TRANSIT ORIENTED DEVELOPMENT & HOUSING PRICING IN HIGH-DENSITY CITIES_Paper presentation

TRANSIT ORIENTED DEVELOPMENT & HOUSING PRICING IN HIGH-DENSITY CITIES (Chapa Kiran; Amaan Chhipa; Vikas Yadav; Sagar Sinha)

INTRODUCTION Transit-oriented development (TOD) is defined as “a type of community development that includes a mixture of housing, office, retail and/or other amenities integrated into a walkable neighborhood and located within a half-mile of quality public transportation.” (What is TOD?, 2017) According to a study, there are both positive and negative effects of a rail station on the property values of surrounding areas. “Ease in commute due to vicinity of station and growth of commercial and retail activities in the area factored the rise in property values, increase of criminal activity and rise in air & noise pollution as well as degraded imageability due to coming of station precinct are listed as the possible reason for decrease in property values.” (Ihlanfeldt & Bowes, 2001).

Studies show that the range of rail impact estimates on land/property values is large. ―The majority of research has identified positive gains in values, although some studies suggest depreciation in some locations and a small number of reports show no significant differences in some properties (Sara I. Mohammad, 2013). This research claims that rail system besides having positive& negative effects can have no significant effects as well on land & property prices which can be attributed to many simultaneous factors working in the complex urban system. But the probability of rail transit infrastructure having a positive impact on the housing prices are very high.

According to a research, transportation and real estate are mutually related. “Improvements to the transportation network (e.g., building connecting lines, introducing rapid-train services, or increasing train frequencies) can make certain areas more attractive for development, which is reflected by higher property prices and rents. Property developments around station areas increase the number of residents and people working in these areas, and thus the number of passengers using the stations/railway network.” (Chorus & Bertolini, 2014) This suggests that an efficient transit system acts as a magnet for commercial & residential activities due to better accessibility and thus lead to densely populated development which further accounts for growth and efficient working of the transportation system itself.

TOD may be seen as a fascinating concept, however, if we look closely, the concept of Transit Oriented Development is not new. Pre-automobile era most cities grew along streetcar lines and inner urban systems, where every workplace, service amenities etc. were located at a walkable distance. The following are some direct and indirect impacts of transit-oriented development: 1. Ensures sustainable urban growth: TOD ensures that high-density development reduces the possibility of any urban sprawl. It helps in achieving a controlled and balanced urban development.

2. Reduces travel time and monthly expenditure on transport: TOD essentially decreases the average trip length of the commuters. Thus not only it saves time for the commuters but also saves monthly expenditure in transport. Lesser distance means lesser travel and more use of non-motorized transport. Thus, it helps in decreasing the average expenditure on transport.

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Transit Oriented Development & Housing Pricing in High-Density Cities 3. Increased use of Non-Motorized mode: TOD often iterates a walk distance of 500-800 m from the transit station. This distance is appropriate for walking and cycling. Further, the concept of last mile connectivity gets readily applied by non-motorized travel. Thus, transit Oriented development encourages the use of non-motorized mode for commuting. This step is one step forward in decreasing the energy footprint of our cities.

4. Increase in ridership of public transit: Most of the public transport systems in developing countries face the problem of low transit ridership. As a result of which the transit authorities often face heavy losses in terms of patronage. Transit Oriented Development works on the principle of using public transport as the spine for commuting. Hence, high-density development means a large number of people will use public transport and thereby increase the patronage of the public transport.

5. Efficient management of infrastructure spending: Transit Oriented Development may be thought as a tool to fight urban sprawl. With a check on the city size, the city‘s civic administration finds it easy to lay down infrastructure in the city. Smaller size city means easier laying of infrastructures.

6. Expanding vision for public safety especially for women: Women in India, usually make short trips. Cities nowadays have become quite unsafe for public due to various crimes that are being committed. The situation is worse for the working women in the cities. Transitoriented development brings the principle of mixed use to a real virtue. TOD has provisions for commercial activities on major walkways as well as on local streets. Thus, the concept of eyes on street comes into play. This has its own unique role in decreasing the crime rates and thus creating a safer community (Shankar, 2017).

THE 3 D’S OF TOD To add further details to the understanding of Transit Oriented Development, Cervero and Kokelman (1997) have introduced the concept of 3 Ds of TOD. This includes Density, Diversity and Design. Density is a key criterion when it comes to TOD. TOD usually has the provision of higher density along the transit station. Most of the travel behaviour studies that are being undertaken around the globe put density as a major factor in determining the mode choice (Ewing & Cervero, 2010).

