Research suggests that transit access has not unambiguously had direct impacts on U.S. property values
In this post, I discuss research on direct land value impacts of transit improvements. It's a wonky post. Yet, I thought it was worth boring people with some foundational information that I can reference each time I make statements about "transit's modest direct impacts." Prepare to geek out!
In case you don't want to read the whole thing, here's a bulleted summary:
Transit impact studies are a relatively modern U.S. phenomena coincident with the rebirth of fixed-guideway transit investments. While the United States was the epicenter of early urban transit investment (streetcars galore!), private urban rail investments subsided in the 1920s and were precluded by the depression, WWII, and the rise of the automobile in the postwar years (Jones 2008). A modern slate of federally funded rail projects followed the lead of the BART system in the San Francisco Bay Area. A slate of early rail impact studies were sponsored to both evaluate and justify the new Federal funding role, particularly since transit legislation had been sold to congress based on transit’s ability to help “shape as well as serve urban growth" (Federal Transit Administration 2010; Altshuler and Luberoff 2003). More recent transit impacts studies continue to help perpetuate the federal role in transit and the expansion of fixed-guideway investments across the country.
Research found that the first generation of modern transit investments yielded mixed land value impacts. Here are examples from the literature: Damm et al’s (1980) hedonic study found a modest impact of distance from proposed Washington Metro stations on property sales prices. Landis et al (1994) found a positive price premium for each foot closer to a BART station in two of the three counties served by the system at the time. Bowes and Ihlandfeldt (2001) used a hedonic to find that MARTA rail transit station proximity had a greater effect on Atlanta home prices than either crime or retail proximity once one looked beyond the immediate station area where prices were negatively impacted by transit. Gatzlaff and Smith (1993) found no spatial correlation using repeat sales or a hedonic model for single-family properties around proposed Miami Metrorail stations. As you can see, the results were not smoking gun proof that the first generation of modern transit investments had huge land value impacts.
In spite of high expectations that second generation rail systems, like that in San Diego, would learn from prior experience and outperform the land use impacts of their predecessors (Orski 1980; Knight 1980), impact studies of these systems have also found mixed results. For example, it was found that San Deigo’s trolley was a minor consideration for developers and that other market forces were directing growth to areas unserved by the trolley investment (SANDAG 1985). Subsequently, Landis et al (1994) found a positive premium for San Diego transit station proximity using a hedonic model but it was not clear that residential development was attracted to the line. Most recently, Duncan (2010) found that station proximity’s positive impact on condo prices was dependent on the quality of the pedestrian environment around San Diego stations.
Elsewhere in California, Landis et al (1994) found that Sacramento’s LRT had no significant effect on prices. In nearby Oregon, Knaap et al’s (2001) hedonic model for Portland properties found positive land value impacts of Hillsboro line station location announcements. A study by Hess and Almeida (2007) used multiple methods to identify a positive premium effect for LRT proximity on Buffalo, New York property assessments. Differences in control variables (e.g., the lack of highway access variables in the Buffalo study), the sophistication of the analyses, and a diverse set of study area conditions are all logical explanations for the variation in findings for these second generation systems. Regardless of variation, there is still no smoking gun evidence that modern transit investments have had consistently large and positive direct impacts on land values.
In fact, Yan et al (2012) found that the land value impact of transit station proximity for residential properties in Charlotte, NC was negative and varied by time period. In all four time periods they tested, they found that values increased as you went further from the region's initial light rail investment, a counterintuitive finding they speculate is explained by the corridor's former freight rail-orientation. They did find that the relationship between value and distance from stations was less pronounced after the rail transit went into service, suggesting that the transit services did impact on land values but that the new transit access didn't fully overcome the disamenity of proximity to the locations where transit stations were built.
