Probably since Neolithic times, the real estate business has harped on one mantra: Location, location, location. The theory is pretty simple: Two identical properties (caves, back in those days, I guess) can carry hugely different price tags, depending on whether they’re located in the good versus the lousy school district, in a pleasant versus ugly neighborhood and so on. Location, even within a block can change price. A friend of mine who was chief of research for the New York City Board of Realtors used as an illustration of the concept the “pizza house” on his block in Queens. It sold for $30,000 less than all the other homes in the area because it was pervaded by the smells of oregano and pepperoni from the Italian restaurant next door.
Well, guess what? Now there’s a new mantra in town: transit, transit, transit.
A study released on Thursday by the American Public Transportation Association (APTA) and the National Association of Realtors (NAR) claims that property values of houses located near transportation with high-frequency service performed 41.6 percent better than similar properties in a region.
Michael Meliphy, APTA’s president, claims, “When homes are located near public transportation, it is the equivalent of creating housing as desirable as beach front property.”
I completely understand why APTA would want to show that mass transit makes homeowners richer; they’d get more backing from citizens and government officials to build more of it. I’m a bit mystified about the NAR’s interest, however. Perhaps its leadership is trying to show members that in future the hot action in sales won’t be the suburbs, but the cities, or the parts of cities close to transit.
Jed Smith, managing director of quantitative research for the NAR, cited the usual list of mass transit benefits; it reduces congestion and air pollution, invites investment and business activity and saves energy. Consumers are increasingly “voting with their feet,” he said, choosing to buy homes in areas served by high-frequency transit.
Willing to pay more
That idea makes some sense because there have been findings in recent years that Americans are increasingly willing to pay more to live, not in the classic free-standing house on a big suburban lot, but in a high-density neighborhood that offers a mix of uses (housing, retail, offices and so on) and amenities like parks and transit. At the same time, public opinion polls have shown that Americans’ preference for suburban living continues unabated. If you watch GHTV’s “House Hunters” programs as religiously as I do (I ceased to be ashamed after Hillary Clinton admitted being a fan of “Love It or List It”), you’ll know that both trends seem to be operating simultaneously.
This latest investigation explores how well residential properties located near transit maintained their value compared to properties without transit access. The study period covered 2006 and 2011, and analysts zeroed in on five areas: Boston, Chicago, Phoenix, San Francisco and our very own Twin Cities.
I often wonder why so many outfits do studies whose conclusions are preordained. After all, it’s not exactly news that property near transit is generally more valuable than property not near transit. That effect was visible the minute New York City started building its subways at the turn of the last century. Land near them rose so high in value that builders had to put up apartments. Even and especially now, the closer you live to a subway line, the higher your rent. The non-wealthy can afford a single family home only if they endure massively inconvenient commutes. (Mine from a far-flung neighborhood to Manhattan required a bus and subway ride totaling an hour and 10 minutes each way.)
Perhaps the main message here is the resiliency of values near transit in a lousy market. After all, the five years from 2006 to 2011 were not exactly the ne plus ultra of real estate. Housing prices sagged like wet noodles, dropping by an average of 33.8 percent in the nation’s 20 largest cities, according to Standard & Poor’s. The Twin Cities saw prices fall by about 27 percent.
But the “new mantra” study found that sales prices within “transit sheds” (areas within a half mile of a fixed transit line) saw much lower declines, namely 41.6 percent of the 33.8 percent decline nationally and 48 percent of the 27 percent decline in the Twin Cities.
Framing the data that way exaggerates the price difference, however. If home values dropped 48 percent less in one of the cities’ two transit sheds, namely along the Hiawatha LRT and the Northstar commuter line, they would be 14 percent higher than the ordinary house not near mass transit.
Darnell Grisby, director of policy development and research for APTA, told me not to apply these numbers to home values because they’re so variable, but I am going to do it anyway. (Don’t tell.) The average house price in the Twin Cities in 2006 was $231,000. By 2011, it had shrunk to about $169,000. If the house had been close to a mass transit shed, however, it would be worth about $192,000. Ergo, values of property near transit are less awful in bad times.
As a corollary, though as yet unproven, prices of houses near transit sheds should show a greater percentage gain in value when prices across the region are rising. Interestingly, houses near the Hiawatha line performed 62 percent better in the Great Recession than those in the region, while those near the Northstar line did only 11 percent better. The best performing areas were near the Government Plaza station in south Hennepin County.
Analysts also calculated access to jobs per square mile near the Twin Cities’ two transit sheds. Hiawatha showed 132,132 per square mile and the Northstar line 108,354, while the region had only 37,484. Of course, that finding is also a bit obvious. Transit lines travel through dense areas with lots of jobs; that’s why they were built in the first place.
Makes a difference
But here are a few numbers that show why building mass transit may make a healthy and happy difference. The average monthly transportation cost for a household on the Hiawatha line was $840, for the Northstar $977 and for the region $1,164.
Access to # Jobs Per Square Mile
Monthly Transportation Costs
Public Transit Shed
Public Transit Shed Advantage
Public Transit Shed
Public Transit Shed Savings
2x more jobs
3x more jobs
2x more jobs
3x more jobs
2x more jobs
That’s good news for cities because with more change jingling in their pockets, families will spend more freely. Higher sales lead to more jobs and higher tax revenues (without raising taxes), better public services and civic satisfaction.