Next stop, success: Why you should invest near transit
December 09, 2016
Homeowners and renters are willing to pay more to live closer to work, hoping to avoid long, stressful and expensive commutes. This makes proximity to transit and highway options a key driver for Canada’s housing market.
It’s actually a global phenomenon; in London, home values rise £1,000 for every minute less that their owners have to spend on the tube daily; in Los Angeles, values of apartments and houses located a quarter to half a mile from rapid transit are 103.5 per cent higher; in Dallas, properties served by rail increase 39 per cent over those not served by rail, according to the Real Estate Investment Network (REIN).
The influence of being in the vicinity of transit is so marked, that Melanie Reuter, director of research at REIN, says, “Primary researchers across North America and Europe were able to attach a dollar value to square footage based on their proximity to transit; it’s the feature that adds the most value to a home.”
The value of real estate in the regions most affected increases by 10 to 20 per cent, according to the REIN’s Transportation Effect report. This impact also extends to markets in a downturn, where the value of real estate will drop by 10 to 20 per cent less.
Dave Toynbee, an investor in Edmonton and the Greater Vancouver Area, remarks that renters, who rely heavily on transit, will pay to live in an area with a shorter commute to work. “The closer a property is to transit, the more a renter will pay. Commutes are now measured in time, not distance.”
Furthermore, whether it’s Vancouver’s SkyTrain, Calgary’s C-Train or Toronto’s subway, the effect remains, though to varying degrees. The impact of rapid transit is more pronounced “in larger markets such as Toronto, Vancouver, New York or Los Angeles… than in cities like Edmonton and Calgary, which are traditionally car-centric,” according to Reuter.
The largest impact is seen from subways or SkyTrains, explains Reuter, “whether they are below grade, above grade or at grade, these have the largest influence, because they’re permanent. We don’t see that with houses along a bus route, because bus routes can change at any given moment. The research also doesn’t support that rapid bus transit has the same influence on nearby housing.”
The transportation effect is mitigated, however, by the fact that many homebuyers don’t want to be too close to train or subway stations, REIN reports, because of negative issues such as nuisance, property crime, noise and increased traffic on properties adjacent to transit stations.
Jarek Bucholc, Calgary-based founder of the Canada Real Estate Investors Club, which has more than 2,000 members nationwide, agrees that properties very near transit “will decrease in value, because people want to face onto greenspace, not a highway.”
Overall, however, property values rise due to Transit Oriented Development (TOD) – mixed-use residential and commercial neighbourhoods capitalizing on proximity to public transportation. Especially when an area can be rezoned for multiple families. Says Reuter, “Buying a single-family home in such an area to tear it down and put 30 in its place makes the value of that property go way up.”
Reuter, who recently participated in a meeting on housing affordability with Prime Minister Justin Trudeau when he was in Vancouver, notes that although some might be “hesitant to invest large sums of money to bring rapid transit to an area that doesn’t have the population, it’s a matter of – if you build it, they will come.”
Rapid transit brings population densification, and as more people move to an area, the shops and restaurants to serve them move there, too, making rapid transit a boon for both commercial and residential real estate markets. As well, when the services in a neighbourhood increase, it becomes more walkable – and walkability just happens to be another of the top features for which homebuyers and renters are willing to pay.
New Westminster Mayor Jonathan Cote, whose dedication to making improvements in the Greater Vancouver Area’s transportation infrastructure is well known, calls rapid transit “transformational for a community,” specifying that it “has a big influence on urban character, and rapid transit locations tend to shape communities to become more mixed use and walkable.”
Select rapid transit plans that are set to shape communities across Canada:
- UBC Line/Broadway Corridor extension:Broadway is the busiest bus corridor in North America, and more than half a million passengers are passed by there every year. It’s estimated that extending the SkyTrain along the Broadway Corridor to UBC will cost $2.8 billion and to be completed by 2020. This project is still very much in the planning stages, and could involve a combination of light rail and SkyTrain.
- Evergreen Rapid Transit Line: This seven-station, 11-km rapid transit line will serve Coquitlam, Burnaby, Port Moody and Port Coquitlam.
- Surrey Light Rapid Transit: The Surrey Rapid Transit Study shortlisted four options to meet its rapidly growing needs. On the list of possibilities are different combinations of Bus Rapid Transit (BRT), LRT and SkyTrain. The City of Surrey favours plans for an all-LRT addition.
- RouteAhead Rapid Transit (BRT) Network:A series of BRT projects that spans over 70 km across all four quadrants of Calgary. Still in the planning stages, the new BRT could begin in 2021.
- Green Line LRT:This line will nearly double the size of Calgary’s LRT network. Construction is scheduled to start in 2017, depending on funding.
- Capital Line (Clareview to Gorman):This 2.9-km LRT extension north of Clareview station will exist chiefly within the current CN right-of-way. Preliminary engineering for the project is complete, and the City expects to move forward to design and construction once funding becomes available.
- Edmonton Valley Line – Stage 1:This 27-km, low-floor urban line is the largest infrastructure project in Edmonton’s history. Ground-breaking occurred in 2016 and completion of Stage 1 is scheduled in 2020.
- Scarborough Subway Extension: This new line will extend the Bloor-Danforth subway line about 7.6 kms from Kennedy Station to Sheppard Avenue and McCowan Road, replacing the aging Scarborough RT. According to TTC’s preliminary schedule, the line will be built from 2108 to 2023.
- Spadina Subway extension:This project will extend the existing Spadina subway line from Toronto into York Region, making it the first TTC project to cross the City of Toronto boundary. Construction began in 2011 and is expected to be complete in 2017.
- Eglinton Crosstown LRT:This $8.2-billion, 19-km line will connect to 54 bus routes, three subway stations and several GO Transit lines. Construction on the project began in 2011 and completion is expected by 2021.
- SmartTrack: SmartTrack will add to the province’s Regional Express Rail (RER) program, using existing GO tracks. When complete, it will connect Markham centre, the downtown financial district and the airport precinct. Ontario has pledged about $160 billion to SmartTrack over 12 years, the largest spent on public infrastructure in the province’s history.
- Confederation Line: Construction began in 2013, and completion is anticipated for 2018. Its 13 stations will span 12.5 km, part of which will be an underground tunnel running below the downtown core.
- Ottawa LRT—Stage 2:Construction is expected to begin in 2018 and be complete by 2023. About 70 per cent of Ottawans will be within five kms of rail when this project is completed.
Public Transit Infrastructure
- Over the next three years, this new federal $3.4-billion fund will be divided according to each province’s share of national ridership. Ontario, with 44 per cent of ridership, will receive $1.5 billion, while Quebec, with 27 per cent, will receive $924,000.
- The budget asserts that investment in public transit hasn’t matched the rapid rate of urban population growth, causing gridlock that costs “billions of dollars in lost productivity each year.”
- The fund will cover up to 50 per cent of eligible costs for transit projects, and may include improvements to the Montreal Metro, upgrades to the TTC’s fleet and new light-rail lines in Greater Vancouver and Ottawa.