Bacon's Rebellion

Democracy Thrives in Sunlight

Demand Surges for Transit-Oriented Housing

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by

James A. Bacon
in ,

In theory, property values should be rising around The Tide's 10 transit stops in Norfolk. Has anyone studied this? Has it happened? Are renters being displaced?
In theory, property values should be rising around The Tide’s 10 transit stops in Norfolk. Has anyone studied this? Has it happened? Are renters being displaced?

Speaking of the economics of mass transit (see previous post)… The good news is that residential property prices are surging around mass transit stations. In the clearest of possible signals, the marketplace is telling us that there is strong demand among large swaths of the American population for access to mass transit service. People are willing to pay a lot more for the convenience.

The bad news (there had to be a downside) is that affluent Americans are displacing poor and working-class residents from transit-accessible housing. Thus, the population that relies upon transit the most has less access than before, the Wall Street Journal today. Writes the Journal:

Professors at Northeastern University in Boston examined 42 neighborhoods in 12 U.S. cities in 2010 and found that housing costs near rail stops increased after light-rail service started in many markets. “A new transit station can set in motion a cycle of unintended consequences in which core transit users…are priced out in favor of higher-income, car-owning residents,” the authors wrote.

The Journal focused on Rainer Valley, a racially mixed neighborhood in Seattle.

Rainier Valley … had a median per-capita income roughly 40% below the citywide median from 2007 to 2011, census figures show. But the announcement of the rail-line route, in 1999, and its launch 10 years later boosted rents in the area. A report by the Puget Sound Regional Council shows assessed values for certain parcels around one Rainier Valley station rose by an average of 513% since 1999.

Part of that increase, the Journal acknowledges, can be attributed to the construction of new, high-end apartment buildings that pushed the average rent higher without displacing anybody. Still, rents are rising in other Rainer Valley apartment buildings as well.

Bacon’s bottom line: One predictable set of responses to this dilemma would be to impose rent controls, force developers to provide low-rent “workforce” housing as a condition for building, or impose some other command-and-control solution. There is a less obvious alternative, however. Loosen zoning codes and other restrictions that make it difficult for developers to build around transit stations! Insofar as the displacement of transit-dependent residents is a function of housing shortages caused by surging demand and restricted supply, the answer is obvious: Allow more supply.

A second critical point: If you want to build more mass transit, rising property prices suggest a way to pay for it without bilking taxpayers. Create a special taxing district around the proposed station, issue bonds backed by revenues from that district, and increase density around the station. Property owners will come out winners, taxpayers won’t get stuck with the tab for the improvement, and citizens will enjoy a transportation option they did not have before.

— JAB

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24 responses to “Demand Surges for Transit-Oriented Housing”

  1. reed fawell III Avatar
    reed fawell III

    Good article. Its central point is devastating. Take Tenleytown in DC, for example. Its centered around a Metro Subway stop. Smart Growth folks hail Tenleytown. Why, for goodness sake? Its a wasteful disaster.

    With every passing year, fewer and fewer DC citizens can afford to live near the metro stop there. Rents and home prices are too high. Supply is too ridiculously low. Demand is sky high. Why?

    Because the locals throttle most all multifamily housing in the area. It’s the I got mine, to heck with everybody else. And its not nice considering all those who paid for that metro stop they can’t use now. Nor is it nice considering all the lost taxes, revenue, and fares so desperately needed.

    1. reed fawell III Avatar
      reed fawell III

      So a great opportunity that was opened for everyone at great cost has now been largely lost. It’s a classic lesson in how we convert hard won opportunity into waste. And Jim’s article suggests it’s going on all around the country.

  2. DJRippert Avatar
    DJRippert

    It’s been fascinating to watch the saga of Rail to Dulles unfold. First, the conservatives jumped on the “it’s a boondoggle” bandwagon. Jim Bacon decried the possibility of using labor unions. TMT railed at the projected densities in Tysons. Ron Utt could be counted on to complain about the costs of the parking garages. The poor Dulles Toll Road drivers were victims. Everybody hated the MWAA board for having the balls to take on the project.

    Now what?

