The ARC Effect

How better transit boosts home values & local economies

A Report by Regional Plan Association July 2010 NJ TRANSIT’s past projects have boosted local economies, and ARC will too

Acknowledgements

This report was written by Juliette We thank the following organizations for This report was designed by Jeff Ferzoco, Michaelson, Senior Planner, with Senior their generous financial support: Creative and Technology Director, with Fellow Jeff Zupan, Research Associate ➜➜The Amy Klette Newman Foundation Benjamin Oldenburg, Research Associate, Andrew Turco, and Associate Planner GIS ➜➜The Citi Foundation Graphic Design. Frank Hebbert. ➜➜The Durst Organization ➜➜The F. M. Kirby Foundation Photo credits: Special thanks to Tom Marchwinski, Senior ➜➜The M&T Foundation p.2: flickr/mkelle Director of Forecasting and Research at ➜➜The Moody’s Foundation p.5: flickr/jenik NJ TRANSIT, and Rachel Weinberger, ➜➜The Nicholson Foundation p.6: flickr/flissphil Assistant Professor of City & Regional ➜➜PNC Foundation Planning at the University of Pennsylvania. ➜➜The Port Authority of and ➜➜The Rockefeller Brothers Fund ➜➜The Schumann Fund for New Jersey Executive Summary

A statistical analysis of the effect of three nearly $23,000 per home (in 2009 dollars). ➜➜The number of residents west recent improvements to NJ TRANSIT’s Homes within walking distance of train of the with a train rail system on home values predicts that stations gained the most value – up to commute to Midtown of under 50 minutes will double after ARC ARC – a new tunnel $34,000. Value appreciations were less , thanks to faster commuting times. The to Midtown Manhattan – could add a significant farther from stations. number of people within 70 minutes cumulative $18 billion to home values Cumulatively, these three projects of Midtown will increase by 25%. This within two miles of NJ TRANSIT and boosted home values by $11 billion. This extraordinary improvement in access Metro-North Port Jervis and Pascack Valley represents $250 million a year in new will have significant positive economic train stations. This, of course, is just one of property tax revenue for municipalities. impacts for families and municipali- ARC’s several long-term economic benefits, ties across New Jersey and New York, ➜➜A detailed comparison of the trip time which also include an overall increase in the reductions provided by these three as wages are 60% higher in Manhattan region’s economy, new jobs on both sides projects with the trip time reductions than west of the Hudson. of the Hudson, higher personal incomes, expected from ARC reveals that ARC higher commercial property values, and could raise home values by an ➜➜The economic development and reductions in driving and air pollution. average of $19,000 per home, and quality-of-life-improving potential of better transit can best be Hedonic price modeling of 45,000 up to $29,000 for homes within one- half mile of stations. harnessed by building new, home sales within two miles of train transit-oriented, mixed-use, stations shows that three improvements to ➜ Cumulatively, ARC could boost economically diverse develop- the NJ TRANSIT rail system – Midtown ➜ ment around train stations. Direct Service on the Morris & Essex home values by $18 billion, and generate $375 million a year in new NJ TRANSIT, Metro-North, munici- Line, the for the property tax revenue for municipalities. palities, and the state of New York and Montclair-Boonton Line and Secaucus This is significant as growing tax bases New Jersey should work together to Junction for the Pascack Valley and Main/ relieve pressure for municipalities to optimize ARC’s benefits for the most Bergen/Port Jervis Lines – increased the increase tax rates. residents possible. value of nearby homes by an average of

Homes near train stations significantly Thanks to faster commute time, the The median wage earned in Manhattan gained in value after Midtown Direct, number of New Jersey and New York is 60% higher than in New Jersey Montclair Connection and Secaucus residents with a train commute to Mid- (Source: Bureau of Labor Statistics, 2009) Junction an average of $23,000 per town of under 50 minutes will double – Manhattan home, with the highest gains closest to after ARC $80,000 the stations Minute-equivalents to Midtown Manhattan 71- 90 $10,286 (2.3%) 51-70 70,000 < 50 $15,287 (3.4%) 3m $22,524 (5.0%) 60,000 $33,852 New (7.5%) 25% more residents Jersey .5 under 50,000 1 2m 70 min 1.5 2 mi. 40,000 100% more residents under Median sale price (FY09 dollars): $451,000 1m 50 min 30,000 Average trip-time improvement: 12 minutes Price increase over 9 years 20,000

