between the two tall buildings over the very active waterway. The article and images are well worth a look. (When you see the renderings, remember that it's getting close to New Years, not April Fools Day! This appears to be a real proposal.)

So, if you want developers to get serious about transit and creative about funding transit access, pass a minimum transit distance policy in your town today. When you do, you'll see examples of transit value capture take hold or at least you'll see amazing feats of architecture!

Happy holidays!!!

In any value capture scenario, the value comes from properties somewhere that are owned by someone. In Toronto, the plan to fund a new subway extension has been to levy charges on all property owners and on developments, all to the tune of $900M. Now, the Toronto Star reports that a real estate development coalition has come forward to oppose the levies based on their unfairness to homeowners.

Toronto Mayor John Tory argues that the government's plan is fair and thoroughly considered.

It's a very lucid description of the benefits principle of taxation, the classic argument for value capture. And the mayor considers it a sound legal argument for the levies.

It will be interesting to see how this local battle plays out. I hope the ending of this story doesn't dampen my enthusiasm for Canadian transit value capture.