TOD Poised to Push Past the Recession

Posted on September 14, 2009 by Nicole Schlosser, Associate Editor - Also by this author

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[IMAGE]TOD.jpg[/IMAGE]More and more Americans are choosing to take public transportation and live in more walkable areas, as evidenced by ridership peaking in many parts of the U.S. Transit oriented development (TOD), the incorporation of business, office, retail or housing properties into transit station plans, is emerging at an increasing rate nationwide, and existing projects are thriving.

While the spending may be on hold in many cases, the planning is surging forward all across the U.S. Transit authorities and developers alike are positioning themselves to be ready for when the economy picks up, so they can reap the benefits these new projects will bring. 

Factors urging TOD

Four basic factors have recently come together to make the climate for TOD projects more opportune. A cultural shift is the result of demographic changes in age and the number of singles increasing; less home buying and transit ridership growing, due to the recession; and a different type of economic driver emerging and exposing a pent-up demand for more walkable urban communities. Also, cities nationwide are waking up to the fact that the combination of a robust transit system and mixed use will keep them viable, as evidenced by Portland, Ore., Phoenix, Dallas and many others.

Demographics. In late 2006, the Journal of the American Planning Association published an article by Arthur C. Nelson, which was later referenced by Christopher Leinberger, metropolitan land strategist and developer, The Brookings Institution, in his book, The Option of Urbanism, showing the fundamental change in the demographics of the U.S., the average household size and its makeup. Americans are living longer, there are fewer households with children and many more single-occupancy households in the country. Consequently, there has been a different housing product mix desired in the country over the past few years.

Additionally, in 2008, the Center for Transit Oriented Development (CTOD) updated its market demand estimate from 2004, and projected that by 2035 there would be a doubling of demand for homes near transit and that to keep up with that demand, 2,000 of these units must be built, per year, between now and 2035.

The study used census projections on aging, as well as demographic changes in ethnicity and immigrant populations, both of which, the study claimed, are more inclined to want to live in higher density communities near transit. Combined, these populations are driving the interest in demand for homes near transit, and, currently, we don't have enough.

Pent-up demand: The new "American Dream." Leinberger stresses that transportation drives demand for development. "Of the 15 infrastructure categories, transportation is by far the most important because it dictates what we in real estate can build." The last two to three generations in the U.S., he explains, mostly built highways, which was what the market demanded then, creating drivable suburban areas.

"Americans embraced it, and rushed out to the suburbs. And, that became the basis of what most people think of as the 'American Dream.' A fleet of cars, white picket fence, single family house," Leinberger says. "People forget, though, that that dream was really focused on the industrial era in this country."

Leinberger says that today Americans are living in the new, "Knowledge-Experience-based economy." Manufacturing is occupying a much smaller percentage of the workforce. As a result, the "American Dream" is changing as well. "As a reflection of that change underlying the economic driver of this economy, the 'American Dream' today is of choice. You can have either drivable suburban or walkable urban, and you can have them at different times in your life," Leinberger says. There are also different kinds of walkable urban, ranging from low-density to extremely high-density. "Today there's pent-up demand for walkable urban, because we have not been producing much in the last 60 to 70 years," he adds.

About one-and-a-half years ago, Leinberger conducted a survey at the Brookings Institution, called "Footloose and Fancy Free." It listed the walkable urban places in the top 30 metro regions in the U.S., and found 157 of them that were at critical mass. Approximately two-thirds of these areas were served by rail transit, indicating that rail service and walkability go hand-in-hand. 

The Washington, D.C., region has, on a per-capita basis, more examples of walkable urban places than anywhere else in the country, Leinberger says. This is much higher than New York, where only eight percent of residents in the region live in Manhattan out of almost 20 million people. The rest of the 92 percent are spread out over four states, at a density lower than Los Angeles. "So, the people in Manhattan are certainly living like Seinfeld, but the rest are living like Tony Soprano," Leinberger points out. "Washington, D.C. has 20 walkable urban places that are regionally significant. Ninety percent are rail transit-served. That's not a coincidence. So, this is a real demonstration that transportation drives development and that rail in particular drives development."

The recession. Even in the current economic climate, Gloria Ohland, VP, communications, for Reconnecting America, a national non-profit organization that works to integrate transportation systems and the communities they serve, says that walkable neighborhoods near public transportation are holding their own. "There was an article in the Denver Post earlier this year that called [Denver RTD's light rail system] 'the Money Train,' because property values along the line had gone up seven percent while property values in the region at large had gone down 15 percent." While seven percent may not be a big number, the fact that property values were decreasing everywhere else indicates that the market recognizes that people are interested in sites near transit.

