How Does Mass Transit Affect Property Values?

I’ve been at a couple of gatherings lately with Microsoft employees and other tech folk who have some money to invest and are considering investing in real estate. I’ve recommended that they consider buying along future transit lines like the green line (monorail) or the lightrail route. (If they’re feeling adventurous, I also mention the southlake union streetcar.) In making these recommendations, I’ve been operating under the assumption that additional mass transit will increase nearby property values. But rather than live by assumptions, I decided to do a little research on the subject.


Financing Transit Systems Through Value Capture does a great job summarizing how transit can affect property values:

Proximity to transit can affect property values in three somewhat different ways, one negative and two positive.

First, being located very close to a transit station or along a transit line tends to have negative effects, due to noise and air pollution from trains, and increased automobile traffic from users. These nuisance may reduce residential property values very close to a transit station or rail line.

Second, it gives one location a relative advantage over other locations, attracting residential and commercial development that would otherwise occur elsewhere in the region. This is an economic transfer.

Third, transit can also increase overall productivity by reducing total transportation costs (including costs to consumers, businesses and governments) for vehicles, parking and roads and providing a catalyst for more clustered development patterns that provide economies of agglomeration, which can reduce the costs of providing public services and increase productivity due to improved accessibility and network effects (Coffey and Shearmur, 1997). Although these productivity benefits are difficult to quantify, they can be large: just a few percentage increase in property values, a few percentage reduction in automobile and parking costs, or few percentage increase in business productivity in a community can total hundreds of millions of dollars.

The cited report operates under the assumption that mass transit not only increases property values, but that it increases them to a point where the projects could pay for themselves if only the increased property values could be “captured” through some type of taxing mechanism. This argument is one that has been around since at least the 70s, and while the argument is interesting, I’m began my research wanting to test the basic assumption that mass transit even adds value to nearby properties.

Actual Data
Probably the most comprehensive study I could find on the subject was a study by PB (a transportation consulting firm) called: The Effect of Rail Transit on Property Values. It is loaded with case studies for both residential and commercial properties, and in general, the data is clear that a property values near a rail station are much greater than those farther away. The report gives lots of data showing that property values in Washington DC, Atlanta, San Francisco, New York, Boston, Los Angeles, Philadelphia, Santa Clara County, Portland, and San Diego all increased near transit stations. (Note that many of the results are phrased “price decrease by $XXX for every XX feet further from station.’ This is just another way of saying that prices increase near the station.) While two cities (Sacramento and San Jose) showed either no effect or a decrease in home values near the transit stations, the report found that (at least in San Jose), the property along the rail corridors were historically poorer (long before the current lightrail was added) than other parts of San Jose.

The results from a study of property values around BART in the San Francisco Bay Area are pretty conclusive:

Table 1: Single Family Homes

Distance from BART CBD/Urban Suburban
(feet) (per unit) (per unit)
0 to 500 $48,960 $9,140
500 to 1000 $14,040 $7,930
1000 to 1500 $8,640 $3,040
2000 to 2500 $5.760 $5,500

Assuming this data holds for Seattle, then residents should expect to see substantial increases in property values after the mass transit is built assuming that this price increase is not already factored into the existing property values. Note that almost all of Seattle is “urban” by the study’s definition. (On a personal note, I recently purchased a home in Ballad near the proposed green line and am thrilled by the prospect that Seattlites will be essentially subsidizing my property values should the monorail ever be built!)

While, I started off thinking that additional mass transit would add to property values, I had a hard time finding any evidence to the contrary (research bias?). Nearly every article I found on-line gushed about how mass transit was increasing nearby property values:

In conclusion, after a few hours of research, I’m more convinced than ever that mass transit increases property values.

Does this mean that mass transit is always a good idea? Probably not… There are plenty of good arguments for not wanting mass transit such as increased noise, increased traffic, increased parking congestion, etc. However, if you are interested in making a good investment in the Seattle area, finding a home/apartment/commercial building near a future transit line seems like a great way to increase the likelihood that your investment will pay off in the long run.

Do you want more information? I’ve created an on-line bookmark of related articles at del.icio.us. I’ll continue to update add articles to this link as I come across them!

In addition, I’ve just received an email from Seattle Monorail staff that they will be sending me a report (hard copy) that I requested titled The New Seattle Monorail’s Potential Effect on Property Values (Seattle Monorail Project, August 24, 2002). (I have no idea why they don’t have an electronic version..). If there are any gems of information out of that report, I’ll update this posting.

