New light-rail transit leads to sizable increase in nearby housing values

For sale sign with lightrail in backgroundLight-rail transit (LRT) is commonly thought to stimulate economic development and boost property values. However, knowledge gaps have made it difficult to gauge exactly how much property values increase and when the increase happens. 

In a new study, U of M researchers Jason Cao and Shengnan Lou help fill those gaps. Using tax parcel data and modeling techniques, they assessed the impacts of the Green Line LRT on sale prices of single-family houses near station areas in Saint Paul. They also examined when the value uplift occurred, focusing on two key time points—before and after the Federal Transit Administration’s announcement of the full funding grant agreement (FFGA) in April 2011, and before and after the start of Green Line operation in June 2014. 

“In contrast, most studies examine only how property values change after a transit system begins operating,” says Cao, an associate professor with the Humphrey School of Public Affairs and the principal investigator.

Light-rail transit

The findings show that the Green Line lifted the values of houses within a quarter mile of stations and that most of the value uplift occurred right after funding for the Green Line was confirmed. Using before and after data, the researchers found that housing values rose by $9.20 per square foot following the FFGA announcement. Prices continued to rise, and by the time operations started, values had risen by $13.70 per square foot. Prices have remained stable since then.

“Pinpointing the timing of price increases is critical for benefit-cost analysis,” Cao explains. “Higher property taxes associated with the value uplift provide revenues and help justify local government investments in transit infrastructure. If a before-after analysis looks only at property values after service begins, the ‘premium’ obtained from LRT is undervalued.”  

Overall, Cao says, the higher property values benefit homeowners along the Green Line corridor, which is particularly important because of the overrepresentation of low-income homeowners in the area. On the downside, higher home values can result in higher property taxes and increase rental rates, potentially displacing some existing low-income homeowners and renters and contributing to neighborhood gentrification.

Cao also notes that some increases in housing values along the Green Line corridor should be attributed to associated policies and investments, such as streetscape improvements and grant and marketing programs that helped small businesses survive during LRT construction and thrive afterwards. In addition, zoning amendments implemented in April 2011 increased the development potential of existing properties, which helped to boost housing values. “These policies and plans related to LRT investments also seem to increase property value,” he says.

The study was funded by CTS, and valuable guidance was provided by Donna Drummond, planning director of the City of Saint Paul. “The study is very useful in helping us understand the potential impact of transit investments on property values as we plan for other transit corridors in the city such as Riverview and the Gold Line,” she says.

A history of transit research

One of the projects funded in CTS’s first year was a study of rural transit service design. Since then, researchers have studied a range of transit-related topics. In 2006, the Transitway Impacts Research Program (TIRP) was launched by the Hennepin County–University of Minnesota partnership to answer questions about the economic, travel, and community impacts of transitway corridors in the Twin Cities metropolitan area. TIRP-funded projects have looked at impacts on job accessibility, auto ownership, and property values, for example.

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