Lawrence D. Frank and Gary Pivo (1994) found that modal share for transit is related to gross residential density and employment density. Gross residential density refers to the ratio of a number of dwelling units to the total area (Landcom, 2011). Employment density refers to the floor space per employee (Government of U.K, 2015). Areas with higher densities tend to have higher public transit ridership.

Similarly, with diversity Cervero and Kokelman basically mean the land use diversity. Land use diversity basically means a mixture of various appropriate land use in an area. Land use diversity plays a significant role in bringing origin and destination closer to each other. This step is critical in Transit Oriented Development. Moreover, it also plays a critical role in increasing the ridership of the transit system during the off-peak hour (Lavoie, 2012). In California, it was found that the mixed-use suburban nodes had 3.5% higher ridership when compared to single-use nodes present in the vicinity.

Design in Transit Oriented development often focuses on designing for pedestrians and cyclists.

The quality of public realm is important when it comes to better livability of the community. Welldesigned streets and public realm are important measures to enhance the use of non-motorized transport as well as to create pedestrian-friendly community. However, if we look closely into various impacts and ARP, INDIAN INSTITUTE OF TECHNOLOGY, KHARAGPUR - 2017

Transit Oriented Development & Housing Pricing in High-Density Cities effects of TOD, there is significant evidence of mishaps if the TOD is not designed properly. High accessibility has a great deal of influence towards an increase in housing prices and thus the choice of housing becomes in according to the housing prices. The next section will brief out the certain theoretical background on how Transit Oriented Development affects housing prices and thus impacting the dynamics of housing choice.

THEORETICAL BACKGROUND The idea that TOD or other transport improvements can raise property values relies upon the theoretical framework provided by location theory. If we go through the location theory given by William Alonso (1964), with an increase in accessibility to the workplace the commuting cost/transportation cost decreases which translate into more competitions and higher property bid values. In other words, higher the accessibility greater will be the price of the housing. Proximity to public transit station as well as better walking environment increases the competition for housing and thus appreciates the land value. Some question the applicability of location theory in modern cities, especially with regard to non-auto modes. Most regions in the US already have a well-connected, auto-based transport network accompanied by a spatial dispersion of both housing and commercial activity. This translates to a high minimum standard for accessibility and lessens competition for the most accessible locations. The dispersed development also limits the effectiveness of non-auto modes and reinforces an already strong general preference for auto travel.

TRANSIT ORIENTED DEVELOPMENT (TOD) v/s TRANSIT-ADJACENT DEVELOPMENT (TAD) A study shows that TOD have lower median household incomes compared with TAD, and a higher share of renters compared with all other typologies. The data obtained show more home value growth in TOD station areas compared with other categories. TOD home values grew 2.9 times versus 1.74 times in hybrids and 1.34 times in TAD5. “The study also shows significant growth in apartment prices in TOD compared with other station typologies, with a 45% growth in TOD compared with a 31% growth in hybrids and a 24% growth in TAD over the period.6” (John L. Renne, 2016) Table 7 Studies of price effects (Ewing K. B., 2011) City Atlanta

Property Type

Transit Type

Period of Observations

Number of Observations

Result

Residential sales

Heavy rail

1991-1994

22,388

Properties within ¼ mile of transit sell for 19% less than those more than 3 miles away, but those 1 to 3 miles away sell for

5

Because of data limitations, this included 830 TOD station areas, 1,077 hybrid station areas and 1,057 TAD Limitation of the LAI data used in this study is that it has quickly become outdated in a national housing market that is constantly changing 6

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Transit Oriented Development & Housing Pricing in High-Density Cities 3.5% more.

San Diego

Condo & singlefamily residential sales

Light rail

1997-2001

139,000 Condos

Âź mile from station sell for $22,000 more and houses $12,000 more than those 1 mile away.

San Francisco,

Residential sales

Commuter rail (CalTrain), heavy rail

1990

4,180

Homes in Alameda County sell for $2.29 more for every meter closer to a BART station; homes within

San Jose, Sacramento, San

(BART), light rail

Jose

300 m of the CalTrain sell for $51,011 less; proximity to light rail was mixed with San Jose showing a negative effect, San Diego a positive effect, and Sacramento no effect.

Minneapolis

Condo & single family residential sales

Light rail

1997-2007

14,943

Condos and homes with good access to station platforms have price premiums of $350 and $45/m of proximity, respectively; condos and homes separated from stations by arterial and industrial uses show no benefit.

