Residential properties in ‘transit sheds’ held their value better

A new research paper determined that residential properties near transit stations in five major cities across the US maintained their values significantly better during the housing downturn than properties outside of transit sheds. “Across the study regions, the ‘transit shed’ outperformed the region as a whole by 41.6 percent” from 2006 to 2011, according to The New Real Estate Mantra: Location Near Public Transportation.

Transit sheds were defined as areas within a half mile of fixed-guideway transit stations, including rail and bus rapid transit. The study of the Chicago, Minneapolis/St. Paul, Boston, San Francisco, and Phoenix areas was commissioned by the American Public Transit Association and the National Association of Realtors, prepared by the Center for Neighborhood Technology.

Although transit sheds as a whole did significantly better, the pattern across regions was surprisingly uneven. More transit sheds lost value than gained value in some regions. In Chicago, for example, more than 60 percent of the region’s 388 transit sheds underperformed the region as a whole. The transit sheds that did better than the region tended to have high densities and rise startling amounts. One station in Evanston, near Northwestern University, outperformed the Chicago region by 550 percent. In San Francisco, one transit shed did 287 percent better than the region, while a transit shed in Boston outperformed the region by 316 percent.

Transit sheds in the Chicago Transit Authority system are shown above. Yellow and orange areas lost more value than the region. Green and white sheds outperformed the region. Map from The New Real Estate Mantra

The pattern  that emerged is one of revitalization downtown and in other highly walkable, desirable urban places in cities and suburbs. Neighborhoods in many poorer sectors of cities languished, as did automobile-oriented outer suburbs.

Where transit sheds are perceived as safe, and they have great urbanism, they are going up in value — often skyrocketing. But many are losing value and depopulating — even in neighborhoods with a well-connected street network and streets that would be highly walkable given more and better destinations.

As a whole, the data shows the rising appeal of transit access, which bodes well for walkable neighborhoods. Yet in many cities, walkable neighborhoods seem to be moving in two directions. Transit-served neighborhoods in desirable areas are becoming even more popular — others, not so well placed, are losing population.

What can be done?

No city can afford to put tons of money into places that are losing value — so what can be done on a limited budget? One strategy would be to improve destinations. Neighborhoods need stores, particularly grocery stores and pharmacies, selling daily necessities to serve current residents and appeal to middle-class households. Neighborhoods also benefit from a connection to nature that can be enhanced through street trees. On Google street view, one noticeable characteristic of value-gaining transit sheds is that they tend to have more street trees. Planting trees in languishing neighborhoods with good “urban bones” and transit access could spark a revival in values and give an immediate impression that these places are cared for. Trees also enhance walkability by providing shade and slowing down traffic.

As the Knight Foundation’s “Soul of the Community” study pointed out, art and culture are key factors attaching residents to their communities. An emphasis on arts and culture would benefit the struggling neighborhoods.

A more expensive approach, but effective, is placemaking. Areas around transit stations tend to be neighborhood centers that could benefit from a strong identity. A great public space near a transit station creates a real estate “center of gravity,” raising property values and potentially turning a neighborhood around.

To do it properly — by creating a new square, plaza, or other civic space — is usually only possible with new development. The Project for Public Space’s approach of “lighter, quicker, cheaper” is a less expensive option. “We often start with Amenities and Public Art, followed by Event and Intervention Projects, which lead to Light Development strategies for long-term change,” the Project for Public Spaces explains on pps.org. Lighter, quicker, cheaper champions “use over design and capital-intensive construction.”

Another idea that could be helpful is complete streets. Transit and walkable streets are amenities. Combining those qualities with a sense that a neighborhood is reviving can spark a turnaround. Complete streets projects can be implemented along corridors that also have fixed-guideway transit. These projects are funded by Department of Transportation dollars and can be justified on many grounds — from safety to repair to economic development.

If Arthur C. Nelson is right in his book Reshaping Metropolitan America (see “Where the Market is Heading” on page 8), then transit sheds, particularly those in the central city and inner-ring suburbs, should gain value through 2030. That means that the transit sheds that lost value from 2006-2011 — and where real estate is a bargain today — could be investment opportunities in the years to come.

Values and transit service

The higher values in transit sheds overall ranged from 30 percent in Chicago to 129 percent in Boston. The effect was most strongly associated with transit providing a high and frequent level of service. In addition, households living in transit sheds had better access to jobs and lower average transportation costs than their regions offered generally. The jobs per square mile in transit sheds is two to three times higher than the regional average. Household transportation costs in transit sheds are $3,600 to $4,200 a year lower in the Boston, San Francisco, Chicago, and Minneapolis-St. Paul regions. In Phoenix, with fewer walkable neighborhoods, those in the transit sheds saved merely $2,100 a year.

In addition, transit sheds were correlated with much smaller block sizes and higher density. The transit sheds consist of, to a greater extent, walkable, mixed-use neighborhoods. The higher the walkability, the better the sheds appear to perform. Many factors — access to transit, transit type, walkability, access to jobs, and even lower transportation costs — possibly contributed to the superior real estate performance of the transit sheds.

Overall, there was a substantial decline in real estate values across these regions in the period studied. Residential properties in the transit sheds lost significantly less value compared to their regions. But it’s not just the higher values that are interesting, but that the higher values appear to be growing. This report correlates with other research, like that of Christopher Leinberger and Nelson, who report growing demand for walkable, transit-oriented neighborhoods compared to automobile-oriented suburbia.

For some, but not all, regions, every residential property type in transit sheds, including single family, outperformed regional averages. In Phoenix, the least walkable region, single-family housing in transit sheds did not perform as well.