    The very transit oriented approach being implemented in Rail To Dulles has “demand surging”. The Fairfax County BoS imposed a special tax district similar to the recipe provided by Jim Bacon. TMT thinks Tysons might just work out after all. Ron Utt is still pissed at the cost of the garages.

    Was uber-liberal carpetbagger Gerry Connolly right? Rail to Dulles and transit oriented development in a higher density Fairfax County were big parts of his vision, no?

    But now comes the fly in the ointment – there are no cheap, safe walkable communities in major metropolitan areas. There are plenty of safe walkable communities – they are just not cheap. Ask the people who were living along the Rosslyn – Ballston corridor how the cost of living has changed since 1980. Ask the maids and housekeepers who used to live in Hell’s Kitchen in Manhattan where they live now. See if you can still buy a nickel bag of pot at Cabrini Green.

    If you want to see the end game of this urbanization trend, go to Washington, DC. The largest income and wealth gap in the US. The most spent per pupil on public schools. Very poor educational results. Crime is still terrible but the police have generally contained the worst of it in the poorer parts of town.

    The only people who can afford to live in these safe, walkable communities are the same people who own cars for the many times they don’t feel like walking or using mass transit. So, surface streets become the limiting factor. The supply of the housing is limited by the capacity of the streets. Demand exceeds supply and prices rise. Income inequality becomes a way of life.

    Is this really the right answer?

  3. larryg Avatar
    larryg

    Who paid for the transit that then made the adjacent properties valuable for developers? Why can’t the folks who paid for the property-enhancing transit require some percent of affordable housing since the same people will likely also get the bill for those who don’t have affordable housing options?

    1. DJRippert Avatar
      DJRippert

      Funding for mass transit is needlessly complex. Money comes from the feds. Money comes from the state. The localities borrow money and then establish special tax districts to pay off the notes. I think it’s very hard to say who paid for transit. However, if I had to guess – the wealthy pay the majority of taxes in the US so I guess the wealthy paid for most of the transit expenditure too.

      The only way developers are going to erode their profit margins by building lower cost housing in attractive locations is if they are required by law to do so. As it should be. But government has a problem – every lower income unit reduces the amount of property tax received. Politicians live to get re-elected. Taking more money from the wealthy and then handing out a steady stream of government “goodies” to the less wealthy gets more votes than a one-time affordable housing law.

      You could certainly make the argument that developing expensive, safe walkable communities increases sprawl and congestion. As the wealthy become the only residents of places like Tenlytown in DC the middle class who once lived there need to go elsewhere. They are not going to get Section 8 housing so they move to the suburbs. Of course, they don’t have jobs that support tele-commuting and they are not retired or semi-retired. So, they need to commute into the city each and every day to make a living.

  4. larryg Avatar
    larryg

    So, funding policies beget sprawl and unsafe communities that the wealthy have to pay for regardless anyhow?

  5. larryg Avatar
    larryg

    I’d have to say that “smart growth” That does not incorporate affordable housing just feeds the crime and congestion monster and is less than “smart” especially when we incentivize private-sector profits at the expense of really all tax payers.

  6. reed fawell III Avatar
    reed fawell III

    The problem with Wisconsin Avenue’s Tenleytown is not Smart Growth. The problem with Tenleytown is that Smart Growth has been aborted.

    In explanation, the following is adapted from June 2012 Fiscal Fix on this website.

    “Compare the Tale of Two Grand Avenues in DC – Wisconsin Ave. and Connecticut Ave – twins in all respects, but one. Yet one generates less likely 5% of the hundreds of millions of dollars that the other generates for its City annually, yet costs the same to maintain.

    Why? Both are urban thoroughfares designated Grand Avenues by the City’s Master Plan. Both are engineered to identical standards to serve the same purposes. Each runs parallel to the other, ten blocks apart, flanking the same well established, leafy and affluent neighborhoods they serve, mostly homes on subdivided lots owned by many of the City’s most wealthy citizens. Urban subway stops and commercial stores line both avenues. A university fronts each. Both are also major commuter arteries for suburban commuters working in downtown. Each Avenue carries roughly the same amount of traffic daily. And both streets serve an equal mix of local and long distance commuters daily.

    So why is one a great fiscal loser for its city, and shabby sister of its twin?

