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InTransition Magazine : Transportation Planning, Practice & Progress

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USA TOD-ay

Transit-Oriented Developments Multiplied and Held Their Values Comparatively
Well in the Housing Crisis. Will the Trend Continue Post-Recession?

By Josh Stephens

Related Stories

  • Sidebar: What Cities Can Do Experts say thorough planning and zoning efforts are the key to getting developers to pitch the best TOD projects.

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By the middle of 2008 it had become apparent that a trend which had dominated American life for the better part of the past century was coming to a close. What began with Lewis and Clark, covered wagons, and the conquest of the Frontier appeared to be ending in an inglorious mess of bad mortgages, credit default swaps, and zombie houses more prone to causing nightmares than to fulfilling the American dream.

Pasadena, Calif.

Tom Bonner Photography

A train pulls into Del Mar Station, a transit-oriented development located

on the southern edge of downtown Pasadena, Calif.

Foreclosure-racked suburbs like Riverside, Calif., Henderson, Nev., Gilbert, Ariz., and countless other outer suburbs that so recently promised affordable homeownership for striving families are now be-ing called the “slums of tomorrow.” They are the western response to the Rust Belt: cities rotting on the outside, due not to the gradual decline of heavy industry but rather to the self-destruction of the financial sector.

For all the suffering that has come with it, this chaos has helped spur the development of more urban sites, particularly near mass transit stations. Some Pollyannas have even gone so far as to proclaim the death, or at least the withering, of sprawl.

“I don’t think sprawl is going to go away, but I think that the pace at which we saw sprawl pre-recession is going to be completely un-doable,” said architect and planner Stefanos Polyzoides, a co-founder of the Congress for the New Urbanism and longtime transit-oriented development (TOD) advocate.

More objectively, a Pew Research study published in July found that, of 30 major metro areas included in the study, all but seven of the center cities grew at rates equal to or greater than their respective suburbs.

“The pockets of neighborhoods that seem to have weathered this economic trauma we’ve had, particularly in the housing market, have been these great little accessible neighborhoods near transit stations, particularly in central cities or inner-ring neighborhoods,” said Robert Cervero, Professor of City and Regional Planning at the University of California, Berkeley. 

Transit Boom

But while tract-home magnates may be looking for other work, developers in center cities now have more reasons than ever to focus on urban cores and their immediate surroundings. It is here where the next real estate boom may be—and there’s going to be one. Demographers predict that the U.S. population is going to reach 450 million, up 150 million, by 2050.

Hudson-Bergen Light Rail

A Hudson-Bergen Light Rail (HBLR) vehicle passes a new apartment

building on Essex Street in Jersey City. The HBLR has expanded

incrementally since its 2000 launch, and is credited as a catalyst

for major economic development activity along its corridor.

Since the opening of Portland’s MAX light rail in 1986, Los Angeles’ Blue Line light rail in 1990 and its subway a year later, hundreds more miles of subway, light rail, streetcar, and bus rapid transit lines have been built in the U.S. A surge has taken place since 2003, as brand-new systems have opened in Charlotte, Dallas, Houston, Minneapolis, and Denver. In New Jersey, in addition to upgrades to “heavy” passenger rail, light rail lines were expanded in Hudson County and Newark and a new light rail line opened in southern New Jersey. Los Angeles’ Expo Line opened just this year, with an expansion of Salt Lake’s Blue Line set to open by the end of 2012.

That trend is not abating. Nearly every other major Western and Midwestern city in the country is planning or expanding similar systems. A 2011 report by the transit advocacy group Reconnecting America estimates that 143 more mass transit projects with station points are in either the construction or engineering phases in cities across the country. The metro regions with the greatest number of projects in the pipeline are, in order, Los Angeles, Washington, D.C., San Diego, and Minneapolis-St. Paul, each with over 30 projects.

