With determined and focused local and regional planning, mixed-income housing at transit stations can be a triple play: supporting transit ridership, promoting regional inclusiveness, and revitalizing underused or blighted areas.
On an almost daily basis, one reads of more stimulus money pouring into American light-rail, streetcar, and walkable neighborhood projects aimed at reducing car dependence and creating more sustainable new urbanist communities. There is no question that patterns of real estate development are being transformed for a whole host of reasons—escalating gasoline prices, global warming, summer smog alerts, extensive traffic jams in major cities, changing housing preferences of younger people, and household deleveraging after the recession, among others. Transit-oriented development (TOD) addresses many of these concerns.
A transit-oriented development is generally defined as a mixed-use residential project that is located within a quarter mile (0.4 km) of a commuter transportation station (usually rail) and within walking distance of retail businesses, restaurants, and/or places of employment, allowing reduced car use through direct access to mass transit. Because one of the fundamental purposes of TOD is to have residents of the development use mass transit as their primary means of mobility, those residents should be persons likely to use transit.
The United States has about 3,000 transit stations, but only about 100 transit-oriented housing developments. However, it is anticipated that over the next 30 years the number of people seeking to live near transit will top 15 million, creating an enormous opportunity for a new wave of real estate development. Although the vast majority of transit-oriented housing to date has been for-sale condominiums, townhouses, and high-rent apartments, it is rental housing that is the preference of the current generation of young people and those recovering from the recession. To tap this expanding market, housing costs at transit-oriented developments must be more diverse.
Because they usually involve several elements that increase expenses—high land costs, structured above- or below-grade parking, land owned by cash-strapped government or transit agencies wanting to maximize their return, and public-use spaces required as part of the project—transit-oriented residential development is typically high-rise construction and considerably more expensive than stand-alone greenfield garden-style apartments. The need to fill development budget gaps means TOD projects almost always involve public money, if not a full-fledged public/private partnership, requiring agreements covering joint development, public benefits, prevailing wages for construction workers, and other government mandates that also increase the development cost. The net result of these factors—high land cost, expensive construction techniques, required public benefits, infrastructure costs, subsidized retail components, and organizational and legal complexities—is escalated rental rates and sales prices needed to support the project.
Most construction of commuter-rail projects occurs on former cargo rail lines, and the rail stations are often located in former light-industrial areas—places where existing housing stock is older, as well as less desirable and less expensive due to its proximity to the rail lines and industrial uses. The people living in these areas tend to be lower-income minority renters—the same demographic group much less likely to own a car and more likely to use mass transit, making them the core transit riders.
The gentrification that occurs when TOD comes to these former lower-income, rail-served areas is an obvious—and to a certain extent intended—result. Elevated development costs require high rents, which push out people with lower incomes; the new residents have higher incomes, are less likely to be a member of a minority, and are more likely to own and use a car to commute. Also affecting the lower-income residents who attempt to remain is the follow-on negative effect of higher appraised home values and higher property taxes.
The unintended consequence of redevelopment at transit stations is sadly ironic: TOD actually ends up reducing the number of transit riders. In fact, Maintaining Diversity in America’s Transit-Rich Neighborhoods, an October 2010 study by the Dukakis Center for Urban and Regional Policy, found that automobile ownership increased faster in nearly 75 percent of transit-rich neighborhoods than in the overall metropolitan area.
Equally detrimental to sustainable development is that TOD often contains ground-floor retail space or restaurants, which offer employees lower wages. Because lower-wage workers cannot afford to live in the new project, they find themselves forced to drive to their jobs, exacerbating traffic congestion and increasing the need for parking. This project form could better be described as “transit-at development"—more like a suburban town center providing a public focal point around which high-end residential and retail development occurs without regard for how the development supports transit ridership, and with increased car ownership, traffic, and parking needs.
Yet, gentrification also brings positive change: without new development, these inner-city and/or former industrial areas would remain blighted. The rail station becomes a catalyst for renewal, driving out mismanaged and poorly maintained properties and increasing tax revenues to support public works and underfunded school systems.
Important legal considerations also surround gentrification, transit, and transit-oriented development. Several transit agencies have been challenged when they place new commuter-rail or streetcar lines primarily in higher-income areas, and affordable housing advocates contest the aggregation of lower-income people in only certain neighborhoods. If new rail lines and the development surrounding them are only available to higher-income people and are subsidized by federal, state, or local funds, these activities could be contested as either violating fair housing laws or as a failure of these government agencies to affirmatively further fair housing.
Wholesale gentrification is not an inevitable result of transit-oriented development—if thoughtful, proactive actions are taken. Many tools exist to balance the benefits and detriments of gentrification while transit ridership is supported and enhanced. Among these are the following:
- Mixing incomes. One approach is to require all transit-oriented development to be mixed income, with a certain percentage of all residential units being income and rent restricted. However, the rent-restricted affordable housing component affects the development pro forma, requiring more public subsidy and significantly increasing the complexity of the project financing. The lower-rent units can be supported with low-income housing tax credits and tax-exempt bonds, as well as a host of other federal and state programs. The city and other local authorities can also participate through tax increment financing (TIF) districts, municipal management, public improvement, or utility districts to assist with infrastructure costs, tax abatements or rebates, parking reductions, and density bonuses, to name a few options.
- Capping taxes on existing properties. Although requiring an affordable housing component in new transit-oriented construction is important, initiatives should also be enacted to retain existing affordable housing. Tax valuations on existing residential properties in the transit zone can be capped for as long as the property is owned by or leased to current residents or subsequent lower-income residents.
- Engaging in regional planning and funding. One of the hindrances to transit-served affordable housing is that transit agencies tend to span a county or region, crossing multiple city boundaries, whereas many of the funding mechanisms for transit-oriented development and affordable housing production are local. To address this problem, a transit corridor–defined TIF district could be created to cover a number of transit stations in both wealthier and poorer areas of town. A developer wanting to use TIF funds in the wealthier area can be required to create a mixed-income development. In addition, the incremental taxes collected from development in the higher-income areas can then be used to support mixed-use retail space and market-rate apartment units at the lower-income transit stations. In essence, metropolitan areas and their surrounding rail-served suburbs can cooperate across city boundaries through sharing of property taxes to create mixed-income, mixed-use development throughout the commuter-rail system, making the overall transit environment more appealing on a regional basis and allowing the economic development benefits of the transit-oriented development to be more widely shared.
Because the vast majority of mass transit users are lower-income people, commuter-rail expansion, transit-oriented development, affordable housing, and gentrification are inextricably linked. Left unattended, transit-oriented development will migrate to the high end, displacing lower-income people and resegregating people by class and probably race. But with determined and focused local and regional planning, mixed-income housing at transit stations can be a triple play: supporting transit ridership, promoting regional inclusiveness, and revitalizing underused or blighted areas. The Dukakis Center report summarized it best: “Transit and diverse neighborhoods need each other.”