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Housing Affordability in Transit-Oriented Developments

Photo of the Miami Metrorail with multiple skyscrapers in the background.When low-income households are priced out of transit-oriented development areas, the cost savings of living in a more affordable area is offset by higher transportation expenses associated with automobile dependency. Photo credit: Umans

Transit-oriented developments (TODs) provide access to high-quality transit that connects residents to resources and amenities across a city or region. Residents who choose public transit have much lower transportation costs than do those who travel by automobile. These benefits, however, often increase housing costs in TODs that can exclude the lower-income residents who are most likely to rely on public transit and have the most to gain from its cost savings. On February 15, 2022, the National Institute for Transportation and Communities hosted a webinar titled “Is Transit-Oriented Development Affordable for Low- and Moderate-Income Households?” Two University of Utah researchers — Reid Ewing, distinguished professor of city and metropolitan planning, and graduate student Justyna Kaniewska — presented findings from their study on housing and transportation affordability in TODs. In addition to discussing the study’s findings, the researchers outlined the most successful city-level policies for producing affordable housing for low- and moderate-income families living in TODs.

Distribution of Affordable Housing in Transit-Oriented Developments

To determine the number of existing TODs in the United States and the income groups they serve, the researchers first contacted metropolitan planning organizations, transit operators, and city offices to compile a list of potential TODs, which was refined to include only TODs that met eight criteria. The first three criteria are consistent with a widely used definition of TODs — that they require high-density development; at least two land uses; and “complete streets” that support pedestrians, automobiles, public transit, and public spaces. TODs must be located within a block of transit to mirror the convenience of driving one’s car, and transit is defined as either ground transportation or light and commuter rail that offer access to jobs and retail across a region. To capture the TODs that reflect the best transit ridership outcomes, Ewing examined five additional criteria: self-contained parking, constructed after transit, fully or nearly developed, master planned with more than one building, and adjacent to transit. The researchers included only fully developed TODs to analyze their potential for transit ridership, and they selected only TODs master planned by a single developer because they benefit from urbanization agglomeration economies such as shared parking and internal trips among residential, retail, office, or entertainment areas.

In all, 85 TODs met the 8 criteria and were included in the housing affordability analysis. Because a single TOD could be the site of more than one project, the researchers counted affordable housing units across a total of 117 projects. Overall, 20 percent of the units were affordable; 13 percent were designated affordable housing (DAH) and 7 percent were naturally occurring affordable housing (NOAH). Nearly a third of TODs offer no affordable housing, meaning that the distribution of affordable housing across the cities is uneven. For example, Miami boasted the highest percentage of affordable housing thanks to a single TOD consisting entirely of affordable housing.

Kaniewska also emphasized that NOAH often serves moderate-income households — those earning 80 percent of the area median income (AMI) — that typically consist of individuals who can afford only small units. This means that families needing larger units cannot rely on market forces to provide affordable housing in TOD areas.

Low-Income Housing Tax Credits Lead the Production of Affordable Housing in TODs

A major driver of affordability in the TODs analyzed were 16 affordable housing projects that provided 40 percent of the affordable housing units in the study. Because the variance in TOD affordability is due to these projects, the researchers could easily determine the mechanisms that produced affordability in TODs. They found that for nine of the properties, low-income housing tax credits (LIHTCs) were the primary source of funding for units at 50 to 60 percent of AMI. In addition to LIHTCs, the developers leveraged an average of 20 other funding sources, including grants or tax abatements from the city.

Kaniewska explained that bottom-up approaches such as LIHTCs are more effective at producing affordable housing in TODs than top-down approaches, which include regulation at the state or city level. Specifically, she compared LIHTCs with top-down inclusionary zoning (IZ) policies, which accounted for approximately 35 percent of the DAH units in the 85 TODs. Less affordable than the LIHTC properties, these projects target moderate-income households who earn up to 80 percent of AMI, and an average of only 5 percent of the units are affordable. In addition, the policy structure of IZ results in a smaller number of affordable units because the 16 regions that have IZ policies allow developers to pay a fee in lieu of providing affordable housing. Furthermore, the data show that the production of affordable housing depends heavily on nonprofit developers and community development corporations (CDCs), which are more likely to produce LIHTC housing than IZ properties.

Low-Income Housing in TODs Optimizes Transit Infrastructure

The data indicate that TODs insufficiently house the people most dependent on public transportation, and few policies specifically target TODs for affordable housing production. A previous study by Ewing found that HUD-subsidized housing often is located far from transit. When low-income households lack access to public transit, the cost savings from affordable housing is offset by transportation expenses from dependency on automobiles, which cost families an average of nearly $10,000 per year. For more efficient total affordability, which Ewing defined as transportation plus housing affordability, Reid advocates for cities and transit operators to require developers to build a minimum number of affordable units in TODs.

Affordable housing near transit not only supports low-income households but also increases the return on investment for local governments and transit operators, who spend millions on transit infrastructure. A lack of regulation requiring affordable housing along transit lines decreases ridership because the residents of luxury apartments are less likely than low-income individuals to use rail systems. In recent years, transit operators have been addressing this issue by leasing their land to produce affordable housing. In 2016, the San Francisco Bay Area Rapid Transit District created a policy that discounts land leases to private developers by up to 60 percent to ensure that 35 percent of the units in the district are affordable.

Because transit operators tend to own the land at transit stops, they play an important role in creating policies that require affordable housing within TODs. This bottom-up approach, in addition to developers combining LIHTCs with other sources of funding, may help house low-income households who will benefit most from living near transit stops.

In the absence of affordable housing policy measures combating the high rents that result from the value of their public transit access, TODs are generally unaffordable for low- and moderate-income households. A lack of city- and state-level policy has left affordability in TODs fragmented because the production relies on nonprofit developers and CDCs who use effective bottom-up approaches such as LIHTC. As regulatory bodies implement more policies that target TODs and developers leverage various funding sources, however, more lower-income households will have access to housing near high-quality transit.

Published Date: 17 May 2022