Rail and Property Values -- Some Gains and a Few Pains

If proximity to mass transit is indeed a boon to commercial property values, as a recent study suggests, Orange County transit officials say they hope to play that card to build support for the proposed $1.2-billion, 11-mile CenterLine light-rail system.

“We could see some benefits accrue shortly after the project opens,” said Monte Ward, manager of special projects for the Orange County Transportation Authority, which hopes to ultimately build an 87-mile trolley network.

The Cal State Fullerton report, which OCTA commissioned, concluded that property values rose for offices, stores, industrial buildings, apartments and condominiums when rail stations were built nearby. The findings, presented to the agency’s board last week, were based on a survey of rail projects in 14 metropolitan regions across the country.

“There’s expected to be [even] more impact over the long term, when the system matures and ridership is built,” Ward said.

Light-rail critics, however, emphasized other conclusions in the study showing that single-family home values increased only slightly or declined 5% to 10%, especially in areas along tracks that had the noise and view disadvantages of rail service but not the benefit of easy access to a station.

Such findings are expected to fuel neighborhood groups in Irvine that have opposed light rail, fearing a drop in property values because of noise, traffic disruptions, safety concerns and visual pollution. Residents will get a chance to vote on their portion of the rail system in the months ahead.

The researchers “have proven that CenterLine will have a negative effect on residential property along the route,” said John Kleinpeter, director of Fund Alternatives Instead of Rail Transit, an Irvine group opposed to the project. “You aren’t going to hear anything but the positive out of OCTA. They will pay for study after study in their effort to convince people that light rail is better than sliced bread.”

The proposed CenterLine would run from UC Irvine to John Wayne Airport, then to the South Coast Plaza area in Costa Mesa. From there, it would travel north along Bristol Street and east on Civic Center Drive to the Santa Ana Civic Center, and finally to the Santa Ana train station.

OCTA officials predict the line would attract as many as 32,000 riders a day if service begins as planned in 2011.

Jim Moore, a professor of civil engineering and public policy at the University of Southern California who reviewed the research, described the work as a conservative and responsible study that shows “very mixed” results about the effect of rail systems on property values.

“If there is an overall price effect, it is thin,” said Moore, who is also a critic of light rail, calling it cost-ineffective and outmoded. “This won’t help policymakers.”

The study, he said, indicates “perhaps that CenterLine won’t be a winner in terms of property values, although it might have high ridership.”

Researchers Lee Cockerill and Denise Stanley, of Cal State Fullerton’s economics department, analyzed 41 economic studies of 14 light-rail and commuter rail systems in the United States. Although their research did not analyze the potential effect of CenterLine on local property values, they concluded that it could mirror that of light-rail systems elsewhere.

Cockerill and Stanley found that property values rose 4% to 30% for office, retail and industrial buildings within walking distance of light-rail and commuter rail stations in Santa Clara County, San Francisco, Dallas, Atlanta and Washington, D.C.

The values of commercial property, they said, rose in anticipation of the opening of rail systems in Los Angeles and San Francisco. But the effects were short-lived, affected only properties close to stations and caused some home values to drop.

In San Diego, San Jose, Sacramento and Portland, the study said, light rail enhanced residential property values 2% to 18%, with the greater increases occurring in those cities with commuter rail systems such as Metrolink or Amtrak. But the study noted that the value of housing within a quarter-mile of a station suffered nuisance effects such as noise and traffic congestion.

Properties that saw the greatest gains were high-density residential developments, such as condominiums and apartments, a quarter-mile to a mile from stations.

Cockerill and Stanley found that residential property values dropped in Miami and Dallas, suggesting that the “car culture” of those cities has restricted public enthusiasm for light rail.

Although some property owners were hurt by their proximity to rail lines, Cockerill and Stanley concluded that the net effect on the market for all types of housing -- single-family homes, condominiums and apartments -- should be positive.

The study concluded that Orange County’s experience with light rail could be similar to that of Dallas, whose residents rely heavily on freeways and have easy access to them. Although residential property values fell near light-rail stations there, commercial property values rose.

Although Ward acknowledges that the Southland’s car culture is an obstacle, he said the study shows that property owners can expect “some modest to significant” gains in value for certain properties, and that any disadvantages would be limited.

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Where it’s up, where it’s down

A Cal State Fullerton study shows that major light-rail projects have had a mixed, though mostly positive, economic impact on property values in California metropolitan areas.

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Commercial property values

City: San Diego

Opened 1991, 34 stations, 40 miles

Study: #1: 1995

Property values: Office

Effect on value: Insignificant

Study: #2: 1997

Property values: Asking rents

Effect on value: Insignificant for three market areas, lower in two. Higher for industrial area.

Study: #3: 2002

Property values: Office

Effect on value: 4% to 72% higher if near station but 10% lower in two areas. 91% higher in central business district.

City: Santa Clara/San Jose

Opened 1987, 33 stations, 39 miles

Study: #1: 2000

Property values: Asking rents

Effect on value: 4% to 12% higher for units within 3/4-mile of station.

Study: #2: 2000

Property values: Office

Effect on value: 23% higher near station.

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Residential property values

San Diego

Opened 1991, 34 stations, 40 miles

Study: #1: 1994, city only

Property values: Single-family home (SFH)

Effect on value: +0.1% for every 1,000 ft. closer to station (+0.1% = $337.) 4% lower for homes within 900 ft. of station.

Study: #2: 2001

Property values: SFH

Effect on value: 0% to 4% lower if near.

Property values: Condo, apartment

Effect on value: 2% to 18% higher if near.

Santa Clara/San Jose

Opened 1987, 33 stations, 39 miles

Study: 1994

Property values: SFH

Effect on value: +0.1% for every 1,000 ft. closer to station. 10.8% lower for homes within 900 ft. of station.

Sacramento

Opened 1986, 28 stations, 36 miles

Study: 1994

Property values: SFH

Effect on value: +0.4% for every 1,000 ft. closer to station. 6.2% if very near station.

Los Angeles

Opened 1990, 36 stations, 42 miles

Study: 2002

Property values: SFH, apartment

Effect on value: 1% to 3.5% higher near stations.

Property values: Condo

Effect on value: 6% lower near stations.

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Sources: Orange County Transportation Authority; Cal State Fullerton economics department