Donald Trump is no friend to mass transit. But tucked away in the 55-page infrastructure plan released on Monday is an intriguing idea for America’s forthcoming subways and light rails, should the administration decide to fund them at all: A demand that all new transit use some form of value capture.
Under the proposal, any city that wants federal money must show that it will collect some of the property value gains that accrue to plots along the new line, and use those proceeds to finance the project. There are lots of different technical ways to do this (with boring names like “tax-increment financing district”), but each of them is grounded in a fundamental expectation: Transit is supposed to make the land it touches more expensive.
This forces transit planners to think as hard about real estate development as getting people from place to place, and not always for the better. Many streetcar projects, for example, are rather transparently intended to spur apartment construction, rather than move people, and their abysmal ridership statistics show the peril of that approach. Relatedly, value capture proponents often oppose adding transit to neighborhoods that are already built out, even if ridership would be high. For example, New York’s deputy mayor Dan Doctoroff once called the Second Avenue Subway—which runs under America’s densest residential neighborhood—a “silly little spur that doesn’t generate anything.”
On the other hand, good transit ridership depends on density around new stations, and in most cases, new transit and new development are surprisingly out of sync. (More on that in a second.) Value capture is de rigueur in many, many cities around the world, and lays at the core of America’s original streetcar companies, which were closely involved in real estate speculation.
The Trump administration wants to make the 5309 Capital Investment Grants, a program run out of the Federal Transit Administration, conditional on value capture. CIG, which includes the popular transit funding grant New Starts, has been responsible for funding virtually every new transit project in the country, including the Second Avenue Subway. In many cases, CIG funding is indispensable: Seattle received $830 million from CIG for its $1.95 billion University Link extension, a popular light rail project in the rare city where fewer people are driving to work alone.
Requiring transit planners to recoup real estate gains would dramatically change the selection, viability, and influence of these multibillion-dollar endeavors.
Capturing value from development is above all a political challenge. If a planner commits to boosting property values, she is laying out two potential scenarios. One option: The buildings around the new stations don’t change, and home values, propery taxes (and rents) go up. That’s not a good result when so many residents face daunting rent burdens. Otherwise, the city commits to up-zoning the area around the new stations, raising property values through the construction of larger buildings without necessarily having rents rise. That’s not an easy sell for homeowners who want to have their cake (an unchanging neighborhood) and eat it too (a convenient mass transit link). And it makes renters who fear gentrification nervous as well.
That said, the status quo is not working. Los Angeles is the leading U.S. city for transit construction, and two of its most recent projects, the Expo Line (which runs from downtown to the Santa Monica Pier) and the Gold Line (which runs from downtown east into the San Gabriel Valley), show some of the problems with new transit construction in this country. Multimillion-dollar stations are surrounded by single-family homes or by parking lots even as the city reels from a housing shortage and traffic congestion. Despite all that money spent on new construction, rail ridership in Los Angeles is declining. Neighborhoods around new transit stops may even lose riders as they gentrify without adding new housing units.
Because transit is undertaken at a regional level and land use decisions are made at a local level, there is a strong disconnect between transit and land use in almost every city. L.A. County epitomizes this. Angelenos pay for new transit through sales tax hikes, but few of them benefit from it, since so few people live around the region’s stations. Measure M, a gargantuan infrastructure package passed at the ballot box in 2016, does require jurisdictions with new transit stops to pay a share of construction costs. But that may not translate into more apartments around the stops.
All California is currently heading into battle over the issue. In January, a San Francisco legislator introduced SB 827, a state bill to override local zoning around transit stops in favor of midrise buildings. It’s an attempt, after the fact, to capitalize on some of the value that transit has created—even if the bill falls short of a Trump-style demand to use that value to pay for the transit in the first place. The mayor of Berkeley, where parking lots form a moat around a stop on the BART system (in which each new track mile costs $780 million a piece) called it a declaration of war.
Ultimately, a requirement that new transit include value capture mechanisms would, I think, effectively demand coordination between transit and city planners, and could all but require larger buildings around stations.
That would bring new riders; it would also bring risks. A focus on value capture might push new projects to run into gentrifying neighborhoods where it looks like real estate growth could pay big dividends—like in New York, where a value capture–funded streetcar has been proposed for the Brooklyn-Queens waterfront. It would reduce the incentive to provide transit for transit’s sake. And given how strong neighborhood opposition to new housing tends to be in both high- and low-income areas, the requirement might kill new transit projects before they begin.
