Transit Cuts Hinder Home Sales

MTA Cuts Hinder Home Sales


SEPTEMBER 10, 2010

By MELANIE LEFKOWITZ

Read More: http://online.wsj.com/article/SB10001424052748703453804575479780527798198.html

Vickie Palmos, a broker in Astoria, Queens, recently found a buyer willing to pay $999,000 cash for a brand-new penthouse condo listed at $1.1 million. "She fell in love with the apartment," Ms. Palmos recalled. The 1,264-square-foot condo in the East River Tower has two bedrooms, a balcony with a view of the Manhattan skyline, a doorman, a fitness center and parking. The biggest drawback: a 20-minute walk to the nearest subway. The buyer, however, was counting on taking the express bus into Manhattan, which stopped nearby on 21st Street. Except it doesn't exist anymore.

- The QM22, an express bus that ran from Jackson Heights into midtown, snaking through Astoria and Long Island City on the way, was among the casualties of the Metropolitan Transportation Authority's most recent round of budget cuts. So when Ms. Palmos's buyer found out about a month ago that the route was axed, the penthouse deal went the way of the express bus. "There are a lot of buildings around here that depended on having the express bus," Ms. Palmos said. "That killed off sales for us over in that building. … for the people who are looking to get in and out of Manhattan quickly it's going to be a tough sell. People aren't willing to walk that far."

- Real-estate data compiled by StreetEasy.com show a dropoff in sales in some neighborhoods along the bus routes since they ended this summer. In Kensington and Ditmas Park, Brooklyn, where condo buildings along Coney Island Avenue and Ocean Parkway can be a half-mile walk from the nearest subway, the X29 stops on Coney Island Avenue could mean a quick ride into Manhattan. That bus was cut. The number of home sales dropped 60% in Kensington and 83% in Ditmas Park between July 2009 and June, when bus service ended, but that is likely due to a spike in June when the first-time home-buyer tax credit expired.

- Not every neighborhood where the buses ran is affected. For example, Jackson Heights, where the QM22 culminated, has been relatively untouched because of easy proximity to several subway lines. Other neighborhoods farther from Manhattan already appeal primarily to those who commute by car to jobs in the other four boroughs or nearby suburbs. But in more far-flung, gentrifying areas, where buyers were willing to accommodate longer commutes in exchange for bargains, brokers say they are already feeling some pain.

- But one more inconvenience, in an outside-Manhattan neighborhood where the commuting options are perhaps already imperfect, will drag prices down, experts said. Sofia Song, the vice president for research at StreetEasy, said transit cuts in general are unlikely to affect the volume of sales—though they could bring down prices. "I think the changes would need to be pretty drastic, because demand for housing is so high. If you make it more affordable and less convenient, there's still always going to be demand," Ms. Song said.




"The buyer who buys in Astoria is looking for a cheaper price and to get into Manhattan quickly," said Ms. Palmos, adding that she is having the same problem with a condominium building in Upper Ditmars, north of Astoria. Apartments there that she said would have easily sold for $500,000 with the express bus nearby are now languishing on the market at prices about $420,000.

Internalizing positive transit externalities


Read More: http://marketurbanism.com/2010/09/13/internalizing-positive-transit-externalities/

- What’s most striking to me is that a simple express bus route can raise prices by $80,000 for a single apartment. Multiply this by the thousands of apartments along the bus route and it appears that the lost value from the cut bus route ought to exceed, by orders of magnitude, the cost of maintaining the route.

- But of course, since the MTA doesn’t see a penny of the value it creates, it isn’t surprising that “the impact on property values isn’t something the agency takes into account.” One way for transit agencies to benefit from the value they create is the use of “tax-increment financing” or “special-assessment districts” that levy taxes on infrastructure improvements specifically on those who benefit, but these mechanisms are pale imitations of the only way to truly link transit-induced value and real estate: allowing joint ownership.

- Transit agencies in the US can’t/don’t develop property and property developers can’t build transit, but it wasn’t always that way. Around the turn of the century, when America’s great mass rail-based transit systems were being built, they were often built by developers who had large stakes in land around their stations. The transit systems could even be loss-leaders that subsidized their developers’ real estate positions, and joint ownership allowed for the sort of coordination necessary to build what’s today known as “transit-oriented development.”

- Progressives and planners in the US soon put an end to this practice by subsidizing roads and placing onerous restrictions on transit operators that eventually let to nationalization, as did governments throughout the world. Some Asian governments, however, have begun to backtrack. Japan’s rail privatization in the late ’80s made transit operators some of the country’s largest real estate developers.

- Although private ownership of NYC train lines seems about as likely as legalized heroin in the short-run, private bus services run by property developers (of groups thereof) could serve as a more politically palatable stepping stone. Very tentative steps toward private bus service have been started, but it will take much more to allow developers to be truly innovative with transit.