Metro Rails: where's the money? And VC, eh? What about it?
Dear Value Capture Friends,
There is a discussion going on over at the New Mobility Agenda (http://www.newmobility.org) where they know a great deal when it comes to matters relating to transportation but seem to come up a bit short in terms of how you put value capture to work to recoup all value which is created by public investments in and around the transport sector. I have extracted both the main reactions as well as the original article (which took urban rail investments as its point of departure, but I would hope that we can keep our remarks on a more general plane. . . all forms of public investment via the transport sector which enhance value.)
It would be interesting to have your reactions and views to this – either to me, to this list, or best of all perhaps to both. The address of the New Mobility Café is NewMobilityCafe@yahoogroups.com.
I look forward to this, because I have for years felt that this simply had to be part of the public policy toolkit, at the very least when the taxpayers dollars are the ones who are going the work (or at least some key part of it).
From: "Lee Schipper" <SCHIPPER@...>
Date: Wed Aug 9, 2006 1:47 pm
Subject: Re: [NewMobilityCafe] Metro Rails: where's the money? Where's the property?
There is ample evidence of the same kind of value gain along the Trans
Milenio corridor in Bogota. There is no REAL BRT in the US (perhaps
parts of Los Angeles not withstanding) to compare with this kind of
improvement. The beautiful apartments along the main line in Curitiba,
some there before the line went in years ago, some built afterwards, are
also evidence that ANY reliable fast transport stimulates growth in
housing, etc., particularly if the density is high. Los Angeles has
been talking to developers for a long time to beef up the nodes around
the Wilshire and Valley BRT lines.
Contrast with my real home town in Beserkeley CA, who made it clear
over the last 30 plus years that there would be ABSOLUTELY no
development of property around the N. Berkeley BART site, something we
call a parking lot with rails. Since dozens of homes were removed to
create the BART station and parking lot, the net "gain" to the
relatively low-density, single family home community near the stop was
probably negative. Berkeley is still fighting over whether to develop
around the s. Berkeley BART station, and El Cerrito Plaza, one stop
north of n. Berkeley, almost died over the decades of neglect before
finally being rebuilt, with (chuckle) Trader Joes as the centerpiece.
Other parts of the BART system are equally outrageous, with virtually no
development on top of or close by stations, but lots of parking for
lucky and wealthy suburban commuters. Some stations in DC are like
that, notably Vienna Va (you emerge and ask "Where's Vienna" and no one
knows" and many other outlying stations.
In other words, its all a matter of luck, planning, and many other
factors whether there is sizeable development, who gains, or who
Unfortunately there is another side to this value gain. I live 2 blocks
from the Cleveland Park Metro in DC. Comparing house prices close (i.e.,
within four blocks) and farther way showed a huge gradient. Its one
thing if you already own the house (or you own lots of undeveloped
property, such as all those real estate magnates who want billions of
OPM ("other peoples' money) to be spent for rail to the Dulles airport
so they can cash in) --- but what if you are one buying in and find you
have to pay the $200K extra. Do a present value on that extra cost
against the time and/or fuel saved. Is it worth it or would it be
cheaper to live father away and use a car? My lovely CP neighbors have
fought much densification here and at other stations -- even worse, were
not allowed to build up on the existing 50 year old strip mall (the very
first in the US) that is astride the Metro Station. Contrast that with
Bethesda (six stops northwest) or Silver Spring (15 stops in the other
direction, NE DC just in Maryland) where huge apartment developments
really make these two town-lets good examples of transit metropolis that
Bob Cervero has written about.
In other words, its all a matter of luck, planning and who opposes...
Director of Research
EMBARQ, the WRI Center
for Sustainable Transport
+1202 729 7735
From: NewMobilityCafe@yahoogroups.com [mailto:NewMobilityCafe@yahoogroups.com] On Behalf Of Richard Layman
Sent: Wednesday, August 09, 2006 1:24 PM
Subject: Re: [NewMobilityCafe] Metro Rails: where's the money?
This was my original reaction to the article as well. In large part, public investment, especially in transit, is to spur additional private investment. In North America anyway, I think it's unlikely that BRT will do so, while there is no question that rail-based projects do.
In my neighborhood for example, which is maybe 1/6 of the area impacted by the new "infill" station, the New York Avenue red line subway station in Washington, DC:
1. Houses rose a minimum of $200,000 in value between the time of the announcement and opening of the station. That's a rise of $350 million in property value.
2. Construction projects for between 2,000 and 2,800 units of condominiums are in process now also. (Some were announced beforehand, but for years and years had gone nowhere.) Arguably, separating out previously announced projects, this is worth $1 billion.
And this is but 1/6 of the total geography impacted by this station. And the station cost $120 million to build. Granted the red line had already been built, costing billions.
(Other examples include the construction along the Hiawatha Line in Minnesota, and the experience of Houston and Dallas. There is a chapter in the new edition of _Geography of Urban Transportation_ on this topic, although I do not yet have this book.)
And speaking of depreciation. Buses wear out and need to be replaced. While it is true that train cars wear out too, they are usually refurbished, and last for decades.
Where U.S. transit systems have "problems," is that most of the value captured from transit investment connotes to private investors. Unlike HKT and the Japanese Railway system, U.S. transit systems aren't active property-portfolio developers, and therefore lose additional revenue streams that could be used to "subsidize" transit, just like transit was often developed to spur housing development in the 1800s and 1900s.
Roland Sapsford <roland@actrix. gen.nz> wrote:
Posted by: "Lee Schipper" SCHIPPER@...
Tue Aug 8, 2006 3:52 am (PST)
Nice example of what can be done with OPM -- Other Peoples' Money!