HEDONIC PRICE The hedonic price model is to access land and housing prices on the understanding that the value of an individual piece of real property is neither monolithic nor completely intrinsic to the property itself but is the result of a multitude of characteristics, many of which come from the context in which the property is located (Ewing K. B., 2011).

There are two characteristics that define the variables which affect the hedonic price model.

One is related to structures built on the land and other related to the land itself (Ewing K. B., 2011).

According to the research, “In the case of residential hedonic studies, which are the most common type, structural characteristics often include features such as the square footage of living space, the number of bedrooms and bathrooms, the presence of a garage, the age of the house, the presence of a ARP, INDIAN INSTITUTE OF TECHNOLOGY, KHARAGPUR - 2017

Transit Oriented Development & Housing Pricing in High-Density Cities pool, and other features known to influence sales transactions.” (Ewing K. B., 2011). According to Seo (2014), “Hedonic modelling is well suited to estimating the market value of externalized costs such as noise or pollution, or externalized benefits such as access to freeways or light rail.”

A CASE OF BOX HILL, MELBOURNE Box Hill is known for its long-standing Transit Oriented Development within Melbourne, Australia. Box Hill is an existing metropolitan activity centre as identified in Plan Melbourne 2050 and it plays a major service delivery role to the residents in the Melbourne Inner East region. The station of Box Hill is currently serviced with multi-modal public transportation (train, tram, and bus).

Box Hill underwent a major redevelopment in the 1980s which transformed its ageing ground-level railway station into an underground station with an above-station shopping centre; placing it as Melbourne‘s only underground station outside the city-loop stations. One of Melbourne‘s largest Metropolitan Activity Centre, the Box Hill area has a population of approximately 4,400 people, employment of 15,600 jobs, and a Gross Regional Product of $1.622 billion. While an underground train station is the most expensive type of transit development, the benefit of choosing Box Hill as opposed to the other TODs in Melbourne is that the presence of a ‘disamenity zone’ due to the noise from the railway station is unlikely to distort the pricing model for the area studied. Additionally, most residential properties are buffered from the direct rail noise impact by the commercial area surrounding the railway station. Nevertheless, disamenities attributable to the commercial area such as noise, light, trash, traffic, and higher crime rates may still be present.

The analysis of TOD over housing prices was considered by taking the regression analysis of various types as follows: A – Linear. Assumes a perfectly linear relationship between distance and price in which price changes linearly and monotonically with distance from the station.

B – Log. Assumes that a non-linear relationship exists, whereby any influences (positive or negative) from the station decline in marginal impact as distance increases C – Ring. Three concentric rings are analyzed to see impacts from proximity to the station do not follow any well-specified change over space. Rings at 0– 750 m, 750–1250 m, 1250 m+.

D – Spline. Using the rings above, the spline specification allow for impacts to vary within the rings as well as between them (same ring distances as in C).

The linear treatment shows that for each increase of 1 km from the station, prices decrease by approximately 13.8%. The log results show, similarly, that a doubling of distance, say from 1 to 2 km, incurs a 13.9% decrease in price. For the ring model, homes located in the second ring (750–1250 m) are worth approximately 8.0% less than those in the nearest ring (0–750 m). Homes in the third ring (1250 m and greater) are worth 13.7% less than those in Ring 1. Interpreting the spline model is not as straightforward. The spline coefficient on Distance indicates that in the first ring, price declines 20.2% for each km away from the station. The change in the slope of the coefficient in Ring 2 means that the

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Transit Oriented Development & Housing Pricing in High-Density Cities change in price as distance increases in Ring 2 is a combination of the −.202 and the −.032, or 23.2%.

Slope change in the third ring is then a combination of all three.

Figure 11: Illustration of the various regressions Overall, while property prices decrease as the distance from the TOD increases, this effect dissipates as the distance from the TOD increases. This ending is illustrated by the flattening of the price curves in the log, ring, and spline treatments. The results align with the expectation that past a certain distance from the TOD, residents would no longer be interested in commuting to the TOD by foot and would find alternative methods to go to their destinations.