- ’95 2010 post 10,000 ARC

See box on page 6 for a definition of minute- equivalents

The ARC Effect: How better transit 1 boosts home values and local economies The ARC Effect: How better transit 2 boosts home values and local economies accessible housing, as reflected in home Increase in Hudson River crossings, Introduction values near train stations. by mode since 1980 This prospective analysis is based on 200% ARC is New Jersey and New York’s biggest past experience. In 1996, 2002 and 2003, NJT investment in transit ever. It involves the NJ TRANSIT significantly improved train construction of a second commuter rail service with Midtown Direct Service on tunnel that will connect NJ TRANSIT’s the Morris & Essex Line, the Montclair existing rail network and Metro-North’s Connection for the Montclair-Boonton Port Jervis and Pascack Valley service with Line, and for the Pascack a new terminal station at 34th Street in Valley and Main/Bergen/Port Jervis Manhattan. ARC will double the number Lines. Each of these projects shaved up bus of trains that can travel every morning into to 20 minutes in travel time to Midtown 100 the economic engine of the region from Manhattan (up to 40 minutes roundtrip). west of the Hudson River. For several train Anecdotally, there is little doubt that most lines that currently terminate in Hoboken of the communities along these four train or Newark, ARC will provide new, direct lines experienced increases in home values service to Midtown. For those lines that due to the improved service. This statistical PATH already terminate at Penn Station-NY, ARC analysis attempts to measure quantitatively will significantly increase the frequency and the relationship between home values and reliability of service. improved train service, all things being The purpose of this analysis is to assess equal, as reflected in 45,000 home sales, how this increased access to Midtown before and after the projects were built, -6 will increase the attractiveness of transit- within two miles of the train stations. cars

How past and future capital projects have improved, and will further improve, rail access to Manhattan from west of the Hudson.

PAST FUTURE

Main/Bergen/ Main/Bergen/ Port Jervis Line

New one-seat ride to Midtown New one-seat ride to Midtown Transfer at Secaucus instead of Hoboken NY Increased frequency NY

Pascack Pascack Valley Valley Line Line

Montclair-Boonton Line Montclair-Boonton Line

Dover Dover Secaucus MSU MSU Junction ARC

NJ Morris & NJ Morris & Essex Line Essex Line Newark Penn

Montclair Connection Raritan Valley Line

North Jersey Coast Line Coast Line Northeast Corridor

Long Branch

The ARC Effect: How better transit 3 boosts home values and local economies Travel time to Midtown Travel time to Midtown in minute-equivalents in minute-equivalents <50 NY <50 NY <70 <70 <90 <90 90+ 90+

! ! NJ ! NJ !

1995 2010

A reasonable commute of 50 or 70 minute-equivalents gets passengers much farther into New Jersey and New York now than before Midtown Direct, Montclair Connection and Secaucus Junction. The improvements will be even more dramatic after ARC. (All travel times calculated for the morning peak two-hour period. See box on page 6 for an explanation of minute-equivalents.)

