What ULI members need to know to ensure that revenues support equitable decarbonization of the built environment.

This article appeared in the Summer 2022 issue of Urban Land.

Over the next five years, $590.7 billion will be spent on U.S. transportation networks through the Infrastructure Investment and Jobs Act of 2021, the largest investment in infrastructure since construction of the Interstate Highway System.

These funds will be distributed to states, metropolitan planning organizations, and local jurisdictions through formula-based funding and competitive grants. This article focuses on what ULI members should know about the spending process to ensure that the money makes its way to transportation and infrastructure projects that support an equitable, decarbonized future for the built environment.

Infrastructure Investment and jobs act transportation funding breakdown

Sources: Brookings Federal Infrastructure Hub, ULI.

In addition to the $590.7 billion, $273.1 billion will be invested in energy, broadband, water, watershed, and coastline infrastructure, as well as other infrastructure programs. This funding builds on the $350 billion in emergency funding for states and local governments and $30.5 billion for public transportation as part of the American Rescue Plan Act of 2021. Historically, about 70 percent of infrastructure funding is nonfederal, meaning that these funds will be leveraged through investment by states, local jurisdictions, and the private sector.

“Much of the Infrastructure Investment and Jobs Act funds can be flexible or can be used to really achieve a larger purpose,” says Mike Parker, infrastructure leader at EY Americas. “At the same time, we need to realize that if we don’t mobilize the state and local and private-sector funding and investment focus as well, we’ll lose the magnitude and the distinct opportunity that’s arising from this generational level of investment.”

Transportation plays an important role in everyday life as it moves people and things. This includes connecting people to employers, needed services, stores, and other people, as well as allowing goods to reach their destinations. Transportation is an inherently social activity that enables human connection. And public transportation that is multimodal and integrated with land use can create compact, human-focused urban development that generates tremendous real estate value while reducing greenhouse gas emissions and increasing economic access.

As identified by survey participants for the joint ULI/PwC report Emerging Trends in Real Estate® 2022, transportation and infrastructure are of “great importance” for real estate and development issues. Transportation—and infrastructure more broadly—provide the regional framework for real estate development because the overall quality of infrastructure, along with consumer demand, is a key driver for real estate investment.

One finding of the 2021 ULI Global Member Infrastructure Survey was that Institute members in the United States rate the quality of infrastructure in their own metropolitan area lower than do members who work primarily internationally. This puts the U.S. real estate industry at a disadvantage in attracting new investment and in its ability to increase economic competitiveness, especially as U.S. infrastructure fails—such as the collapse in January of a 50-year-old bridge in Pittsburgh. The “2021 Report Card for America’s Infrastructure,” released by the American Society of Civil Engineers, concluded that “Growing wear and tear on our nation’s roads have left 43 percent of our public roadways in poor or mediocre condition.”

Guiding Investment

An opportunity exists for ULI members and key partners to identify and promote more equitable and resilient infrastructure investments that create long-term value for both real estate and communities. To help policymakers, real estate developers, and community leaders prioritize and leverage infrastructure investments like federal funding, the ULI Curtis Infrastructure Initiative in 2021 released the report Prioritizing Effective Infrastructure-Led Development, which lays out five key focus areas that the real estate industry and ULI members can address. In those five key areas, the report states that infrastructure should do the following:

  • Increase equity and sustainability;
  • Invest in public transportation and mobility;
  • Combat the global threat of climate change;
  • Increase access to the internet; and
  • Increase housing affordability and attainability.

In addition, regarding leveraging infrastructure investment, “simply maintaining existing infrastructure without new and restorative investments is not enough to support and create sustainable growth,” says Craig Lewis, global practice leader of planning, landscape, and urban design for CallisonRTKL, and global board chair of the ULI Curtis Infrastructure Initiative. “Nor does it tap into the unique value-enhancing relationship created by the real estate development process between those who build and maintain infrastructure, the developers of buildings, and the end user.”

ULI members can use this report to guide the conversations locally by encouraging more investment in infrastructure that embraces the five focus areas.

These new funds will be critical to the country’s economic, social, and environmental well-being. All too often past investments have favored some communities at the expense of others. Interstate highways, for example, have greatly improved mobility and promoted economic prosperity throughout the country, but they have also cut once thriving communities in two, displaced thousands of low-income households, and otherwise disproportionately harmed Black people and other communities of color.

As noted in the new ULI report 10 Principles for Embedding Racial Equity in Real Estate Development (page 22), some of these physical and social divides were advanced intentionally and unintentionally during the 20th century by the commercial real estate industry—including advocacy through articles in this magazine as well as by some ULI members—through racial covenants, support of inequitable highway alignments, and other “best practices” of the time. As more ULI leaders and members understand the legacy of these infrastructure investments, they will be in a better position to shape a more equitable future with racial equity as a core value.