    The answer is startlingly simple: Some 60 apartment and condominium buildings front Upper Connecticut Avenue in DC. These range from 3 to 12 stories, comprising thousands of apartments and condos amid vibrant neighborhood centers and busy subways stops that share Connecticut Avenues sidewalks. Thus tens of thousands of people flood those pavements, shopping, living, eating, walking around, and commuting by subway, spending money that ripples throughout the Avenue and city, dramatically enlarging its wealth.

    All day and evening these residents enrich local merchants who employ others who pay their own taxes, spend their own profits, and create their own families who in turn do the same. They also pay local income tax, sales taxes on their purchases, and real estate property taxes (personally if condo owners, through landlords if not). Such revenues easily total hundreds of millions yearly.

    Thus Upper Connecticut Avenue, an engine of exponential wealth, spreads revenue throughout its city. And does it efficiently too, at low cost to the city, in a myriad of ways. Its density of its mixed uses reduce commutes and maximize public services at low public cost, whether in terms of utilities, street repairs, garbage collection, to public transport. The benefit versus cost equation is astounding, and its all for the Great Public Good.

    So what about the shabby twin sister? … Upper Wisconsin Avenue (from The National Cathedral north to the D.C. line into Maryland) is a second-class street at best. It’s few apartments rise mostly across from the Cathedral then tail off rapidly.

    Once past Sidwell Friends School, and Fannie Mae, Wisconsin’s streetscape fades into a 1950’s era retail strip. One typically found along aging suburban thoroughfares: 1 story convenience stores, a few low rise class B & C office with first floor storefront retail, amid gas stations, fast food outlets, one hour opticals and the like.

    Half way up Wisconsin, 10 blocks north of the Cathedral, one encounters Tenleytown. This odd assortment of tired small 2nd and 3rd class buildings present a startling contrast to Connecticut Avenue’s bustling commercial centers such as Woodley Park and Cleveland Park.

    Here, at Tenleytown, the eye sore traveler, otherwise surrounded by many the America’s most affluent communities, will confront:

    A Z Burger, a Mattress Discounter, a Pancake griddle shop, a Radio Shack, a Payless Shoes store, a Pizza Hut, a Subway shop and Guapos, several dry cleaners, a computer repair shop, a Karate studio, liquor store, crab house, record exchange – cluttered around two “Anchors”.

    One Anchor, a Whole Foods Store, hides as if embarrassed within an abandoned concrete multi-story parking garage. The 2nd Anchor, a Best Buy big box retail store, hides across Wisconsin Avenue, inside a defunct and long abandoned Sear Roebuck Store built in the 1950s.

    Everything in Tenleytown squats beneath its two high-rise radio towers, the first built in 1949. And, despite its Metro Stop, nothing bustles in Tenleytown. A closed 2nd entrance of its Metro Subway stop disappears darkly into the pavement of its busiest corner.

    Tenleytown calls itself “eclectic … a trendy shop-and-cafe zone …” A Washington Post article’s description is more apt: “A Hodgepodge.” And it gets shabbier traveling north up Wisconsin Avenue. Eye sore before, our weary traveler’s teeth now also begin to hurt … Why? Because urban streets need Walking About People the way People need Blood: desperately.

    So Upper Wisconsin Avenue remains a shabby sister to Connecticut Avenue, indeed even a pale shadow of it own self in Maryland on the north and Georgetown on the south, until somebody fixes its people problem .. this lack of “Walking About People” …

    I’d suggest a detailed cost/benefit analysis of DC Upper Connecticut Avenue that goes from the Taft Bridge over Rock Creek Park to Chevy Chase Circle on the DC line … such cost benefit analysis of this Avenue will astound. And demolish myths. For example, in addition to the property tax revenues generated by low-to-high rise residential buildings as described in february article on this website entitled Land Use and Tax Revenue in Fairfax County, such buildings bring a wide array of benefits to their city.

    Here’s a partial list if buildings are part of a efficient mixed use commercial center served by mass transit. Like Connecticut Ave in DC, or within Arlington County Virginia’s new downtown, the Rosslyn – Ballson Corridor.