Travel improvement Lines Improvement affected Travel time Frequency Transfers Midtown Morris & Essex Reduction in travel time due to Same frequency but half the trains One-seat ride instead of transfer to Direct a) loss of transfer and b) loss of now go to Penn Station-NY instead PATH at Hoboken wait time for second train of Hoboken Montclair Montclair-Boonton (MSU Reduction in travel time due to Increased frequency but half the One-seat ride instead of transfer to Connection and east) a) loss of transfer and b) loss of trains now go to Penn Station-NY PATH at Hoboken wait time for second train instead of Hoboken Secaucus Main/Bergen/Port Jervis; Reduction in travel time due to Same frequency One transfer still required – now at Past Junction Pascack Valley faster service to Penn Station-NY Secaucus instead of Hoboken on NJT via Secaucus than on PATH via Hoboken ARC Northeast Corridor; Morris Slight improvement in travel Increased frequency Same one-seat ride & Essex (MSU and east); time due to increased system Montclair-Boonton; North reliability Jersey Coast ARC Main/Bergen/Port Jervis; Reduction in travel time due to Increased frequency but some trains One-seat ride instead of transfer to Pascack Valley; Raritan a) loss of transfer and b) loss of will go to Penn Station-NY instead of NJT at Secaucus or Newark, or to Future Valley wait time for second train Hoboken or Newark PATH at Hoboken ARC Montclair-Boonton past MSU; Reduction in travel time due to Increased frequency but some trains One-seat ride instead of same- North Jersey Coast past Long a) loss of transfer and b) loss of will go to Penn Station-NY instead of platform transfer to electrified line Branch; Morristown past wait time for second train Hoboken or Newark Dover Note: The improvements described above are overall improvements that apply to entire lines. Specific stations are subject to specific service schedules.

The ARC Effect: How better transit 4 boosts home values and local economies What similar research has shown:

➜➜Homes within walking distance of stations on the Morris & Essex line increased in value by $90,000 more than homes Travel time to Midtown in minute-equivalents farther away after direct service to Midtown Manhattan <50 NY was inaugurated in 1996 (Michaelson, 2004). <70 <90 ➜➜Houses immediately adjacent to San Francisco’s BART 90+ sold for nearly 38% more than identical houses in areas not served by BART (Landis and Cervero, 1995).

➜➜Residential rents decreased by 2.4% for every one-tenth mile further from Washington DC Metro stations (Benja- min and Sirmans, 1996).

! NJ ! ➜➜Single-family houses in communities served by Boston’s commuter rail were worth 6.7% more than similar homes in other communities (Armstrong, 1994).

➜➜In , the prices of single-family houses located with- in 1,000 feet of stations were 20% higher than comparable houses located a mile away (Gruen, 1997).

➜➜Median home prices in the Philadelphia region were 10% higher in census tracts served by PATCO rail line, and 4% higher in tracts served by SEPTA rail line (Voith, 1991). Post-ARC ➜➜For a complete literature review, please refer to Appendix A.

The ARC Effect: How better transit 5 boosts home values and local economies Methodology & Findings What is a minute-equivalent?

This study relied on a multiple regression In order to compare the different trips that NJ TRANSIT and Metro-North commuters analysis of home sales before and after make every day, the value of certain commute factors, such as train transfers and service NJ TRANSIT’s three projects were frequency, was translated into a common currency, called minute-equivalents. The model inaugurated in order to identify the value assigns a “value,” in minute-equivalents, to the burden of having to change trains or having of improved transit service among several to wait for a train in the morning peak, so that this burden can be compared with the actual property characteristics. Once this value time spent traveling on a train. This methodology was developed by NJ TRANSIT and has was estimated, it was applied to properties been used in several of their past modeling exercises. that will, in the future, benefit from ARC. For instance, the value of avoiding a transfer is estimated to be worth 5.3 minute- The study examined and answered these equivalents; unless the transfer is simply across the platform, in which case it is 2 minute- three questions: equivalents. A similar minute-equivalent estimate was included to reflect the frequency of service in the morning peak period. (For a detail description of this methodology, please refer ➜➜How did travel improvements from the to Appendix B.) three built projects affect home values, on average? 15 min 15 min 1 35 min Total wait time + travel time + platform + travel time = trip transfer ➜➜What was the cumulative gain in value from these three projects, and how did these gains translate into property tax revenues for municipalities?