In total, the National TOD Database (toddata.cnt.org) estimates that over 1,500 stations are in the development pipeline in 54 cities. And while these projects have served to shuttle commuters, they also can instigate profound changes in cities’ urban fabrics. If designed and developed well, many of them could become new, distinct communities: microcosms of what some planners say a city should be.

“We’re seeing a heightened desirability after the real estate crash,” said Geoff Anderson, president of Reconnecting America. “The markets are really reflecting the demand that’s out there where the places around transit are walkable and closer to centers.”

Changes in Culture, Demand

America’s older cities with so-called “legacy” transit systems, such as New York, Boston and Philadelphia, make little distinction between transit-oriented development and mere development. For newer, mostly Western cities, however, transit-oriented development has been the typology of the future roughly since urban planner Peter Calthorpe popularized the notion in the 1980s and it was enshrined in the 1991 Congress for New Urbanism Charter. Many “inner ring” suburban towns have been prompted to explore development around long neglected train stations and transit routes.

Broadly defined, TOD is dense, often mixed-use development that is oriented towards high-frequency, high-capacity public transit stations; the radius for TOD is generally considered 1⁄4-1⁄2 mile around a station. Its proponents cite two broad categories of benefits: people who live and work in TODs do not need to rely on personal automobiles to get around and therefore produce less pollution and do not contribute to traffic; and dense, well-designed communities, unsullied by heavy auto traffic, are simply more vibrant, appealing places than are their tract-home, office-park counterparts.

Englewood. Colo.

Courtesy Denver RTD

A rooftop view of transit-oriented development around the Englewood light

rail station in Colorado.

For many years, promoters of TOD had only a handful of high-profile developments that served as models of what TOD could be. Most are one-off developments. They include the Fruitvale Bay Area Rapid Transit (BART) station in Oakland and Pasadena’s Del Mar Station, both of which hug their respective rights of way, thus creating an unmistakable connection between structure and train. The Roslyn corridor in suburban Washington, D.C., has been hailed as the most complete vision of a new, suburban transit-oriented corridor, and the Contra Costa Center—mainly an office park with a few important nods to its BART station—is one of the more fully realized transit- oriented districts in the country.

“TOD is something that government pushed fairly proactively at many levels for the past 10 to 15 years for all kinds of reasons: energy conservation, air quality concerns, traffic relief,” Cervero said.

Recently, however, demographics and culture gained momentum so that demand now obviates the need for overt public sector promotion. Developers want to build TOD. A recent study by Christopher Leinberger of the Brookings Institution suggests that, for possibly the first time ever, residential properties in urban infill locations (with or with-
out transit) have appreciated more dramatically than have comparable suburban properties, thus suggesting a macroeconomic shift in demand.

“As energy becomes more expensive it is much more fashionable for younger people not to be driving,” Polyzoides said. “Over time we’re going to see a steady increase in the desire of people to live in metropolitan cores.”

Proponents of TOD are hoping that, before long, it becomes so commonplace that it is no longer seen as a typology apart and instead becomes the norm anywhere public transit can support higher residential densities and supporting commercial uses. (Studies have suggested that, for the purpose of decreasing auto travel, TODs should focus more on office space; thus far the trends have leaned towards residential development.)

David Frank, who was named the City of Minneapolis’ first transit- oriented development manager in 2011, said that the culture of the upper Midwest is as unfamiliar with dense development and walkable streetscapes as it is with palm trees. But, he said, success breeds success. “Living in big buildings is not what people who live here know,” Frank said. “Having examples in baby steps at first…has been what’s helped.”

Minnesota Hiawatha Line

Metro Transit

The Hiawatha Light Rail Line, which debuted in 2004,

is credited for spurring economic development along its

corridor, which runs from Minneapolis to

Bloomington, Minn.

Developers and planners alike insist that fundamental cultural and demographic forces point unwaveringly in the direction of TOD. An increasing number of Americans simply do not want single-family homes and are willing to pay more for TOD that combines the convenience of urban living with the mobility that suburbanites enjoy.