Status Quo: Incentivizing Sprawl

Simply moving people is becoming the largest contributor to greenhouse gas emissions in the United States, especially when the real estate industry is doing such a good job of electrifying and reducing emissions from buildings: between 1990 and 2020, emissions declined 7.6 percent in the residential sector and 7.7 percent in the commercial sector, according to the U.S. Environmental Protection Agency (EPA). This, along with other industry improvements, is driving down greenhouse emissions in every U.S. sector except transportation. According to the EPA, this rise in transportation emissions is largely due to gasoline consumption by cars and trucks as vehicle miles traveled has increased.

A major cause of this is land use policy that incentivizes automobile-centric development that increases vehicle miles traveled. An example is North Carolina, where the transportation sector accounts for 36 percent of the state’s gross greenhouse gas emissions and was highlighted as the key sector that needs attention in order to meet established climate goals. All other emission sources—from electricity generation and residential, commercial, and industrial uses—reduced their gross greenhouse gas emissions by 16 percent between 1990 and 2018.

According to the Transportation for America report “The Congestion Con: How More Lanes and More Money Equals More Traffic,” total U.S. highway lane-miles increased by 42 percent between 1993 and 2017 in the 100 largest urbanized areas. This increase outpaced population growth of 32 percent during the same period, and points to states taking on significant financial liability as they attempt to relieve traffic congestion, which increased by 144 percent during those same years.

Those additional lane-miles make it more likely that a person drives on the roadway even if it involves more miles traveled—choosing time savings over reduced distance, thereby increasing vehicle miles. In contrast, if investment had instead been made in creating frequent and reliable public transportation or safer bike routes, those trips would either not be taken at all or would been taken on another mode of transportation. This is because investments and improvements to transportation networks induce demand by generating new trips.

Durham, North Carolina—one of the fastest-growing U.S. regions—is taking a different approach by investing in public transit. During the pandemic, the region revamped its Durham County Transit Plan through an extensive community engagement process to better understand the needs and priorities of transit riders. This initiative was partially conducted in response to the decision not to move forward with the city’s light-rail project and instead direct investment toward increased bus rapid-transit service. This effort is being coordinated with the region’s 2050 Metropolitan Transportation Plan, which has removed from the city’s Transportation Improvement Program 19 highway projects that would have cost $504 million and involved 51 lane-miles (82 km) of highway construction.

To help communities calculate the impact of adding highway lane-miles, the Rocky Mountain Institute and other national partners developed the State Highway Induced Frequency of Travel (SHIFT) Calculator. The 51 lane-miles removed from the transportation plan would have induced 88 million to 123 million additional vehicle miles (142 million to 198 million km) traveled per year and increased greenhouse gas emissions by the equivalent of about 11,000 passenger cars and light trucks.

Despite the state’s stated goal of reducing overall greenhouse gas emissions, the majority of the highway funds not spent in Durham will instead go to other North Carolina regions seeking to expand their highways, thereby incentivizing sprawl elsewhere. This is due to statewide policy on how federal and state transportation funding is distributed.

“Every transportation decision is a climate decision,” Pete Buttigieg, U.S. secretary of transportation, said at the 2022 SXSW Conference, “whether we recognize it or not.”

Colorado is taking a different approach. Officials there are implementing the nation’s first rule requiring that the state’s five metropolitan planning organizations develop near- and longer-term plans to cut transportation greenhouse gas emissions caused by vehicle trip demand induced by expanded roadways.

This will incentivize investment in transportation alternatives that will improve quality of life and air quality, such as adding sidewalks and protected bike lanes, upgrading local and intercity transit, and supporting compact and walkable land use. This will make the state more competitive for grant funds from the federal government and support land use that shows higher returns on investment for real estate developers. It will also help address issues such as the threat of wildfires as development expands at the border of Colorado’s wildlands and urban areas.

The Uptown Brampton plan, developed as part of ULI Toronto’s Getting to Transit-Oriented Communities Initiative, integrates active mobility as a key component to enable car-free living and enable child-friendly arterials and intersections early in the implementation phase. (ULI Toronto)

Looking Forward: Reinvesting in Communities

The public sector can act as a catalyst and accelerator for transit-oriented development—as well as for other urban infill to create compact, walkable neighborhoods, even without public transportation—by investing in infrastructure early and allowing the cost to be paid back over a longer period.

“There’s something unique about infrastructure that goes beyond the distinct site upon which an investment is happening,” says Leslie Woo, chief executive officer of CivicAction + CivicAction Leadership Foundation. “[This] gives public bodies the ability to be better able or positioned for infrastructure investments.”

ULI Toronto is leading the Getting to Transit-Oriented Communities Initiative, which is developing a collaborative city-building model to manage growth in a way that creates 15- to 20-minute neighborhoods—places where all needs are within reach of someone walking or biking a short time. This is taking place as the region invests C$62 billion (US$48 billion) to improve regional rail through new and expanded subways, new and expanded light rail, and enhanced bus service.

