Two smaller improvements proposed for Metro stations in Arlington, VA. The top star marks a proposed second entrance to the Crystal City Metro Station that would improve connections to the adjacent Virginia Railway Express (VRE) station. The lower star marks a proposed pedestrian bridge connecting a neighborhood separated from the Washington National Airport Metro Station by VRE train tracks and the GW Parkway. (Images: Stan Wall during the LOCUS Summit)
This week, the 2018 LOCUS Leadership Summit: Rebuild America’s Neighborhoods brought local elected officials, transit and land-use planners (including members of the TODresources Peer Network), and forward-looking real estate developers and investors to Washington, DC.
Value capture, gentrification, and building affordable housing around transit were among the many topics on the agenda. With value capture in particular, having developers and consultants with relevant experience in the room provided some important insights into how to successfully execute such projects.
A fundamental point, emphasized by Stan Wall of HR&A Advisors, is that to capture value you need to create value. This means first, there must be sufficient demand for the projects that will generate the value; and, second, a community pursuing a value-capture strategy needs to be accommodating to new development to encourage private investment. Wall made three recommendations:
- Incorporate TOD planning from the beginning.
Bringing new transit to an area, particularly fixed-route and/or rapid transit lines often results in increased land values, reflecting the value of transit. To best take advantage of that value, transit-oriented development should be included in plans from the very beginning, not added on later. Like planning for affordable housing, waiting too long can limit your options and potential payoff.
- Reduce the barriers to TOD implementation.
A cumbersome entitlement process can discourage developer and investor interest by increasing risk. Localities can reduce that risk by adjusting zoning codes and other ordinances that may restrict more compact or mixed-use development. Parking in particular can be problematic, especially when considering that the most loyal transit riders are those who can walk to transit from their homes (those living in transit-oriented developments). The point is to reduce uncertainty for those with development proposals.
- Pursue smaller investments that have an outsized impact.
Creating new connections between transit and surrounding neighborhoods cost money but are much cheaper than building entirely new transit lines and can big impacts on access and ridership. A new station entrance can dramatically improve access to a station and surrounding destinations while pedestrian bridges or walkways can connect nearby neighborhoods that are otherwise inaccessible due to a highway, waterway, or some other obstruction, as shown in the image above. Investments like these can often catalyze more development and create new value.
The panel on value capture at the LOCUS Summit included Stan Wall as well as Doug Firstenberg from StonebridgeCarras and Chris Leinberger at George Washington University’s Center for Real Estate and Urban Analysis. They all agreed that in order to get the best development proposals for value capture, RFQs (as opposed to RFPs) are much more attractive to developers. Many developers ignore RFPs because they’re too prescriptive while RFQs can lead to more responses and thus better projects.
While there are many ways to do value capture—like tax assessment districts or tax increment financing—Leinberger noted that being an active, investing partner in the final deal and projects allows an agency or municipality to be a participant in shaping the outcome, and receive greater benefits from the returns over time. The role of a transit agency isn’t just moving people, it’s the economic development that comes from people being able to move. Capturing that value over the long-term by being a party in real estate development that supports transit is where many international transit agencies get 50-60 percent of their revenue (and how some even turn a profit).
Value capture does come with some risk to all parties involved. But with upfront planning for TOD, the right policies in place, and active participation in development projects, it can be a powerful tool to finance transit and create vibrant communities.
The TOD Peer Network is expanding
We’ll be expanding the Peer Network in the near future to invite more transportation and land use staff from more cities and towns. We’ll also be adding real estate developers who can be a great resource for more information on value capture and public-private partnerships. Start thinking of good, local developers or other public officials in your region that could benefit from being in the Peer Network and stay tuned for an announcement in the coming weeks.
Recent TOD news
Here are a few things that have been happening this week with TOD projects across the country.
- Lehi and American Fork, Utah planning TOD zones (Daily Herald)
- Underutilized property near San Diego rail stations could be housing (KPBS)
- A Nashville suburb braces for urbanization (Tennessean)
- Is this the future of Seattle transit? A look at Vancouver, BC (Seattle Times)
- Superhuman city, a look at New York’s Hudson Yards (New York Magazine)