A growing population of elderly Americans is increasingly moving to places where driving is not necessary. On the other end of the spectrum, many young adults no longer pursue the American dream of a large suburban plot with the same vigor that their parents and grandparents did. In other words, dense urban living is as much as sign of the times as tweeting and blogging—but might be more enduring.

“Young people, old people, couples that aren’t having children … these demographics are all growing,” said Aaron Golub of the School of Geographical Sciences & Urban Planning at Arizona State University. “They’re searching for something other than the status quo, which is detached suburban homes.”

While planners and developers have, in many cities, gone to great lengths to promote TOD, the economic downturn has, in some ways, threatened to derail development plans. Then again, some say that the downturn has done nothing but strengthen TOD’s position relative to new suburban construction.

As these lines have opened, the combination of the downturn in the suburban economy and the resurgence in urban life has prompted a steady stream of development. TOD-like projects have arisen even in such unlikely places as Dallas, Houston, and Sacramento. The national TOD Database now lists 4,161 stations nationwide that are ripe for development of potentially millions of units. However, the reduction in car trips can be negligible.

“You’re talking about 4 million people making 5 million motorized trips per day,” Golub said of the impact of Phoenix’s Valley Metro light rail system. “You add roughly 20,000 public transport trips to that mix, you shift about 20,000 car trips. It’s a flea on the side of the elephant’s back.”

Even so, those trips can sometimes be the difference between gridlock and mere traffic. And for the people who live in TODs, access to public transit can be transformative —even if most residents remain stuck on the freeway.

Transit Lines, Agencies as Catalysts

Transit agencies in particular are often the biggest proponents of TOD. Development that complements transit nodes often provides some of the raison d’etre for transit projects in the first place; that’s important for projects that often routinely cost hundreds of millions of dollars. A project that might not have won approval if its only purpose was to shuttle commuters around gains far greater value when viewed by public officials and civic stakeholders as the catalyst for new development.

Harrison, N.J.

Harrison, N.J., is repositioning a longtime industrial area next to its PATH

rail station as a commuter hub with a group of new mixed-use developments.

Proponents contend that new development around transit areas, if designed well, will produce external, region-wide benefits, mainly in the form of reduced pollution and fewer vehicle miles traveled on the part of residents who either use the public transit to commute to work or who are lucky enough to both live and work in a mixed-use TOD. Despite transit agencies’ natural advocacy for TOD, most do not actually have anything to do with development or land use regulation—nor do they wish to.

“The potential is there in every city that’s building out [transit],” said Tony Salazar, principal of affordable housing development with St. Louis-based developer McCormack Baron Salazar, which has done TOD projects around the country. “The issue is now…the people that are building these out are not generally concerned about building other kinds of real estate activity other than the rail, the station, and the adjacent parking.”

Running bus and train systems is challenging enough. Therefore, though a transit agency can have the grandest of visions for a station area and plan a line with progressive regulations in mind, developers usually can do little without city approval. Some agencies, such as Los Angeles Metro, offer financial assistance to municipal planning departments that want to create transit-oriented districts, but that assistance is indirect at best. The New Jersey Department of Transportation has a similar, statewide program (see related story).

At worst, some agencies have rolled out lines of track along expedient rights of way—rather than through areas desirable to developers —meaning that cities have to go to great lengths to make the areas attractive to developers.
While many cities with new transit are diligently promoting TOD, some observers of real estate trends fear that a new cloud may be building on the horizon: a resurgence of suburban greenfield development. Supporters of TOD remain confident that, no matter how many new tract homes sprout up in former farmland, a revival of old-style suburban development cannot stop the train that TOD is on.

“In the long term, I think it’s been very good for TOD for the market to see that these are the places that have the fundamentals underpinning their value and not just this speculative bubble,” said Anderson.

TOD Development a Specialty

Even if TOD represents a new ideal for some urban residents, some fear that the decades-old momentum— buoyed by public policy, lending patterns and investment in roads— will continue to tempt developers, possibly at the expense of infill locations. With an economy creaking back to life, it’s certain that the bulldozers will rumble back to life in many places.

