Don't Underestimate the Value of Public Transit

* This is a personal post from Ty Wahlbrink

I have always been amused by how so many American tourists – especially those here in Cincinnati – will travel to Europe and return charmed by their cities’ expansive public transportation networks. For one reason or another, their positive experience rarely converts to support of public transit in the states.

Skeptics typically cite smaller metro population and lower density as reasons their high quality systems will not work here. First, many Americans do not realize that many European metros are in fact smaller in population than Cincinnati. While Dublin and Oslo sound like massive cosmopolitan capitals, their metro populations are comparable to Cincinnati, yet sport world-class bus networks. Second, even small secondary cities off the tourist routes sport high-quality, efficient, and connected bus networks that dwarf what mid-sized US metros have.

In June, I had the opportunity to study at the Norwegian School of Economics in Bergen, Norway for the capstone of my MS in Applied Economics program at the University of Cincinnati. Bergen, idyllically tucked behind dramatic coastal mountain islands, is Norway’s historic capital and gateway to fjord country. With a metro population just over 400,000, I was expecting a mediocre public transit network at best to help me explore, but I was so wrong. Bergen’s bus system boasted real-time arrival information and shelters at each stop, main corridors with under 5 minute frequencies, in-bus screens with approaching stops, night bus service, and even routes extending about fifty miles out into the rural surroundings. Armed with a convenient multi-day pass, I rode out to far-flung trailheads, a remote suburban mall, and the airport.

If a city the fraction of the size and less dense (due to its islands and mountains) than Cincinnati can support this level of bus service, Cincinnati surely can too. We simply need to invest in frequency, bus rapid transit (BRT), and improve amenities so that the bus becomes the primary mode of transport for more residents, especially current car owners. When we invest in public transit, not only can we move around our cities more easily, but study after study has shown that property values also increase.

Using a technique called housing price hedonics, economists can divide up the value of the various parts of a house a buyer purchases. Obviously, when you buy a house you pay for the number of bedrooms and bathrooms, square footage, lot size, and house condition. However, other amenities such as quality of schools, neighborhood safety, proximity to parks and entertainment, et cetera, are not free add-ons. Using relatively simple hedonic regression techniques, economists can measure the “shadow price” of these amenities and how much value can be attributed to each amenity.

With the help of these tools, researchers have compiled substantial evidence on the impact of BRT lines and other bus service improvements. From Columbia to Boston to Australia, each study concludes that bus system improvements increase city land values overall, particularly near the new or improved lines (see Munoz-Raskin, Perk et al [2014], and Mulley and Tsai, respectively, for each city study).  

Skeptical this impact is limited to just large cities? One of the earlier hedonic studies on BRT’s impact was done just a few hours up river in Pittsburgh. Comparable to Cincinnati in size and geography, proximity to BRT was shown to boost land values in Pittsburgh (Perk et al, 2010).

Higher land values are clearly a good outcome. However, much of the story is missed if the analysis stops there. Higher land values indicate three important takeaways:

  1. People and the market value transit: When market values increase, that simply means many sellers perceive their property is worth more.

  2. People are willing to pay for transit: If buyers are not willing to pay the premium sellers demand, then prices will eventually fall. But studies showing consistently higher values tell us people are willing to pay for this premium.

  3. People are willing to move to be close to reliable transit: To track price history, economists typically only look at transactions in order to see what buyers are actually willing to pay. For a transaction in the housing market, there must be obviously a buyer; it follows that a buyer (or a tenant) will move in to enjoy the premium paid for transit.

From this expanded analysis, we can see that investment in a better bus system is a net positive for a community. Existing residents are able to get around their community better and can enjoy their appreciated investment. New residents are willing to pay and to move to the community, enhancing the community’s vibrancy. Even those who do not use the bus system have the choice to cash in on their higher property values. The next time you encounter a great bus network in a city you visit, know there are real economic benefits to bringing public transit advocacy home as a souvenir.

References

Mulley, Corinne, and Chi-Hong Tsai. “When and How Much Does New Transport Infrastructure Add to Property Values? Evidence from the Bus Rapid Transit System in Sydney, Australia.” Transport Policy, vol. 51, 17 Feb. 2016, pp. 15–23.

Munoz-Raskin, Ramon. “Walking accessibility to bus rapid transit: Does it affect property values?” Transport Policy, vol. 17, 22 Dec. 2009, pp. 72–84.

Perk, Victoria, et al. “Silver Line Bus Rapid Transit in Boston, Massachusetts: Impacts on Sale Prices of Condominiums Along Washington Street .” Transportation Research Record: Journal of the Transportation Research Board, vol. 2350, 2014.

Perk, Victoria, Melissa Mugharbel, and Martin Catalá. "Impacts of bus rapid transit stations on surrounding single-family home values: Study of East Busway in Pittsburgh, Pennsylvania." Transportation Research Record: Journal of the Transportation Research Board, vol. 2144 (2010): 72-79.