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Transit-Oriented Development

Agencies Need to Use Federal Funding to Buy Land for Transit Oriented Development

Transit agencies do not prioritize transit-adjacent housing development often because they lack funding to acquire land.

Photo: Inhabitat|

Low-density sprawl is a result of a failure to create transit-oriented development.

This piece was originally published on Urban Wire, the blog of the Urban Institute.

Housing in the United States became even less affordable for the average American in 2023, thanks to high mortgage rates and sales costs that have risen more quickly than incomes. To reduce overall costs of living, address an insufficient housing supply and reduce the major expense of driving, policymakers could promote transit-oriented development.

Unfortunately, transit-oriented development is more of an ideal than a reality in much of the country, comprising up only a small share of US housing. People living in homes farther from transit — where housing costs are often lower — spend far more on transportation. Cities have become more adept at transit-oriented development in recent years, but almost nine times as many units were added far from transit stations as near to them over the past two decades.

One explanation is that transit agencies do not prioritize transit-adjacent housing development and lack a dedicated source of funding to acquire land for such projects. To help enable transit-oriented development, a federal land acquisition program that supplements transportation infrastructure grants could help.

US cities are doing better, but...

Examining housing growth across U.S. urban areas, I found that neighborhoods near stations that opened in the 1960s, 1970s, and 1980s had a lower rate of housing growth than other parts of their respective urban areas during the 10 or 20 years following station openings.

These trends have reversed since the 1990s, fortunately. Neighborhoods near stations that opened from 2000 to 2009 had housing growth by 2019 that was about eight percentage points higher than similar neighborhoods with no transit access.

Chart: Urban Areas Have Become More Effective in Adding Housing Stock near Transit

Yet that growth is inadequate to account for population change. I found that, in urban areas, tracts with transit stations added about two million housing units between 2000 and 2019. But those without stations added 17.6 million units. Too many new housing units are being added far from stations, increasing transportation costs for millions of Americans.

Agencies are disincentivized from using federal funds for land

The federal government devotes almost $4 billion annually for the construction of new rail and bus lines through the competitive Capital Investment Grants program. Though federal rules encourage mixed-use “joint development” projects near stations and prioritize CIG applicants that propose projects in neighborhoods with higher densities and a higher share of affordable housing, integrating transit-oriented development with new transportation projects remains relatively rare. Indeed, the Federal Transit Administration notes that few agencies “to date have included joint development-related costs” in their capital grant proposals.

“Part of the challenge is that transit agencies aren’t really real estate agencies," a federal Department of Transportation staffer told me. "[Transit agencies] have this mission to get transit on the street, so getting them to think beyond transit is really difficult.” Therefore, when thinking about new bus and rail lines, staffers don’t focus on what housing can be built near them.

Transit agencies, even those interested in planning housing near stops, also lack adequate funding for anything other than the transit line construction itself. A second federal staffer, speaking to conditions in one city, said that the transit agency’s “intention [was] to do transit-oriented development, [but] real estate costs were rising,” so they did not acquire extra land for housing as part of their project. Transit agencies — facing rising infrastructure costs — don’t have money to spare.

“I have not seen agencies buy extra land,” the staffer said, even though “that’s not to say they couldn’t.”

As a result, localities have difficulty targeting housing investments in areas near stations, which particularly hurts projects that involve subsidized affordable housing. One city official said that it’s difficult to compete with private investors for land, especially because property values often increase after a transit project is implemented. Private entities often develop station-adjacent land they own, but others simply sit on it, waiting for the right opportunity years or decades in the future, even when the need for more housing is apparent now. They may be particularly reluctant to develop when they face local zoning codes that restrict density around stops.

Local governments could help close the gap by using federally provided Community Development Block Grants, which allow land acquisition as an eligible use. Yet funding from these block grants has declined by more than two-thirds since the 1970s. Municipalities operating on a tight budget may struggle to allocate even a small share for housing-related land acquisition.

Fed support for land could increase transit-oriented housing

Recent federal initiatives, including billions of dollars devoted to infrastructure projects and rules related to property disposition and low-cost loans, will likely enable greater investment in housing near transit. But those funds are unlikely to encourage transit agencies to identify and purchase land for housing specifically.

If the federal government hopes to spur further transit-oriented development, it could invest in a dedicated land acquisition program. This program’s funds could be used specifically to buy vacant or underused land, such as surface parking lots or one-story strip malls primed for redevelopment.

One promising option for such a program would be to provide grants directly to localities in association with the Capital Investment Grant program. Cities and transit agencies that receive funding for new lines could also receive an associated grant for land purchasing around stations. This type of federal fund would be particularly effective in generating housing construction if recipients were required to demonstrate that the relevant local government would rezone for high housing densities any land acquired.

With land on hand, localities and transit agencies could then implement public-private partnerships with developers through long-term ground leases that mandate a high level of housing production. Or they could combine land acquisition with social housing programs, such as those currently being piloted by Montgomery County, Maryland, and Atlanta, both of which are developing new mixed-income apartments on public land. In either case, a federal program that allows for localities to purchase land near transit could help Americans reduce their cost of living and increase affordable housing options.

Note on the graphic: Fixed-guideway transit operates in its own right-of-way; subway, commuter rail, and bus rapid transit lines are fixed-guideway, but regular bus service that shares the right-of-way with cars is not. Graph shows coefficients on multivariate regression that also incorporates fixed effects for relevant urban areas and controls for housing density. Graph only includes tracts with minimum housing density of 1,000 units per square mile at the beginning of the period. All changes are statistically significant at p < 0.01 level, except 10-year change for stations opening in 1990s.

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