 Despite the fact that in most places developers are having a hard time getting financing, Ohland says this is an important time for the public sector, transit partners and cities to get their ducks in a row.  "It's also a good time for them to buy property near stations. Land prices are lower right now, so it's a good place for them to position themselves so that when the market comes back up, they'll have sites that are ready to go," she adds.

Valerie Knepper, transportation planner, at the San Francisco-based Metropolitan Transportation Commission (MTC), agrees that now is a very good time for TOD projects. "In this economic recession, which has hit housing very badly in general...areas hit the hardest are away from the urban core. It's single-family housing, where people have to drive a lot, and have little accessibility to transit. The worst hit are on the edges."

"We've seen a huge uptick in the amount of transit ridership, and less of a problem with foreclosures in more urban areas that are well-served by transit," says Dena Belzer, president, Strategic Economics a consulting firm that works on economics projects and partners with CTOD.

As far as projects being planned in the current economic downturn, Belzer thinks that progress will be slow-going, but agrees that now may be an ideal time for property investment.

"[Strategic Economics] was talking to an architect who's working with a developer in the Los Angeles area, who says that he's seen a huge decrease in construction costs, and they're moving forward with a very dense project along the proposed extension of the Gold Line...he's saying the property owners are unloading the property at a relatively inexpensive price, and construction costs have dropped enough so that it makes a project that didn't necessarily look feasible before look [more realistic] now."

While that may be just one example where the conditions appear to be ripe and the developer is capitalizing on the opportunity, "the metrics are right-sizing themselves in a way that's making the projects feasible...in some places," Belzer says.

Cities reassessing futures. Streetcar circulator systems have also played a role in cities transforming their accessibility with TOD projects. Rick Gustafson, principal, at Portland, Ore.-based Shiels Obletz Johnsen Inc., who worked on the Portland Streetcar project since its inception in 2001, with two vehicles, discussed the transition, and its impact on the city.

What started out as a run-down industrial area has, over the past 12 years, generated approximately $3.5 billion in investment, and from that came nearly 10,000 new housing units. Daily ridership for Portland Streetcar is approximately 12,000. The reduction of vehicle miles traveled (VMT) is 70 million per year.

The consulting firm formed a relationship to work on projects in Portland and Seattle, and both, Gustafson says, are oriented toward the shorter trip. "Seattle is 1.3 miles long. Portland started at 2.4 miles. Both of them were projects [geared] toward higher density in town locations."

In Seattle, the interdependence of transit and a local business became a big boon to the city when Amazon decided to relocate its headquarters, one million square feet of new office building, on the streetcar line. The move created a need for employment, a major benefit for the city. The decision was influenced dramatically by the location of the streetcar, Gustafson says.

Still, circulator projects have not been considered very high-priority regionally or nationally. According to Gustafson, that's largely due to a mentality that the primary value of transit is for commuters to deal with congestion.

"We've been trying to press for high-quality circulation. You can support a much higher density of development. When you [do that], you begin to have a real impact on the carbon footprint, travel and behavior of individuals. Creating a park-and-ride, and running long-run commutes certainly gets people onto transit, but that...tends to support the current land use patterns of our country: urban sprawl," Gustafson says.

He sees the biggest obstacle as getting people to realize the benefits of mixed use. "You can begin to accomplish a lot of your trip purposes as a resident by walking. Our whole institutional structure is set up to keep uses separated. This idea of mixing uses has forced a lot of changes on typical institutional structures. It's not as easy as people think."

Still, the atmosphere for streetcars has never been more aggressive and positive with regard to cities wanting to invest. "There's a thing going on with the country, with cities re-assessing their futures. Most cities are now starting to recognize that their transit network [is] symbolic as a fundamental component of a 'good city'." More cities are recognizing that a high quality transit system reflects on their viability and future growth potential. "It's overwhelming how many cities are seriously looking at major investments in streetcars and rail across the country, to a large extent, to rebrand [themselves]," Gustafson adds.

Other recent, successful streetcar projects have taken place in Little Rock, Ark.; Tampa, Fla.; and Kenosha, Wis., according to Reconnecting America. In addition, 85 cities in the U.S. are currently studying streetcar systems. Gustafson observes that more cities are now advancing beyond the talking stage, to putting the resources together to make it happen.

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