Developers, however, are quick to point out that there is really no such thing as a “housing” industry. Market segments are so well defined—with radically different products, development processes, and sources of financing—that infill developers and greenfield developers who work in the same metro area might as well be building on different planets. They are not going after the same capital or residents.

Pheonix light rail

Metro Valley

Phoenix, Ariz., was awarded a $2.9 million Sustainable Communities grant

by the U.S. Department of Housing and Urban Development in December

for the Reinvent Phoenix Program, which will promote transit-oriented

development along the area’s light rail line.

“I really think developers see the outskirts as quite a different animal,” said Golub. Megan Gibb, the transit-oriented development program manager for Portland’s Metro said much the same: “I think they’re totally different markets.”
Moreover, some of TOD’s former foes have turned into boosters. The Urban Land Institute has historically been accused of supporting sprawl. Recently, however, the national organization and local chapters have expressed strong support for TOD and infill. ULI chapters now sponsor “TOD Summits” and other conferences; Michael Leccese, executive director of the ULI’s Colorado Chapter, said that his chapter enthusiastically supports high-density development in Denver.

“Homebuilding has crawled back really slowly, as opposed to this apartment boom, which is really transformative,” Leccese said. “As these projects open, they lease up very quickly.”

That kind of development requires a vastly different skill set from that required for suburban development. Developers of tract homes are not necessarily likely to try their hand at TOD, or vice-versa.

“They can quickly turn 10 to 50 acres into a package and sell them. You will never find that ease into the urban areas,” Golub said. “Developers who are getting interested in downtown are adding it to their portfolios cautiously.”

System Historically Favored Suburban Building

While many advocates of suburban development have long insisted that development simply reflects consumer choice, critics counter that suburban developers benefit from a host of economic and policy conditions that favor greenfield development. Foremost among those conditions is the public financing of highways that connect suburbs with employment centers and center cities.

Banks have often reinforced the culture of suburban development by making loans for greenfield construction relatively easy to obtain. Meanwhile, many multi-family developments—especially those on urban brownfields and with a mix of uses—have had to cobble together financing packages just to fulfill even the faintest TOD vision.
Paradoxically, it can take longer for lenders to figure out how to direct capital to TODs than it does for transit agencies to actually build the accompanying infrastructure.

“There are up-front structural issues: when you combine commercial and residential, mixed-use usually crosses the lines of commercial lending and residential lending,” said Richard Manson, program vice president with LISC, a nonprofit affordable housing lender that has funded TODs nationwide. “Most banks have different underwriting criteria, different risk levels associated with those.” Manson said that the TODs that do get financing often aim for lower-income renters, which, he said, is the most stable market in the current economic climate.

In addition, banks typically are wary of the long processes of getting development permits in infill areas, preferring instead the certainty and ease that developers find on the urban fringes. Anderson, however, hopes that the recession will help developers and lenders alike figure out what the best investments will be in the coming decades.

“While we were in the boom times, every real estate play looked like a good one,” Anderson said. “It was hard to separate the places that were really creating value versus places that were just sort of…speculative where people hoped to flip it. The recession forced a market shakeout and revealed where the real value was being created.”

Ready or Not

Despite, or rather because of, the enthusiasm for TOD, the clock may be ticking. If TOD development speeds up, regardless of what happens in the suburbs, cities will have precious little time to actually plan for it.

Polyzoides of the Congress for New Urbanism and Salazar, the developer, both noted that good planning and good design are crucial, especially when different buildings and developments are supposed to be coordinated in a cohesive community. Hasty development could equal bad development. Then again, timing may not be everything in the effort to create the cities of the 21st century.

“I try not to get too worked up about the market cycle,” said Frank, of Minneapolis. “Of course it matters, but…if it weren’t beyond my control I’m in the wrong job. You build when you can and you plan when you can’t build.” 

Josh Stephens is a freelance writer based in Los Angeles.

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