Last week I started looking for answers to some questions I had about transit oriented development. Today, I want to see if I can answer the question “are we doing enough to keep supply in pace with this increased demand?”
According to this report, “Hidden in Plain Sight; Capturing American’s Demand for Housing Near Transit”, sponsored by the Federal Transit Administration, Fannie Mae and the Surdna foundation, in 2004 there were just 6.1 million households currently residing within a half-mile of a fixed-guideway transit station in the US. By 2025, the report estimates there will be at demand for at least 14.6 million households, which represents a quarter of new households expected. According to the authors, there could be even more if growth rates increase or gasoline prices rise more than expected.
This is good news, right? Maybe not. According to the study, there were 3,341 fixed-guideway transit system stations in the US in 2004, but the number was only expected to grow by 630 stations by 2025. That number may be a bit off today- a number of transit systems are in various stages of construction across the country right now. Still it’s certainly correct in order of magnitude if not precise. My next post will highlight some of what could happen if the gap is not closed, but today I’d like to talk about ways of doing just that.
Hong Kong has one of the better ways of turning the demand for housing near stations into, well, new stations and new housing. The railway operator there, the MTR Corporation LTD, is a for-profit enterprise majority-owned by the government of Hong Kong – a common arrangement for transit operators in Asia. MTR is also a major property developer, and uses the money from the property development to fund new subway line construction, where it starts the process again with new housing. This arrangement would never work here: transit systems can’t really run the kind of profits necessary to make them private enterprises and government agencies can’t really become property developers (or can they?). Still, it’s not impossible to imagine some sort of public-private partnership emerging to build a transit line.
Take Dallas for example. Dallas Area Rapid Transit (DART) has opened 72 miles of light rail track in the past 15 years, and had opened 43 miles of track by the time this 2007 on the fiscal impacts of TOD was written. The study found that in the period from from 1999 to 2007, $4.9 billion worth of transit oriented development was built along DART lines, with $4.26 billion worth of that attributable to DART. Now, 1999 to 2007 coincides pretty closely with a massive real estate bubble, but it’s worth noting that TOD construction has continued there during the recession. The study finds that this resulted in an annual tax revenue capture for local governments of $127 million for 2007. I’m sure this number is lower now due to the recession, but it isn’t inconceivable to imagine the system paying back its construction costs in some way over time.
Portland’s streetcar makes an even stronger case. A 2008 study prepared by the Portland Office of Transportation and Portland Streetcar, Inc. indicates that $3.5 billion in new construction was invested within two blocks of the streetcar from 1997 to 2008. Yes, this also coincides with the real estate bubble, but that’s not really the point. The streetcar cost just $103 million to construct – a 34:1 ration of development to construction cost – suggesting it could have been possible to pay for the entire construction with fees on real estate in the area immediately adjacent to the project. To be fair, a “Local Investment District” contribution from property owners did finance about 19% of the project’s cost, but capturing 3% of the construction value could have paid for the entire thing.
The SLU streetcar got half its funding from area property own, and it took just three years from planning to completion. It’s already attracted a lot of development near it, though I’m not sure how much development in SLU could be directly, quantifiably attached to the project. I imagine we’re going to see quite a bit of construction in the First Hill Streetcar area, and it might be worth capturing that and other center-city demand to help built out the network.
Housing bubble-driven speculation or not, it does seem possible to capture some of the demand for transit-oriented housing as cash to fuel the construction of new fixed-guideway transit lines. Even though there’s decades of literature on this subject, I’m sure it’d take some time and some tweaking to get the formulas correct, and it would probably work a lot better for cheaper streetcar projects than for more expensive light rail projects. Still, it’s worth having a go at it and not just for the infrastucture. In my next post, I’m going to look at what happens when the demand for transit-friendly housing exceeds supply, and the problems that arise therefrom.