Commercial Real Estate
Rail Access Can Enhance Property Values
Angelenos’ skepticism aside, many cities report that homes near transit stations often command hefty premiums.
As Southern California’s rail transit system continues to grow, so does debate over what effect tracks and stations have on nearby properties.
While no firm evidence exists for the Los Angeles region, experience in other cities suggests that access to rail transit will gradually cause a measurable increase in property values. Yet many property owners near existing and planned Los Angeles rail lines remain convinced that the constant train noise and activity reduce real estate prices.
In less than a decade, “you could see 5% to 10% premiums,” said Larry Kosmont, a Los Angeles-based real estate consultant, “If you have access to transportation, it’s considered a benefit.”
With support for subway construction waning, the MTA has turned to the less-expensive alternative of building above-ground light rail on existing rights of way, several left over from Los Angeles’ historic Red Car system.
Opponents of this plan–including many homeowners with property near the old track lines–complain that the revived lines will be a nuisance.
Supporters point to other cities where homes within walking distance of rail lines, including those on the surface, are coveted. It is an established principle, said urban economist Aaron Gruen of San Francisco-based Gruen Gruen & Associates, that proximity to transit service increases land values.
Boston and Toronto, for example, both preserved large portions of their original trolley lines and modernized them into light rail.
Single-family residences in Boston are valued an average of 6.7% higher in neighborhoods with rail stations compared with neighborhoods without them, according to a 1994 study by the Washington-based Transportation Research Board, a nonprofit institute that operates the National Academy of Engineering.
Residential properties in Toronto carry a higher value if located near rail, according to a 1999 economic impact study prepared by the University of North Texas.
Portland and San Diego, with newer light rail systems, have seen similar boosts in property values.
In Portland, residential properties within 500 meters of a light rail station fetch an average of 10.6% more than comparable properties farther away, according to a 1999 study by the research firm of Booz-Allen & Hamilton.
In San Diego, the study said, property values increase an average of $2 per meter the closer the property is to transit.
But San Diego may not be an apt comparison to Los Angeles, said Gary London, a San Diego-based real estate analyst. Downtown San Diego has substantial residential and tourist elements as well as office commuters.
Yet Dallas, as decentralized and automobile-dependent as Los Angeles, is often cited by light rail advocates. The University of North Texas study found inconsistent but often substantial increases in property values from 1994 to 1998 in areas served by its light rail over similar properties outside the service area.
There is some extra property value attributed to proximity to transit, London agreed. But in Southern California, “The premium is minimal compared to views or ZIP Codes.” While a home with an ocean view can command 50% more on the market than a similar house located inland, transit access is not likely to bring more than a 10% premium, he said.
In Long Beach, where a light rail line from downtown Los Angeles has operated for a decade, real estate agents say properties have increased in value as much as 30% in recent years. There may be several causes for the rise.
Real estate analysts agree that, so far, there’s been no demonstrable upward effect that can be tied to proximity to the line, although they note that advertisements for homes often boast of access to light rail. Still, “it just doesn’t drive values” either way, said Harvey Mark, a Prudential agent who represents Long Beach properties.
“I think there will be real estate price bumps for parcels close to transit in Los Angeles, but it’s going to come later,” said Bill Fulton, president of Solimar Research Group, a Ventura-based urban planning consultancy.
The North Texas study found that it can sometimes take decades before significant increases in valuations occur to transit-adjacent properties. According to the study, this explains why cities with older transit systems such as Boston, Toronto and New York have more consistent positive effects.
The study suggests that the cost of moving is higher than the perceived advantage of living or operating a business close to transit. Therefore, not until new residents enter the area–or old residents decide to move for other reasons–does increased demand begin to drive up values for properties near transit.
There’s such a thing as being too close, according to sales agent Mark, who represents a tract of townhomes where one row is right up against the Long Beach line. “You can reach out and shake hands with the conductor,” he said. Homes adjacent to the line sell well, he said, but fetch 5% less than homes in the next row and the rest of the development.
“Just 50 feet farther along, there’s no [negative] effect” on price, Mark said.
“Trolleys are typically quiet and will be value neutral, but in some cases the bells do ring and they’re bothersome,” London said. But in the case of the Long Beach line and most other planned MTA light rail lines, “they’re building over tracks that already existed, so these properties were already affected,” said West De Young, branch manager of Dilbeck Realtors in South Pasadena.
Developers, it would seem, agree with the prediction that values will rise in the long haul.
In Pasadena, where the light rail line is scheduled to begin service in less than two years, two major developments have been completed.
One is Holly Street Village, a mixed-use residential complex built directly over a future Pasadena line station.
The other, far larger, project is Paseo Colorado, a mixed-use shopping mall and apartment complex which is a short walk from the Pasadena line. Other mixed-use developments are in various phases of planning around transit stops on other lines.
Betting that a bump in value will come, developers would like to squeeze as much revenue out of the parcels of adjacent land as possible, London said. This should make low-density homes within walking distance to a station a rare and highly valued commodity.
“Pasadena may be the first place where you start seeing a bonus for adjacency, if you have the quality of living in a house and can still access the line,” Kosmont said.
“People will say, ‘This is a plus to me. I want to live there so I can walk to this and go work downtown,”‘ De Young said.