‘Beachfront Property’ in Minnesota
Realtors know that home values depend on three things: location, location, location. Not long ago, that meant splendid isolation in sprawling suburbs. No more.
With the galloping fuel prices and mortgage meltdown of the past decade, now the best locations are urban and transit-accessible. Who says so? The real estate market.
A study of U.S. residential property value shifts from 2006 to 2011, released today, shows that homes near high-quality transit outperformed the rest by an average of 41 percent. In the Twin Cities, one of five metropolitan regions studied, the financial transit advantage was 48 percent. (pdf)
"When homes are located near public transportation, it is the equivalent of creating housing as desirable as beachfront property," said Michael Melaniphy, head of the American Public Transit Association, one of the study sponsors. "Consumers are choosing neighborhoods with high-frequency public transportation because it provides access in some instances to more than three times as many jobs per square mile [plus] lower transportation costs [and] walkable areas ..."
Wait, you say: Of course the trade group for urban buses and rail would say that. But the other sponsor, the National Association of Realtors, has no such agenda. They're happy to sell houses anywhere, but particularly where values are the highest. They have a strong disincentive to cook the books.
"Higher home values reflect greater market demand for areas near public transportation," said NAR chief economist Lawrence Yun. "Transportation plays an important role in real estate and housing decisions."
That makes sense these days because transportation is now the average U.S. household's No. 2 expense, topped only by housing itself. But it wasn't always so. Before the Arab oil shocks of the 1970s, 19-cents-a-gallon gasoline and $2,000 new cars made the cost of driving everywhere—largely in Detroit gas-guzzlers—practically negligible. For decades afterward, Americans kept ignoring the steeply rising costs when choosing a place to live.
Economics, however, eventually and inexorably, changes the culture and people's choices, and the changes are reflected in property values. The APTA-NAR study confirms that.
"When consumers choose a home, they also choose a lifestyle," the NAR's Yun said. "Shorter commutes and more walkable neighborhoods matter to a growing number of people, especially those living in congested metro areas."
The study focused only on properties within a half-mile of a rail or bus rapid transit station, which limited the Minnesota sample to those along the Hiawatha light rail and Northstar commuter rail lines. Each less than 10 years old, they account for only 11.2 percent of Metro Transit's bus-heavy weekday ridership. And their so-called "transit shed" is home to just 2.2 percent of the region's population.
Those 2.2 percent have been either smart or lucky, the study shows. They have access to three times as many jobs and save $324 a month in transportation costs compared with the rest of the metro. And their home values have been extraordinarily resilient during the Great Recession and the ongoing recovery.
It's unfortunate that the study did not consider bus routes, which predominate in most transit systems. But it's likely that homes with easy access to bus stops also held value better then those in transit deserts.
On the other hand, the findings provide strong evidence that the kinds of 21st century transit improvements conservatives routinely oppose significantly boost the wealth of families who choose to locate nearby. Not surprisingly, real estate development along the Central Corridor light rail—set to begin operations next year as the Green Line—has been robust.
"As Congress and state and local governments look for ways to accelerate economic growth, this study shows that investing in public transportation is a boon to revitalizing our economy," the APTA's Melaniphy said.
Plans are being drawn for a few more light-rail lines plus an array of highway and city street bus rapid transit improvements in the Twin Cities. Gov. Mark Dayton has called for a regional sales tax increase to finance them. We can still argue about the revenue mechanism, but the case should be closed on the benefits of these transit projects.