Comments

  1. Tim says

    People in Ravenna are already pricing their homes with the light rail in mind.

    Apartment complex off 65th and 23rd Ave NE just sold for $1 million dollars.

    Why don’t you have your Microsofties buy out the Sislley slum lords that inhabit so many run down homes around Roosevelt High?

    It would a breath of fresh air to see 65th and 15th area become a community draw like Third Place on 20th and the Roosevelt Square area has become.

    But you have to find enough $$ to buy out the Sisleys who own RR Hardware, the fruit stand, the Pizza Slut and other corners.

    Good luck with your work.

    TSC

  2. Tim says

    People in Ravenna are already pricing their homes with the light rail in mind.

    Apartment complex off 65th and 23rd Ave NE just sold for $1 million dollars.

    Why don’t you have your Microsofties buy out the Sislley slum lords that inhabit so many run down homes around Roosevelt High?

    It would a breath of fresh air to see 65th and 15th area become a community draw like Third Place on 20th and the Roosevelt Square area has become.

    But you have to find enough $$ to buy out the Sisleys who own RR Hardware, the fruit stand, the Pizza Slut and other corners.

    Good luck with your work.

    TSC

  3. Scott says

    I think a main consideration in rail vs. no rail is that rail requires you to increase density near stations with new multifamily construction and commercial developments. Otherwise, there would not be enough residences or destinations near stations to make the trains have an efficient level of ridership.

    The tradeoff is that your neighborhood is now completely different. I suppose the choice for the residents is whether that would be a good thing or a bad thing. And what about areas that aren’t near a station? Don’t they deserve better transit too? They’re helping pay for it.

    I wish there was some way to have rapid transit that could serve any and all neighborhoods efficiently, soon, without the disruption and cost of ‘transit-oriented’ redevelopment.

  4. says

    I’d agree with you, Scott, that rail requires an increase in density… and density issues are always a major community concern.

    However, the intent of the article was not so much to look at mass transit from a home owner’s perspective, but rather, from a real estate investor’s perspective. In other words, I was looking to answer “will a mass transit line increase property lines?” Not, “how will mass transit change the character of a neighborhood?” (Although I must say that the second question is also very interesting and well worth more research. As you point out, the mass transit almost always leads to higher density developments.)

    From an investor’s perspective, I was interested to learn that mass transit is likely to increase property values. My research convinced me that I’d choose to buy an investment property that was near a potential mass transit station, assuming all other factors were the same!

  5. says

    I’d agree with you, Scott, that rail requires an increase in density… and density issues are always a major community concern.

    However, the intent of the article was not so much to look at mass transit from a home owner’s perspective, but rather, from a real estate investor’s perspective. In other words, I was looking to answer “will a mass transit line increase property lines?” Not, “how will mass transit change the character of a neighborhood?” (Although I must say that the second question is also very interesting and well worth more research. As you point out, the mass transit almost always leads to higher density developments.)

    From an investor’s perspective, I was interested to learn that mass transit is likely to increase property values. My research convinced me that I’d choose to buy an investment property that was near a potential mass transit station, assuming all other factors were the same!

  6. says

    By the way, I did receive the document from the Monorail agency titled “The Monorail’s Potential Effect on Property Values: A Brief Synopsis”. The document cited almost all of the same sources as my article and came to very similar conclusions. There was really nothing new to add…

  7. says

    Neighborhoods served by the Hallitube (PRT) system would increase in value as thin design makes construction rapid, w.o. loss to adjacent businesses.

    • says

      Hi Emily: I have no idea… The post is obviously a bit dated at this point (May of ’05, wow, I’ve been blogging for a long time! :) ). My guess is that some other folks have built upon this research over the past few years, so there’s probably more up-to-date reports to be found on Google anyway!

Trackbacks

  1. […] RCG had an excellent post last May that goes into great detail about whether mass transit increases property values. As with everything, (from the referenced report) Of course, as with any infrastructure project – be it a transit system, a public park, a highway or a school – there may be negative impacts that reduce the location value for some people. Some people move away from highways to escape the noise and smog, and some people move away from playgrounds to escape the shrill voices of kids at play. But for the market overall, positive impacts tend to outweigh the negative impacts, increasing overall property values. […]

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