Stephanie Hession runs some useful comparisons on housing costs in the DC area and finds that people are willing to pay a significant premium to live within walking distance of a Metro station. It’s about a 9 percent premium in Fairfax County, a 28 percent premium in the District, and in “the Northern Virginia, Inner Beltway and Montgomery County submarkets, the premiums are even higher, both near 40 percent in the third quarter of 2011.”
2012 is set to be a big year for transit starts, which is good news. But it’s worth reflecting on the fact that these high premia are a sign of something out of whack. It’s natural for land with access to special geographical features, be that a Metro station or a beach, to be more expensive than land elsewhere. But we have the technology—specifically elevators—to fit a very large number of homes on a small patch of land if the market demand for living there is real. The gigantic premiums in the inner ring of suburbs strongly suggest that the areas around their Metro stations are under-built, and probably saddled with excess parking requirements, height restrictions, and other rules that restrict access to transit-oriented housing. The 28 percent premium in the District is bad enough, but 40 percent is absurd. The lesson for cities around the country who are making new investments in transit infrastructure is that this stuff is both expensive and valuable. But to maximize the value you get for your expense, you really need to unlock the potential for densty created by the high demand for these locations. If you build the lines but don’t allow the density, you’ve really just created a private benefit for people who happen to live near the stations.