AHMEDABAD Ahmedabad is the largest city in Gujarat and 5th largest in India with a population of about 5.58 million spread over an area of about 460 square kilometers. The overall density 120 people per hectare. (Office of the Registrar General & Census Commissioner, 2011) Table 2: Study of Floor Space Index (Ahmedabad Urban Development Authority) Zones

Base FSI

Premium FSI

Total FSI

Non-Transit Oriented Zone

1.8

0.9

2.7

Non-Transit Oriented Zone

1.8

2.2

4

Central Business District

1.8

3.6

5.4

Affordable Housing Zone

1.2-1.8

0.9-1.5

2.7

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Transit Oriented Development & Housing Pricing in High-Density Cities In Ahmedabad, the base FSI is 1.8, a band of 400m wide around the Bus Rapid Transit (BRT) network and proposed metro rail is termed as Transit-Oriented Zone (TOZ) and is allowed a higher FSI of 4 while CBD in close proximity to the two networks is allowed more FSI and that is 5.4. And in order to utilize such a high FSI, there is need of a rapid increase in the infill development of the area.

Figure 12: Population Density (Centre for Urban Equity, 2017) The Ahmedabad Urban Development Authority has commissioned planning firms to prepare Local Area Plans for the areas that come under the TOZ. Some of these plans have been prepared and public opinion is required on them. These are currently pending with the state-level planning agency for approval. The Local area plan mentions the use of mixed development in buildings along the transit corridor with residential and commercial uses. At present, the corridor along the BRT has various uses like big institutions and universities, residential and commercial as well as civic uses. It is essential for TODs to have housing as they “preserve, enhance, or contribute to creating active pedestrian districts within walking distance of transit system” (Still, 2002).

Transit-oriented development in Ahmedabad lacks Non-motorized transit infrastructure around the BRT corridor hampering last mile connectivity. Very few stations have footpaths, although they are not shaded. In the existing situation, the density is quite low even when FSI is permitted on the higher side (National Transit Oriented Development Policy, 2017).

CONCLUSION The study has found that “the impact of rail on land/property values was found to be higher in European and East Asian cities compared to cities in North America”. Commuter rail was found to

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Transit Oriented Development & Housing Pricing in High-Density Cities have higher impacts on land/property value changes in comparison to light rail. “Also across studies, average land/property value changes tend to be higher at distances from 500 to 805 m of a rail station, compared to distances longer than half a mile away” (Sara I. Mohammad, 2013).

“The study shows that the compounded cost of housing and transport in Transit-oriented developments were more competitive than in hybrids and TAD around 2010, but since 2012, the housing market in TOD appears to be accelerating faster than in the other typologies” (John L. Renne, 2016). According to Mohammad (2013), “Land value changes tend to be higher than property value changes. Also, no noticeable difference was found for rent values of properties compared to purchase prices. The results indicate that changes in commercial land use tends to be higher than for residential properties, but dwellings and office values exhibit similar changes.”

The study has found that “proximity to transit corridors which should have a negative disamenity primarily from the noise and air pollution and no positive accessibility effect was not statistically significant for highway and rail. This can be accounted for the fact that local highway authorities have properly installed sound walls or sound berms along the highway adjoining residential areas and applied noise dampening pavements to reduce noise impact.” Another possible reason can be that “properties located very close to exits or rail stations lose market value more because of traffic associated with the station or exit, which would not necessarily be experienced between exits and between stations, rather than due to noise or air pollution that would seem to be experienced all along the line. Nuisances are perceived as worse near the exits due to traffic congestion, and worse near the stations due to the congregation of passengers waiting for and disembarking from the trains.” (Kihwan Seo, 2014) “Hedonic price literature confirms that the market shifts in favour of pedestrian- and transitdesigned development indicated by survey data and demographic analyses are, indeed, being capitalized into real estate prices. As such, this literature provides a third, independent method of confirming and observing those market shifts” (Ewing K. B., 2011).

Also according to Duncan (2011) “housing prices in a good pedestrian environment and near a station (i.e. TOD) has a significantly higher value than a condo in a similar neighbourhood not near a station." Conversely, a housing unit in a less walkable residential neighbourhood near a park-andride station (i.e. TAD) can have values that actually fall below a housing unit in a similar neighbourhood not near a station. Hence, TOD does seem to have a synergistic value greater than the sum of its parts, at least in case of San Diego housing market.

“However the direct effects are generally larger in absolute value than crime or retail effects; retail effects are larger than crime effects, except in the immediate vicinity of stations located close to CBD; and total effects vary a great deal with neighbourhood income level, distance to downtown, and distance from the station. Regarding, the largest positive total effects tend to occur at the farthest distance from the CBD between one-quarter to one-half mile of a station” (Ihlanfeldt & Bowes, 2001).

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