Responding to Americans’ changing preferences, developers are helping transform the way cities grow with projects huddled near transit hubs. Such projects are increasingly popular, and are likely to become more so as concerns about climate change and gas prices continue to rise. They also have drawn support from the federal government. But in many ways they can be more challenging than traditional developments on virgin land.
Although some cities like New York and Chicago have long-entrenched public transit systems, in most places Americans’ attachment to their cars made new public transit a hard sell for decades.
But attitudes are changing. Concerns about global warming and increasingly volatile gas prices have led to increased interest in environmentally friendly transportation. The weakened economy is forcing Americans to scrutinize every penny they spend on housing and commuting. And ever-worsening traffic gridlock may also be converting nonbelievers into transit evangelists. When asked the best approach to solving traffic problems, 47 percent of respondents to a 2009 National Association of REALTORS® and Transportation for America (online at T4America.org) poll favored improving public transportation, 25 percent preferred building communities that make it possible for people not to drive, and only 20 percent advocated building new roads.
Real Estate Development Follows Transit
Increasingly, this shift in attitudes is leading cities to build new public transit systems or expand their existing ones. “In Denver, voters agreed to tax themselves to pay for a regional light rail system,” says Allison Brooks, managing director of Reconnecting America, an Oakland, California, nonprofit transit advocacy organization. “Minneapolis-St. Paul is investing in a new light rail system. In Los Angeles, voters approved a tax to pay for the expansion of the current system.” Charlotte and Phoenix are also investing in transit.
Following close behind is real estate development clustered near light rail stations, at subway stations, and near streetcars--called transit-oriented development, or TOD. These are projects like the Lake Highlands Town Center in Dallas, a nearly 2-million-square-foot, mixed-use project that will include a Dallas Area Rapid Transit (DART) light rail station. “A growing number of developers really get transit-oriented development,” says Jud Pankey, chief executive officer of Prescott Realty Group, which is building the Lake Highlands Town Center. “It’s a whole new way of doing business.”
“Transit-Oriented” vs. “Transit-Adjacent”
Transit-oriented development is not just any land use located adjacent to or near a rail station. To be “transit-oriented” the nearby land uses must be readily accessible to and from stations and must be designed for safe, convenient use by pedestrians. True TOD has an organic relationship with transit. It increases transit ridership and it directly benefits from high pedestrian activity levels associated with the transit line. Successful TOD districts generally display pronounced elements of “place” in the sense that people willingly spend time there (not just waiting for transit) and the district has a neighborhood name and is well-known to the area population as a destination.
The land use mix required to achieve these characteristics can vary depending on the transit mode and on the location of the station within the metropolitan area. Generally, at least three major land uses should be immediately present. Residential, retail, restaurant, and civic uses would represent a common TOD mix. Hotels, office buildings, and other places of employment may also be present.
There are many rail transit stations in the United States (including some in and around major cities) that have no significant organic relationship with their surrounding land uses. This is most common for suburban commuter rail stations that serve primarily to provide park-and-ride access to the transit line, but it can also be true of major employment centers served by a transit stop. In other cases, auto-oriented development patterns and infrastructure design have negated any land use benefit from the transit service. These sites are generally referred to as “transit-adjacent” and may represent a significant missed opportunity.
Transit-oriented districts are mainly located within a quarter to a half mile of a high-capacity transit station. This radius is related to pedestrian walking distances, since public transit most influences those land uses that can be reached on foot in five to ten minutes. It is important to note that the size of a TOD area can be larger or smaller than this depending on the quality of the walking environment and the presence or absence of significant barriers to walking.
A Growing Trend
Those who have mastered TOD say the phenomenon will only expand. “In five years, properties along transit routes will have increased in value because people will pay a premium to live where they can walk to a transit station, even if they’re not using it every day,” says Carl Dranoff, president of Dranoff Properties in Philadelphia. “Those will be the most sought-after locations.” One of Dranoff’s projects, a 163-unit condominium development in Philadelphia’s cultural hub, is within steps of a subway entrance and the Kimmel Center for the Performing Arts. That project is now 90 percent sold. “We were able to hold our prices, and our fall-out ratio of people who cancelled contracts while waiting for their unit to be finished was only 7 percent,” says Dranoff. “We were able to go against the grain because sales on projects near transit are better than those further away.”
“I’ve been doing TOD since the late 1990s, and I continue to ask myself whether it’s going to go away,” says G.B. Arrington, vice president and principal practice leader for PB PlaceMaking, a Portland, Oregon, design and planning firm specializing in TOD. “But the interest and demand in both the public and private sectors continues to grow because developers who follow the principles of TOD will create places that are more resilient in the face of gas prices and climate change.”
Federal Policy Support
Federal policymakers seem to agree. In March 2009, the U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of Transportation (DOT) announced a joint “livable communities” initiative to help Americans gain better access to affordable housing, find transportation options, and lower their transportation costs. According to the two agencies, the average working American family spends nearly 60 percent of its budget on housing and transportation.
They’ve united to cut those costs by creating affordable, sustainable communities that rely heavily on transit. DOT also announced $100 million in federal funding for transit projects that reduce energy consumption or greenhouse gases.
“In the last six months, we’ve seen national interest at the policy level that we haven’t seen before,” says Abby Thorne-Lyman, a principal at Strategic Economics, an economic and real estate consulting firm, and a staff member for the Center for Transit-Oriented Development, a nonprofit research and advocacy group in Berkeley, California. “It’s become a nation.al movement, not just of developers but also of policymakers realizing they have a role to play and that transit has large benefits in terms of greenhouse gas reduction and economic development.”
But even with increased federal support, TOD can be much more difficult and complex than development on virgin land. It can be difficult to assemble the necessary parcels, and the approval process can present a maze of zoning and permitting restrictions. “You’ve got multiple public entities and public constituencies to work with,” says Pankey. “You have not only the transit authority, but other public improvements may also have to be done, and that could mean working with the city, county, and a tax increment financing (TIF) district. Those members represent various constituencies, and you have to be able to navigate that process and articulate the benefit of transit living.”
Lenders often don’t understand the large and intricate--and long-term--nature of TOD projects. Often a developer must borrow in order to acquire property and then hold that property until the transit service matures and the demand it brings can support the development. This means lenders, which often include public entities alongside private banks, must be willing to wait a long time.
Local residents may also lay down early opposition to high.er-density developments. Not-in-my-backyard (NIMBY) concerns are nothing new to developers, but TOD presents added complications. Dan Johnson, deputy city manager and chief operating officer for Richardson, Texas, which is adding four stations to the DART rail line that runs through the city, says early planning is one way to avert NIMBY sentiments. “Several years before the rail was developed, we were active with our city council and speaking in public sessions,” he says. “We were also selected by the Urban Land Institute for a panel study in which a task force of professionals conducted planning and visioning sessions. A lot of problems were circumvented by having that session early on.”