    1/ Compared to types of housing, multi-unit residential buildings generate by far the lowest auto trips per day. The reasons are obvious. Tenants rely on walking or mass transit, for work, shopping, and entertainment. Even the few auto trips taken to or from such buildings are typically far shorter, given the abundance and variety of nearby services. Thus typically high density tenants own fewer cars, and require less parking per unit.

    2/ The interior living space, and exterior walls, per occupant is typically far smaller and more efficient than single family housing. Electric, oil, and water consumption is far less. Less roof, less outside hard-scape plus underground garage = far less storm water runoff per unit. The advent of LEED building codes compound these natural advantage exponentially. As do fire and safely cost given more compact populations at risk. And all these advantages apply to all nearby stores, shops and restaurants.

    3/ Such residential tenants also typically put far less demand on schools. The reasons are obvious. They tend to be young, middle age, or elderly singles (whether alone or in groups), or couples whose children are grown.

    4/ Such tenants also use far more mass transit, and use it far more efficiently. So, to a great degree, they subsidize the mass transit system for outlying low density areas whose far fewer riders heavily burden the system, given the far higher capital / operating costs incurred to serve them.

    5/ Many such tenants lead far more efficient lives that most suburbanites. They have far shorter commutes, far more local conveniences, far fewer kids, so enjoy far more “free time” to work, play, and spend money locally. Plus more are single. So they often tend to go out more, to restaurants, bars, movies, galleries, plays, etc. than suburban cousins. Hence they pump vast sums into down-down local economies that would otherwise be dark and dangerous. These monies radiate throughout the city, whether in tips to waiters or sellers of expensive art, and everything imaginable in between. Much of all this would be lost without these multi-unit buildings.

    6/ Also many tenants in these buildings are not able to afford to rent or buy a home on a lot, or a townhouse in high priced down-towns. Thus these tenants would likely be living outside Wash. Dc. or Arlington Country but for these down-down rental units and condos. So instead to living and paying their taxes “in town,” they’d be paying sales, income, and property taxes to an outlying county while commuting daily into Washington or Arlington, often by car. This would clog the streets and poison the air of DC and Arlington after they’d lost the tenants’ tax revenues to maintain them, and their consumer buying power for the local economy to boot.

    7/ In addition, without such rental and condo units in-town, many such otherwise tenants would refuse to waste their time on long commutes into town. They’d find jobs elsewhere, outside DC and Arlington. DC and Arlington then would lose not only all the benefits that go along with these vibrant and highly productive citizens, they’d likely lose their employers as well. Without nearby affordable employee housing, many companies would move out of Arlington and DC or refuse to move in town in the first place. More and more employers today need to locate where the best workers for them are, if they’re to compete, given ever increasing commutes into single use commercial areas. Indeed bosses demand it for themselves as well.

    8/ Imagine if these multi-family units weren’t in Arlington’s downtown. Or on Connecticut Ave. I guess that roughly 18000 low mid to high rise occupants front Upper Connecticut Avenue alone. Without the buildings, where would their occupants go. Many elderly depend on their convenience for the lives. Many others can’t afford living any where else in Downtown DC. If DC lost these thousand of units, the already ungodly high housing prices in all the rest of NW Washington would sky-rocket yet again. It’d cause a forced migration by the thousands, including many of our most vulnerable citizens. Only the richest among us would be left. Connecticut Avenue, because of its high density apartment stock, is our last barrier to the exclusion of all but the rich in NW DC. Its been doing this invaluable service for generations …

    And this is only half the story. It doesn’t explain how such housing works in tandem with nearby office use to exponentially compound the benefits they spread throughout a city. Which is precisely what’s happening in Arlington County Virginia’s new Rosslyn-Ballston Corridor. More about that later.”

    1. reed fawell III Avatar
      reed fawell III

      The Rosslyn-Ballston Corridor, like Connecticut Ave. has been affordable for decades. Prices now are escalating ever higher and quicker now is a testament to the corridors success combined with Arlington County’s difficulty in expanding and/or building new such corridors.

      Likely its encountering the same opposition that one finds around Tenleytown. Single family residential is highly resistant to change.

