Recognizing the Limits of Transit-Oriented Development

Examining whether or not transit and light rail stations drive economic development

With high gas prices prompting a surge in transit ridership to 52-year-highs, there are calls to dramatically increase investment in public transit. The danger, however, is that transit advocates might take their argument about the successes of transit too far. Indeed, this may well be the case with the so-called claims about “transit-oriented development,” or TOD, where transit advocates often suggest that transit is a driver of economic development.

For the most part, property values increase around transit stations. Often, the range of the increases is between 25 to 30 percent higher than the growth non-transit neighborhoods. Unfortunately, these same studies about property values have not examined the underlying causes of these price increases. Despite that, many observers simply assume proximity to transit is the most important factor.

Lots of factors influence private investment, including public safety, access to jobs, quality housing, tax rates, financing, and zoning. Access to transit is likely far down the list compared to these other factors.

A closer look at the numbers suggests that actual transit ridership has little relationship to the private investment around transit stations.

Take the Dallas Area Rapid Transit light rail network, or DART, which is often heralded as one of the most successful new systems in the country. DART’s light rail trains carried nearly 20 million riders in 2008, up 10 percent from 2007 and its website declares the system has “the power to drive land use and urban development in exciting and environmentally friendly directions.”

An analysis of investment within one-quarter mile of transit stops – the standard rule of thumb for estimating maximum impact of transit – by economists at the University of North Texas at Denton estimated that the transit investments triggered $3.3 billion in new investment between 1999 and 2005.

Unfortunately, the economists didn’t examine transit ridership. If they had, their conclusions might have been very different, or at least significantly tempered. The Mockingbird and downtown Plano DART stations, for example, attracted nearly the same level of investment – $270 million and $260 million in new investment respectively. Yet, their ridership is nowhere near the same. Plano’s annual transit ridership was just 22 percent of the level at Mockingbird.

Similarly, the areas near the Galatyn Park and Cedars DART stations attracted nearly the same amount of investment. Yet Galatyn Park’s transit ridership was just 30 percent of the ridership at Cedars. Indeed, some of the stations with the highest ridership-including Pearl, Westmoreland, and the VA Medical Center-had among the lowest levels of investment.

Transit ridership is not driving property development decisions around light rail stations. Other factors are, although most studies have done little to tease out the real causes and relationships.

Although objective research on development and investment around transit stations is sparse, a detailed statistical analysis of investment along the South Corridor of the Charlotte, North Carolina, light rail system raises cautionary flags. The value of development added by light rail to investment amounted to about 13 percent of the $1.86 billion value estimated by the transit agency. After accounting for actual growth (versus announced growth), existing regional and local growth trends, and other factors, former University of North Carolina transportation studies professor David Hartgen figures that any added growth along the light-rail line amounted to about $246 million over 20 years.

The point is not that transit can’t spur economic development. Rather, the concern is that planners and elected officials should not presume that simply improving access to mass transit will goose development in a significant way. The relationship between investment near rail stations and transit ridership is not direct.

This shouldn’t be surprising. Transit follows a fixed-route to specific destinations based on a set schedule. Rail or bus transit is thus frequently an inferior alternative to the flexibility and mobility provided by the customized travel afforded by the automobile. The exceptions are the few places such as Manhattan or travel corridors that are so dense that auto travel is slow and cumbersome.

The rising property values around transit-oriented developments are likely less about providing access to transit than accommodating demand for higher-density and more urban lifestyles that local zoning codes and development regulations impede. To compete against low-density subdivisions, transit-oriented developments must offer significant non-transportation benefits-walkability, mixed uses, public safety, quality housing, urban parks, etc.-to offset the inherent mobility limits of transit. Pharmacies, grocery stores, hair salons, and other neighborhood residential services need to be provided within walking distance.

Understanding the proper role of transit in promoting urban development is important for public policy. Whether we build great urban places or emphasize higher transit use is not a “chicken and egg” choice. Great urban places come first because their benefits offset the individual and social costs of greater dependence on a less flexible, restricted mode of transportation.

In the end, higher transit use is an outcome, not an input, in economic development and urban redevelopment.

Federal and state policies should emphasize transit in the sense that it becomes a service that local residents and businesses demand. Planners and elected officials should not lose sight of the broader need to meet the demand for more dense and varied land uses.

Sam Staley, Ph.D., is director of urban and land use policy for Reason Foundation and co-author of Mobility First: A New Vision for Transportation in a Globally Competitive 21st Century (Rowman & Littlefield).