Bus Rapid Transit impacts property values
With any public investment people want to know what benefits they will get for the cost, that is their tax dollars, and rightly so. One could certainly argue the benefits from investments in Bus Rapid Transit (BRT) to a community as being reduced congestion, less stressful and less expensive commute options, improved air quality and better access to education and employment. But another benefit is the subject of ongoing research at the NBRTI: increased property values due to proximity to BRT systems.
Think of all you look for when deciding on a place to live. Not only are the property characteristics important, but so is its location in relation to employment, schools, shopping and parks. To what extent is location near BRT considered? Is the availability of BRT service a factor in an investment decision such as a home purchase? We set out to answer these questions.
What we found
We found that previous research in the United States on property value impacts of transit focused on rail transit. This previous work generally found results that are statistically significant, positive, and yet relatively small in magnitude.
Some research has been done in this area for BRT systems that operate outside the United States, but this research is among the first to study this issue for BRT systems operating in the U.S. Because many BRT systems in the U.S. may be too new to find evidence of capitalization into property values, we used data from Pittsburgh’s Martin Luther King, Jr. East Busway, one of the oldest operating BRT systems in the country.
The marginal value of being near rail transit is really to be expected considering the myriad of factors that comprise the total market value of a given property. This is not an easy subject to tackle but the question of whether BRT can have a positive impact on surrounding property values is very important and requires a scientific, statistical approach. Correlation does not imply causation.
Our hypothesis was that BRT stations have an impact on property value that is commensurate with rail transit projects considering the level and permanence of services and facilities. We want to learn the extent to which proximity to BRT is considered in the home-buying or investment decision.
Do people consider a BRT system to be as “permanent” as a rail transit (i.e., light rail) system?
To test this hypothesis, we used a hedonic regression model to isolate and estimate the impact of distance to a BRT station on the fair market value of single-family homes located near Pittsburgh’s Martin Luther King, Jr. East Busway. It was expected that, as the distance to a BRT station decreased, the property value would increase.
It was found that the relationship between the distance to a station and property value is inverse and decreasing as distance from a station increases, which matches our hypothesis. Similar to the research on rail, our results were statistically significant and relatively small in magnitude. Follow this link to read the full report for all the details: NBRTI Research.
Using the model from Pittsburgh, we have some encouraging results that show BRT can have impact on property values similar to rail transit, including LRT.
Decreasing marginal effects were found. Moving from 101 to 100 feet from a station increases property value approximately $19.00, while moving from 1001 to 1000 feet increases property value approximately $2.75. Another way to interpret this result is to say that a property 1,000 feet away from a station is valued approximately $9,745 less than a property 100 feet away, all else constant (this figure is determined by summing the marginal effects for each foot of distance). The results shown in this report are only valid for the data used in Pittsburgh’s case. As more BRT systems continue operating in the United States for more years, this method should be applied to other cities and other types of properties to gain a better understanding of the general property value and land use impacts in proximity to BRT.
Of course, we can improve our model to provide more conclusive results, and we are working on that right now. We are refining our method, including other types of properties such as multi-family and commercial, and looking at other BRT systems, such as Boston’s Silver Line. I like to share a favorite quote from the statistician George Box with my economics students when we’re discussing the finer points of the Keynesian and Classical macroeconomic models: “All models are wrong, but some are useful.”
Without a doubt, our model of property value impacts will never be perfect, but it can surely be a very useful tool. We can use it along with qualitative studies and other anecdotal evidence in developing overall assessments of a BRT investment’s benefits to the community regarding land use, property values, and economic development.