      1. DJRippert Avatar
        DJRippert

        Except that there are multi-unit dwellings all around the Russian Embassy. On Tenley Circle, on New Mexico Ave, etc.

        It wasn’t Good Guys, the Zebra Room or the BBQ place on Wisconsin that blocked the construction of apartment buildings.

        Sometimes, cities just need time to in-fill. Look at a picture of the Plaza Hotel in NYC from the time of The Great Gatsby. It pretty much stood alone. Now, not so much.

        http://en.wikipedia.org/wiki/File:Plaza_Hotel_NYC.jpg

        1. James A. Bacon Avatar
          James A. Bacon

          The Zebra Room! I remember the Zebra Room! I grew up near there. Too young to actually go inside the Zebra Room, but I do remember it.

          1. reed fawell III Avatar
            reed fawell III

            “The ZEB” – My favorite Eatery of all time! The stories those walls could tell!

            Don – “cities just need time to in-fill.” In the case of upper Wisconsin Ave., I’ve been waiting well over 6o Years. And doubt I’ll live long enough to see the blessed event.

          2. DJRippert Avatar
            DJRippert

            I worked at an office directly across Wisconsin Ave from Fannie Mae back in 1982. I enjoyed many a “late lunch” at the Zebra Room.

          3. reed fawell III Avatar
            reed fawell III

            Funny about that, Don, I worked in that very same low rise office building in the 90’s. Was helping put together what I believe was first Fanny Mae multifamily securitation package for Wall Street of its kind.

            Before that I recall Speaker of the House Carl Albert stumbling into the ZEB regularly, friend on his arm, after a long days work up on the Hill – That went on like clockwork through the 70’s I recall.

          4. DJRippert Avatar
            DJRippert

            Reed:

            I was a programmer for McGraw-Hill’s Continuing Education Division on Wisconsin Ave. Developed software to track students in these “kit courses” in things like auto mechanics. Wrote code in something called RPGII. Bizarre auto-cycle language written by IBM I believe.

            The head computer guy was named John. He had been a long time federal IT guy before going into private business. Came up through the late 50s, 60s and 70s. His idea of a good work day was … in early (7:00 am or so), work you ass off, hit the Zebra Room at 2:30, late lunch and a pitcher or two, clear some correspondence and go home. Out the door by 4:30.

  7. reed fawell III Avatar
    reed fawell III

    Yes, Don – As I recall Fannie Mae took over that McGraw- Hill building in the late 1980s or so for their multi-family group. It could have the building wrong. But it was directly across Wisconsin Ave. from their headquarters and shared the side road with Sidwell Friends school. And still does.

    Your guy John the computer guy had his head on straight. The ZIB Fish tank indoors was a scene. But for me – summer, spring and fall – that sidewalk pizza at the ZIB in the sunshine off the Avenue was the best seat in town.

  8. Bob Bruhns Avatar
    Bob Bruhns

    All very well and good, but I didn’t see an explanation of how excessive prices for rail or parking garages benefits this scenario in any way.

  9. Bob Bruhns Avatar
    Bob Bruhns

    One other thing about the multi-use part of the Smart Growth model – I am seeing a tendency to forget all about commercial, and only put residential around the transportation points. This is playing out at the Dulles World Center project…
    http://www.loudountimes.com/news/article/dulles_world_development_meets_a_wary_board_of_supervisors543

    …and now it is showing up in the Vienna MetroWest project too.
    http://greatergreaterwashington.org/post/19182/vienna-metro-town-center-wont-have-a-town-center/

    I think we are being sold a bill of goods with rail extension – and we paid a very high price for it, too. Construction powers seem to be saying that we’ll have housing… but not much employment. Hence, I suppose, the focus on housing prices as an indicator of spectacular success.

  10. reed fawell III Avatar
    reed fawell III

    As you point out Bob, such a single use approach is often a big mistake.

    Filling up a place with all residential to make a quick buck market-wise is often no better than doing the same with all office or commercial uses built miles from residential in a mad rush to meet the current hottest demand.

    In such cases the developer gets out, and leaves everyone else with a dysfunctional mess that infects a whole region. Sadly this irresponsibility of single use development has a long tradition in Fairfax County.