While most studies have used hedonic models, some of the more recent rail impact studies used a diverse set of methods to improve their assessments and, again, found mixed results. Chatman et al (2011) used repeat sales to determine that New Jersey’s River Line had a positive impact on some properties but the cumulative land value effect was negative to neutral. In Chicago, where a robust transit network exists, McMillen and McDonald (2004) used hedonic and repeat sales methods to determine that residential sales prices were positively influenced by the extension of the L-system to Chicago’s Midway Airport. In Los Angeles, where rail has only recently been reintroduced, Redfearn (2009) used a hedonic and multiple locally weighted regressions to determine that the Metro Red and Gold lines had inconclusive or no impact on residential sales prices.
Bartholomew and Ewing (2010) conducted a review of land value impacts of pedestrian- and transit-oriented urban design and found that such urban design elements were also capitalized into the value of land. This suggests that those transit impact studies that did not control for design might have over estimated the direct value of transit proximity, further complicating the mixed findings of prior transit impact studies. That said, the authors point to two studies when they suggest that transit-oriented design and transit proximity are both necessary for land value impacts to occur. That suggests that but for the transit investment the value impacts would not have occurred.
I should also clarify some limitations of most of these studies. Transit impact studies generally focus on residential property and do not capture the impacts on commercial property. There are a number of reasons for this, including the simple reality that there are more residential properties and they trade more often, yielding more robust data. Also, any proximity benefit can be attributed to transit, whereas agglomeration benefits will also be capitalized into commercial property values and that benefit can be difficult to parse out. Further, due to the need for larger sample sizes and the interests of research funders, most of these studies consider entire transit project alignments. Therefore, they tend to focus on residential properties because they are present in more transit station areas and can better illuminate a transit project’s broad impact. Due to the wide geographies that are studied and the fact that some studies do not control for the individuality of stations, the results of some of these studies describe averages across entire transit corridors and may not capture the variability in incremental accessibility that a transit investment can confer in specific locations.
As I produced this summary, I relied on a thorough review of peer reviewed studies on this topic. It is worth noting that these studies had to demonstrate their methodological rigor to pass through peer review, including the inclusion of control variables for numerous factors that may also impact land values. In contrast, many other non-peer-reviewed studies that consider the real estate development impacts of transit do not control for many factors that also influence property values. For example, they may list all development that has occurred in a new transit corridor and suggest that the full value of that new development (generally billions of dollars) is attributable to the transit improvement. This is in spite of the fact that more development might have occurred away from transit, suggesting transit had little influence, or that other important interventions contributed to the development patterns (for example, geographically targeted subsidy programs) and would have done so even if the transit improvement had not occurred. In spite of the shortcomings, the non-peer-reviewed research has still yielded mixed results. For example, case studies of three light rail projects implemented in the 2000's found that most development that occurred along light rail transit lines, measured in square feet, materialized in employment nodes—especially downtown and also regional sub-centers—but few instances of residential development were noteworthy (Fogarty and Austin 2011).
Ultimately, the mixed results actually reflect what urban economists would expect. Urban economic theory suggests that transit would have minimal impact on residential accessibility in auto-dominated environments—which describes many of our modern U.S. cities—and, therefore, have little direct impact on land values. While some studies have identified positive land value impacts, the empirical U.S. evidence evaluated by researchers has been unable to unambiguously reject the hypothesis that arises from our best theories: transit will have modest direct impact on land values in our auto-centric urban areas.
Yet, the theory suggests that direct land value impacts can be expected in specific U.S. circumstances where transit provides considerable accessibility benefits. If we hope to see transit have dramatic direct impacts on land values in the U.S. context, transit planners will need to carefully identify instances when considerable accessibility benefits are possible and public officials will need to prioritize those investments that foster the greatest accessibility gains.
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Bartholomew, K., and R. Ewing. 2011. “Hedonic Price Effects of Pedestrian- and Transit-Oriented Development.” Journal of Planning Literature 26 (1): 18–34.
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Stokenberga, Aiga. 2014. “Does Bus Rapid Transit Influence Urban Land Development and Property Values: A Review of the Literature.” Transport Reviews, April, 1–21.
Yan, Sisi, Eric Delmelle, and Mike Duncan. 2012. “The Impact of a New Light Rail System on Single-Family Property Values in Charlotte, North Carolina.” Journal of Transport and Land Use 5 (2).
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.