The general perception, even among most transit agencies, is that transit’s role in land use is limited. What role there seems to be results most directly from joint development opportunities on land surrounding transit stations. But is that the whole story? Work by Cervero,¹ Deakin² and others indicate that proximity to transit raises property values and occupancy rates for residential and commercial properties. The new Center for Transit-Oriented Development has done case study research for the U.S. Environmental Protection Agency in places such as Hoboken, N.J., and Evanston, Ill., and shown similar effects. So how does transit affect land use, and can a transit system behave proactively to influence the type of development that occurs around its major transit facilities? By facilities we mean everything from a multi-bus route exchange center to a central business district facility where multiple transit and intercity modes converge. These might be found anywhere from a growing suburb³ to a major downtown.⁴

An integral component of development around transit in many cases is housing. It can be the primary component of a development, or it can be the basis for a density bonus or other incentive offered to a developer. Generally, when we talk about housing in a development it is understood to be a unitary thing. That is, the discussion quickly becomes one of single family detached, or single family townhomes, or multi-unit housing (apartments). There is rarely a discussion of all three types of housing in the same development, and rarer still is the discussion of mixing housing with any other type of structure such as offices or retail. Yet, before the advent of the automobile, that is how our grandparents lived. Judging by the high prices of residences in New Town Center developments around the country, it is also how the current generation increasingly wants to live. It even has an acronym: TOD.

But, in the current development environment, there is a strict progression of project return. Commercial office space has the highest rate of return – often in the double digits. One anchor tenant can assure the profitability of a new office building. Residential development is not quite so lucrative, but the average return within five years is just under 10 percent. The lowest rate of return is earned on retail space, which has the highest risk of failure – not from construction risk but rather the failure of its tenants. Is it any wonder, then, that developers will specialize in what they know, and avoid that which has the least return? Only when the return is virtually assured (again, the “anchor tenant” concept) will the developer include retail space in a commercial or residential development.

How is a transit agency or a local economic development corporation going to overcome such a market? The method may depend on that acronym: TOD. The transit service provides connection to a wide variety of life needs, higher property value and higher volumes of people. At the same time, the transit service can’t really function unless it serves a broad range of activities. If all of the TODs are residential, there is no reason for anyone to use the transit system except for visits with friends and neighbors. However, when stations have a mix of uses, including offices, residences, retail and services transit seems to work best. There are ample reasons for people to use the transit system and there are ample places for the transit system to connect.

TOD and Joint Development

Transit-oriented development (TOD) is simply the design and construction of buildings, streets, parks and other aspects of a real estate development that are centered on, and depend upon, a public transportation facility. In such a development there is pedestrian, bicycle, bus, maybe taxi and other modes of access to the transit service. The buildings in the development contain a variety of household and community needs, including employment, entertainment, education, medical services, shopping and so on. And the community is designed in such a way as to maximize the opportunities for satisfying daily needs on foot as often as possible. In a TOD community, streets may even be designed to slow automotive traffic, and parking may only be available on side streets or in discreet parking garages, hidden behind buildings that are scaled for pedestrian comfort and convenience.

One such community is King Farm, in Gaithersburg, a distant suburb of Washington, D.C., in Maryland. This is a substantial community that was designed to take advantage of a light rail system that is planned for some time in the future, to connect two branches of the Washington Metro system. The farm became available many years before the light rail system could be built, but a right-of-way for the eventual light rail is preserved in the main entrance of the community. The neighborhood combines single-family detached housing with townhouses and apartment buildings, none of which exceed five stories in height. Public areas and linear parks are all connected through the middle of the community, and they provide access to a wide variety of daily needs. Until the light rail comes, residents may access the Metro station just one mile away, though it does take either the car, bicycle or a bus ride to do so.

The interesting thing about this community is that it is designed to accommodate a mix of income levels. Gaithersburg has one of the highest per-capita household income levels in the country, and real estate prices reflect this. Before a majority of the houses were completed, they sold for more than $400,000, and this was before the recent run-up in home values. However, Montgomery County has an affordable housing requirement for major developments. Depending upon whether any density bonuses are provided to the developer, between 12.5 percent and 15 percent of the new dwelling units must be “moderately priced dwelling units” or MPDU. These may be for sale or for rental, and are intended to be offered to families earning 65 percent of the median household income for the area. The MPDUs must be built within the development and at the same time as other units.