    1. reed fawell III Avatar
      reed fawell III

      One has to be careful of broad statements however. Each project has its own unique dynamics. For example, there the need for a re-balancing at Tysons, generally. And some locales are far more sensitive to uses and their mixes that others. But the basic premise is sound and essential – separating uses magnifies traffic.

    2. Bob Bruhns Avatar
      Bob Bruhns

      Well, now the Kincora project in Loudoun County got a change of proffer to build residential first. You know, I think I see a pattern here.
      http://www.leesburgtoday.com/news/loudoun-supervisors-approve-kincora-proffer-changes-to-get-roadwork-under/article_bc254e20-d43d-11e2-b061-0019bb2963f4.html

      1. reed fawell III Avatar
        reed fawell III

        You are on to something here, Bob.

        Every case is different. And every case has the potential for great complexity. But this case illustrates the potential for the evil proffers can do, or perhaps the benefit they can bring. So I am not saying they are doing evil in this particular case.

        But I am saying that this trading of self interests via proffers is not necessarily in the public interest. And I suggest that public officials can easily lose sight of the public interest as they get caught up in the excitement of the deal. Deal making is exciting stuff. It’s a narcotic, just like climbing mountains. Politicians are susceptible as anyone else or perhaps more so. Thus proffers can easily morph into results that are not in the public interest, but rather are squarely in line with promoting private interests, at the cost of doing harm to the public interests. Or at least as overarching needs change the old ways of doing business (such as proffers) do not recognize these changes and accommodate them.

        These are the grounds for much study. How this system promotes the public interest or tends to work against it. That’s a pregnant question.

  11. larryg Avatar
    larryg

    Retail commercial – will “find” the rooftops! office commercial generally is looking for something else besides “sales” .

    private sector growth can be influenced by govt “master planning” but it makes it’s calculations for any given situation based on fiscal prospects.

    we tend to travel the backroads and byways at times and I’m often struck by seeing a small manufacturing plant in a small town. Many are defunct now but I often wondered by that plant picked that town, often far from an urban area but usually on a rail spur.

    that’s neither here nor there with respect to Smart Growth and TOD EXCEPT companies are not generic and as often as not – as unique as the folks who own or operate a company – each with their own agenda and vision for their venture.

    Reed talked about Wisconsin and Connecticut – and why, with the same govt they are different.

    you can travel the DC region and run into hundreds of half dead, half abandoned shopping centers – often still surrounded by rooftops and sometimes almost across the street from a newer, more vibrant shopping center.

    And we talk out of both sides of our mouths sometimes with respect to the proper role of govt in these activities. On one hand, insisting there are certain things the “planners” must (or must not) do and on the other hand criticizing them for not “understanding” the “needs” of business – and actually the “mix” of business and rooftops.

    One thing is for sure – whether it’s a small plant in a small town on a rail spur, or a self-contained gated-type community or a sprawl subdivision or TOD – they ALL have ONE thing in common and that is an absolute need to be able to move people, goods and services – and for THAT you need transport infrastructure!

    At this point, I’m not even sure what exactly the govt’s role with TOD – SHOULD BE. If it puts in the rail and does nothing else what happens?

    dumb question perhaps – but I’m sure we have places right now where METRO has stations and “nothing” happened… and it’s the SAME govt that has other METRO stations that DID have stuff happen.

  12. reed fawell III Avatar
    reed fawell III

    “Reed talked about Wisconsin and Connecticut – and why, with the same govt they are different.”

    Actually, that statement is wrong.

    Connecticut could not be built today with DC’s current incompetence.

    Connecticut’s density happened concurrently with its single family subdivision residential because the DC government then run by Congress allowed private interests to undertake the task so long as it was done in responsible way. In so doing the capital city was transformed and a new American middle class was born in its capital city. That revolution built Washington City’s new modern future, the one we know and enjoy today.

    In so doing it followed the George Washington Model of establishing and building the city with the active participation of powerful business interests, particularly those in Georgetown. Thus private interests acting in concert with the public interest dictated by Geo. Washington under his leadership and spirit birthed a capital city the new nation could not otherwise afford.

    The DC government of today is unable to lead Wisconsin Avenue down the same road to solution, or get out of its own way.

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