When people are looking to rent an apartment or buy a home, housing affordability is often one of the primary considerations. This is particularly true of low- and moderate-income households, for which an inexpensive place to live can free up income for other necessities such as food, child care and health services. However, housing costs often do not paint a complete picture. Housing costs can be lower in areas without close proximity to employment centers and services. Yet research by the Center for Housing Policy (CHP) has shown that every dollar saved in housing costs is associated with a 77 cent increase in transportation costs. As the maps below show, when both housing and transportation costs are taken into account, the opportunities for true affordability among less wealthy households diminish. 

Public transit investments can help alleviate some of the financial pressures for low- and moderate income households. Transit can be a crucial connection to needed jobs and services. Research has also shown that public transit riders tend to have lower incomes, with nearly 66 percent of riders earning less than $50,000 per year. Transit also has numerous community-level benefits. New transit investments can help spur the redevelopment of struggling neighborhoods. Rising property values can bolster municipal finances and help homeowners build assets.

However, transit expansions and other major public investment projects can also have unintended consequences. The escalation of property values can lead to rent and home price increases that can worsen the cost burden of low- and moderate-income households and potentially lead to displacement. Therefore, it is important to coordinate housing and transportation planning and investment. Creating incentives and financing mechanisms for affordable housing and community development near transit can both improve a transit project’s financial viability (by stabilizing ridership) and ensure that the benefits of the investment are equitably distributed.

Investments in housing, transportation, infrastructure and economic development need to be coordinated as early in the planning process as is possible. Affordable housing preservation and development costs can be significantly reduced if property can be purchased prior to the onset of price escalations. One way to promote early, coordinated planning would be to incorporate affordable housing and community development factors into the rating criteria for transit programs. Last year, Enterprise joined the National Housing Conference and Habitat for Humanity in calling for such criteria to be added to the Federal Transit Administration’s New Starts program (read the full comment letter). Federal initiatives, such as the Partnership for Sustainable Communities also support the coordinated planning efforts that can advance this goal.

Local communities can also promote transit-oriented community development in a number of ways. Jurisdictions can adopt inclusionary zoning policies or set up tax increment financing districts (for a more detailed discussion of local policies, see CHP Executive Director Jeffrey Lubell’s blog post on the subject). Governments, nonprofits and community development financial institutions (CDFIs) can also work to provide financing for TOD projects. As an example, Enterprise and other local entities set up the Denver TOD Fund to support the expansion of the city’s rail system. We are also a partner in the Bay Area Transit-Oriented Affordable Housing Fund in Northern California, and we are working with local leaders to provide financing in other cities. Implementing these strategies can be difficult and require a significant amount of financial, political and human capital. However, with strong leadership communities can employ a variety of tools to ensure that transit investments have an equitable impact on all people. 

Michael Spotts (biography) is a Policy Analyst for Enterprise Community Partners. At Enterprise he conducts research and analysis of laws and regulations related to affordable housing and community development policies, with a primary focus on sustainable community development and transit-oriented development (TOD). 

The two-mile distance between Union Station and Rhode Island Avenue was a long distance between stations in the heart of the Nation's Capital.  Owners of derelict industrial properties in this area were unable to redevelop property because nearby roads were at capacity during rush hour and permitting agencies were unwilling to permit significant new development that would exacerbate this condition.  So the owners petitioned for a new Metrorail station in the middle of this area.  Hurdles to overcome were substantial:

Engineering - How to build a new station between existing stations on a busy line?

Multimodalism - The station location was an area intended for a hiker-biker trail.  Would the trail be displaced?

Funding – How to pay for a very expensive undertaking when the District Government was not flush with cash?

Adjacent Streets – The new station was “landlocked” because the street grid did not extend to the station area.  How would new streets be built and funded?

Equity – Although the station was surrounded by industrial land, several low-income African-American neighborhoods existed a few blocks away in all directions.  Would the current residents of these neighborhoods benefit from the new station or be harmed by it?

I was a new employee of the Department of Public Works’ office of policy and planning when landowners petitioned the DC Government for a new transit station at this location.  I suggested value capture as an appropriate funding tool.  Responding to concerns from the Washington Area Bicyclist Association, I also advocated for the inclusion of the displaced hiker-biker trail in the project, ensuring that it was integrated into the design and construction of the new station.  I negotiated for adjacent landowners to construct new streets.  I also cataloged a series of measures designed to prevent displacement of existing residents.

For more information about financing the New York Avenue Metrorail Station, see https://www.mwcog.org/uploads/committee-documents/k15fVl1f20080424150651.pdf

Rick Rybeck is the director of Just Economics, LLC.  See http://www.justeconomicsllc.com

By Rick Rybeck

The benefits associated with transit are well-known.  Yet, transit can be a double-edged sword.  Well-designed and executed projects inflate land prices.  In some cases, higher land prices preclude development that would be affordable to people who would use the nearby transit.   The “perversity of infrastructure” is that the infrastructure we build to facilitate development often chases it away to cheaper, but more remote sites, creating sprawl.  In other cases, transit provided to low-income neighborhoods prompts more affluent households to locate there, displacing the intended beneficiaries.

Meanwhile, landowners near transit sense that their land will be worth even more in the future than it is  today.  So they withhold their land from development.  By artificially shrinking the supply of developable land, they create real increases in land prices.  Thus land speculation can be a self-fulfilling prophecy – at least up to the point where the speculative price bubble bursts .  Then, speculation throws the entire economy into a tailspin.

Most  households and small businesses do poorly during both phases of the real estate boom-and-bust cycle.  During the boom, they cannot access homes and business sites because speculators outbid them.  During the bust, tenants can be displaced when speculator landlords are foreclosed.

Landowners are the “invisible” beneficiaries of infrastructure investment.  Applying value capture “user fees” to landowners can accomplish important objectives.  They can help make infrastructure self-financing.  They can reduce prices of both land and buildings.  And, they can create an economic imperative for development where land prices are highest – which is close to urban infrastructure and where smart growth should occur.  Attracting more smart-growth development to transit areas can reduce pressure for sprawl in outlying rural areas.

For more information about financing transit with value capture, see https://www.mwcog.org/uploads/committee-documents/k15fVl1f20080424150651.pdf

Rick Rybeck is the director of Just Economics, LLC.  See http://www.justeconomicsllc.com