As part of this effort, ULI Toronto and its partners conducted four workshops during 2020–2021 to learn lessons from across Canada on the best way to leverage this investment. The key findings that emerged from this effort were these needs: to bring together leadership on a shared vision for stations early in the process; to understand that stations are integral parts of communities and should be developed in partnership among the public sector, developers, and the community; and to realize that the value created by stations can be amplified with their integration into the urban fabric. These needs encompass the importance of considering how those benefits are then redistributed to the partners that include the community.

For example, in the Rondo neighborhood of St. Paul, Minnesota, where the construction of Interstate 94 devastated the Black community, the community-based Reconnect Rondo nonprofit group is working to establish an African American Cultural Enterprise District and build a community land bridge over the highway. ReConnect Rondo is developing a restorative development model and metrics to ensure positive outcomes that increase equitable access and use of resources by all people, as well as ensure that people in the city have an equitable economic, social, and environmental stake in their communities.

Some of the key measures for restorative development involve infrastructure—such as water, energy, and internet access—as well as broader indicators like land use and planning, health and well-being, and culture and identity.

“Demand for housing redevelopment will factor the most into shaping infrastructure investment,” said one participant in the “ULI Member Global Infrastructure Survey.” “Meeting [this] demand requires the ability to move people and the capacity to provide services to residents—water, sanitation, community facilities, schools, parks.”

In Indianapolis, as the city invests in three new bus rapid transit lines as well as enhanced local bus service, a partnership was launched to establish an equitable transit-oriented development fund to preserve and spur affordable housing along the new routes and reduce potential displacement. Additional approaches can be to update zoning and land use policy to permit increased “gentle density” farther from the transit stations to allow the market, over time, to develop small projects like duplexes, triplexes, and smaller apartment buildings.

A network of mobility hubs like those being developed in Minneapolis, Pittsburgh, and San Antonio would better connect these new homes to the public transportation network. Also, real estate investors are seeking to leverage walkable communities that require fewer vehicles, such as the Culdesac Tempe project being developed outside Phoenix and redevelopment of The Point outside Salt Lake City on the former site of a prison.

As reinvestment in creating people-centric and walkable communities occurs, the real estate industry should be thinking about the next major disruption for transportation—autonomous vehicles. They have the potential to be as disruptive to communities as the introduction of the automobile was at the turn of the 20th century.

Autonomous vehicles will offer many benefits for communities, such as greater travel efficiency, a reduction in public space dedicated to parking, and increased safety. However, the risk exists that these very vehicles will produce harmful impacts such as greatly increased vehicle travel, noise, and pollution, as well increase inequity and congestion if vehicles are not shared by multiple passengers. Developing tools and resources for communities to plan for future deployment of automated vehicles is essential.

common real estate approaches to deliver infrastructure

Leveraging Federal Infrastructure Investment

This approach to reinvestment in communities is being encouraged by the Biden administration through actions across the federal government that are looking to better shape equitable capital flow into neighborhoods by addressing discrimination, segregation, and displacement as well as integrating place-based investments into policymaking.

“Real estate is a two-tiered system,” noted one participant in the ULI Infrastructure survey. “Capital flows to where wealth concentrates and encounters barriers where household sustainability is highly vulnerable. This is manifested in geographic disparities, which then translate into how to allocate resources for infrastructure investment, which serves the whole and closes the gaps in income, community health, and opportunity.”

In particular, to promote walkable and compact urban development, the U.S. Department of Transportation issued a new transit-oriented development guidance—in the Transportation Infrastructure Finance and Innovation Act and Railroad Rehabilitation and Improvement Financing programs. This makes it easier to finance complicated projects like Denver’s Union Station, which in 2010 was one of the first transit-oriented developments to leverage this type of funding. About $100 billion is available to real estate developers and other entities to finance both horizontal and vertical construction and can be used as a source of equity to attract other sources of capital.

“The [Infrastructure Investment and Jobs Act] is just one component of how state and local officials and developers are looking to put together the political and financial support for their projects,” says Stephen Engblom, senior managing director of CBRE. “ULI is a natural convenor on these discussions and can act as a guidepost [on a project’s environmental, social, and financial impact] since every project needs to attract different levels of [support] to be successful.”

Ultimately, the more forward-thinking and flexible regions that execute successful infrastructure strategies for growth will generate more favorable financial outcomes for municipalities, improve the economy more broadly, and increase socially beneficial outcomes. Now is the time to prioritize effective infrastructure-led development that builds long-term real estate and community value through a holistic and integrated approach instead of engaging in disconnected investments.

PAUL ANGELONE is a senior director at the Urban Land Institute and leads the ULI Curtis Infrastructure Initiative.