Development-Oriented Transit
Occasionally, people faced with very high transit construction costs propose value capture, where some of the increase in land value coming from transit access is directed to the transit agency. Yonah Freemark has just brought up this issue again, in the context of Toronto’s failure to find private investors willing to put money for its extravagant suburban subways in exchange for greater land value.
Despite the list of examples of value capture used to fund transit, the idea remains a poor one. Jarrett Walker gives a list of consequences of value capture, one good (it ties transit success to density) and two bad (it is bad at serving existing density, and at social justice).
In New York, Second Avenue Subway and the 7 Extension are both very expensive, but the 7 Extension is getting funded by value capture whereas to construct Second Avenue Subway, backroom deals by Assembly Speaker Sheldon Silver were required. If anything, Jarrett’s first bad consequence is understated: politicians prioritize projects they can find private support for, especially reformists, and ignore transit lines that merely have very high ridership potential. At worst, it encourages collusion with developers and therefore corruption.
Jarrett misses one additional problem: nobody expects developers who build near highways to contribute to highway construction costs, and until they do, to tax developments near transit is to give developers an incentive to build near highways. Transit agencies should either reform themselves to become profitable or seek a reliable source of tax subsidy, but they should not tax people who do the right thing and build compact, transit-oriented development.
There’s a common misconception that in Japan and Hong Kong, both famous for the integration of rail construction and development, development is used to subsidize transit. Reality is the other way around: in most cases, Japanese private railroads use development to raise transit ridership, and although the real estate dealings are often higher-margin, the rail transportation is profitable by itself without exception. The Hong Kong MTR, too, is profitable on transportation alone, but keeps engaging in development to raise profit margins and provide patronage for the trains.
Many cities do in fact follow the model of Hong Kong and the private railroads of Japan, but entirely in the public sector. They upzone around transit stations, reduce or eliminate parking minimums, and restrain or avoid expanding auto capacity. This was done intensively in Calgary and Vancouver, which in recent years have been North America’s leaders in both efficient transit construction and transit modal share increase.
Note that this is still to a large extent development-oriented transit, and still creates problems with politicians who overfocus on greenfield TOD, but not to the same extent as value capture. Vancouver is seriously planning a rapid transit line to UBC, the main neglected urban line, just later than it should have. In contrast, New York is sidelining future phases of Second Avenue Sagas entirely; even PlaNYC only incorporates the first two of four phases, which are too far advanced to ignore.
Toronto could not follow the positive example of Vancouver and Calgary; there was too much NIMBYism along the routes proposed. This same problem also plagued the proposal for land value capture. The problem is that Toronto’s bad government is so suburban-focused it really believes in building transit to low-density suburban regions, and at the same time in enhancing auto accessibility (Mayor Rob Ford demagogued about a war on cars in his campaign).
In this sense, land value capture, and in general development-oriented transit, should be viewed as a failure of consensus for good transit, regardless of whether this consensus allows transit to be profitable or to be stably subsidized. At its best, for example in the Vancouver suburbs, development-oriented transit is a political price to be paid for suburban support for high-ridership urban lines. More commonly, as frequently happens with value capture, it sidelines the high-ridership lines completely. And at its worst, as is happening with the 7 extension, it’s a transfer of wealth from the public to private developers in the hopes of future tax revenues.