Cities are harnessing future land values to pay for new infrastructure. But the research behind this approach may be flawed.
In transportation planning, the logic is pretty consistent: Build a rapid transit station, and land values are supposed to jump up.
That’s because rail and bus rapid transit provide all kinds of benefits—reduced cost, time, and stress for commuters; cleaner air; more walkable neighborhoods—that can be translated into dollars and factored into property values. Cities can “capture” this “land value uplift” to pay for transportation infrastructure projects (for example, by creating a special tax on certain developments that are projected to benefit most from the expanded transit access). This is the basic financing mechanism behind many recent major projects across the country, including Hudson Yards in New York City. Land value uplift is also important information for potential developers, who might eye land more hungrily when there’s a new train station on the way.
But a major study published in Transport Reviews reveals that common methods for evaluating transit’s impact on land values leave much to be desired. Authors Christopher D. Higgins and Pavlos S. Kanaroglou, both scholars of transportation and spatial analysis at McMaster University, reviewed 130 analyses across 60 studies completed in North America over the past 40 years. They found significant differences in changes to land value across transit modes, cities, and even neighborhoods within the same city. They write:
An argument is often made that rapid transit has generally produced a modest [land value uplift] impact of around 10% for homes close to stations, with the highest values seen for heavy rail transit (HRT) and commuter rail transit (CRT) lines compared to light rail transit (LRT) and bus rapid transit (BRT).
[…] Several heavy rail transit systems, for example, exhibit very high rates of uplift, some with local disamenity effects [such as noise, vibration, pollution, or crime] close to a station. However, the results of some HRT studies are insignificant, negligible, or even negative, and there are sometimes stark differences between studies in the same city.
Of course, there are high-level differences between cities and transit systems that drive differences in how land is valued over time and in different places. But Higgins and Kanaroglou also believe that there are two fundamental problems with the way these studies were designed.
Proximity doesn’t always improve “access”
“Much of this research starts out with the assumption that the value of land goes up as it gets closer to a rapid transit station”—or, as transit becomes more and more “accessible,” Higgins tells CityLab. But proximity doesn’t necessarily equate to access. “For rapid transit to have a benefit that gets priced into the value of land, it needs to be a useful, competitive option compared to other transportation modes,” says Higgins.
For example, if a neighborhood is already well served by convenient access to a highway system, or by cycling and pedestrian options, a wonderful new transit line might not result in more “accessibility.” “On the other hand, factors such as road congestion, fuel costs, parking supply, and road pricing can alter the attractiveness of transit relative to other modes,” the authors write. So in far-flung, traffic-clogged neighborhoods, a transit station can definitely push up the value of land. But if people stick to their cars because it’s easier and more convenient, then transit won’t necessarily translate into higher land values.
Taking the ‘transit’ out of transit-oriented development
The authors found another problem with using proximity to transit as a proxy for land value uplift. Many researchers using that measure failed to account for other transit-related factors that affect land value: namely, transit-oriented development and the policies that encourage it.
For example, mixed-use zoning, open and public spaces, amenity-rich neighborhoods, and pedestrian-oriented street design all carry positive effects on land value. When models overlook these factors, they paint an incomplete picture of projected land values in an area—and even worse, the authors write, researchers can mistakenly claim them as empirical evidence of the benefits of accessibility.
For example, a 2007 analysis of Buffalo’s Metro Rail LRT argued that the line “offers little regional accessibility impact,” despite the high levels of service offered through a tunneled right-of-way. But the study still found stark differences in the changes to land value around individual stations, as the chart above shows. Higgins and Kanaroglou write:
The authors insinuate that factors such as crime may be responsible for unobserved negative effects, while positive effects may arise from “other factors that positively influence property values.” What are these factors? Might differences in [transit-oriented development], such as a more appealing built environment or local amenities, be responsible for some of [the] uplift coefficients across stations?
Controlling for other, context-specific variables could have revealed more across-the-board benefits at all of Buffalo’s LRT stations, they write. To overcome the mistakes of the past, the authors urge planners and researchers to ditch proximity to transit as a proxy for land value, and to be more careful in teasing out the effects of transit and transit-oriented development.
Wonky stuff, but it should matter to those who think deeply about the relationship between transportation and land use, who want to demonstrate a transit project’s larger economic benefits, or who want to harness future land values in order to pay for a new rail line. Cities are operating under great fiscal restraint these days, and those types of financing systems are becoming ever more attractive. If that’s how cities want to pay for new infrastructure, they’ve got to actually understand what it’s worth.