The Wall Street Journal reports that with the decline in transit funding and increased ridership, transit agencies are getting more creative about raising funds, including developing real estate near stations:
The [Atlanta transit] authority is targeting underutilized parking lots near train stations for mixed-use development. It is negotiating leases for three parcels with developers who are planning to add more than 1,400 residential units and about 50,000 square feet of retail space.
Atlanta has company. Cash-strapped public transit systems in other cities such as Washington and San Francisco have moved to take advantage of the rise in values of property near train stations.
To be sure, many transit agencies have had active real estate departments for a while, mainly to figure out what to do with the land they use for construction staging near station entrances. But this article indicates that the effort may become more comprehensive and directed at new revenue opportunities. It also indicates how much land values increase within walking distance of transit.
Ultimately it may make more sense for transit agencies to stay out of the real estate business. Instead, policy makers should ensure that the agencies receive a portion of the increase in local tax revenues that are generated from the rising land values brought by transit. This “tax increment,” representing additional tax revenue above the baseline value of these properties before transit, could help finance transit construction and operation. It would also help these public agencies recoup the private benefit they bestow on landowners near stations.
In the long term,I’d rather agencies get this funding than try to figure out the real estate game, which is probably better left to the private sector. But in the meantime, I’m glad they are capitalizing on the value of these transit-oriented properties.