➜➜What might be the effect of ARC on home values and municipal property tax 7 15 2 35 59 minute- + minute- + minute- + minute- = minute- revenues in New Jersey and New York? equivalents equivalents equivalents equivalents equivalents

The ARC Effect: How better transit 6 boosts home values and local economies How did travel improvements from ➜➜Transit access characteristics: Accounting for all of the above NJ TRANSIT’s three built projects • Distance from the nearest train sta- characteristics, the average increase in home affect home values, on average? tion by road sale prices that can be attributed to reduced • Whether bus service was competitive travel times to Midtown is $23,000 for all This study relied on a multiple regression to Midtown Manhattan with rail at homes within two miles of stations, or 5% analysis of home sales within two miles time of sale of the median property value in the area. of stations (by road) and 70 minute- • The travel time improvement to Homes within walking distance of the equivalent train commutes (see box on Midtown Manhattan after Mid- station (one half-mile) gained $34,000 in page 6 for definition) to Midtown after the town Direct, Montclair Connection value, or 7.5% of the median sales value. improvements, sold between 3.5 years before and Secaucus Junction, in minute- (These results assume an average travel the improvement and 5.5 years after the equivalents, a composite variable improvement of 12 minute-equivalents, and travel improvement occurred, as recorded that includes scheduled travel times a median home value of $451,000.) by the New Jersey Multiple Listing Service to either Penn Station-NY or the and the Garden State Multiple Listing 33rd Street PATH station, a penalty Average increase in Service. The regression included a total of for train transfers, and a penalty for Distance from home values per minute the station reduction in trip times 45,000 sales, and each was assigned to its infrequent service (see box for a full closest train station and that station’s travel description of minute-equivalents) 0 to 2 miles $1,959 improvement. 0 to 0.5 miles $2,902 Multiple regression analysis is ➜➜Economic characteristics: based on the premise that the price of • Year of sale, a variable that accounts 0.5 to 1 mile $1,931 a house represents the value of a set for overall changes in the real estate 1 to 1.5 miles $1,310 of characteristics, such as number of market bedrooms, quality of the school district and 1.5 to 2 miles $882 access to transit. Since these characteristics (For more specifics about the methodology or the can be produced in various combinations, variables, please refer to Appendix B.) the value of each independent characteristic can be estimated. In this study, the characteristic of interest is trip-time improvement at the property’s assigned station. In other words, of all the Homes near train stations significantly gained in value after Midtown Direct, Mont- characteristics that make up the value of clair Connection and Secaucus Junction – an average of $23,000 per home, with a home, what was the value of a commute the highest gains closest to the stations to Manhattan made shorter by Midtown Direct, Montclair Connection or Secaucus Junction? $10,286 (2.3%) The model used in this study includes the sale price of the property in 2009 dollars as the dependent variable, as well as the $15,287 (3.4%) following explanatory variables: $22,524 (5.0%) ➜➜Property characteristics: • Number of bedrooms • Number of full bathrooms $33,852 (7.5% of median sale price) • Number of fireplaces • Garage capacity • Whether the home was of a desir- .5 able architectural style (Victorian, Colonial or Tudor) 1 1.5 ➜➜Community characteristics: • Quality of the school district, i.e. the 2 mi. share of students who are proficient in math and language, per Depart- ment of Education statistics • Density of the road network around the station Median sale price (FY09 dollars): $451,000 Average trip-time improvement: 12 minutes Price increase over 9 years

The ARC Effect: How better transit 7 boosts home values and local economies What was the cumulative gain in value from these three projects, and how did these gains translate in property tax revenues for municipalities?

Average gains in property values for each Time savings generated by Midtown station area were estimated based on each Direct, Montclair Connection and station’s service improvement from the Secaucus Junction (in minute-equivalents) PV M/B/PJ Mo-Bo to MSU Mo-Bo past MSU M&E to Dover M&E past Dover RV NEC NJCL to Long Branch NJCL past Long Branch three projects. These average gains were then Improvement in scheduled trip times 10 10 12 9 12 9 0 0 0 0 multiplied by the number of homes within Faster travel time to 33rd Street/PSNY each half-mile distance band of each station. on NJT than on PATH 8 8 8 4 8 8 Cumulatively, the value of all homes within Transfer at Secaucus instead of Hoboken two miles of all train stations that benefited (walk time) 2 2 from the projects is estimated to be $11.1 No more transfer at Hoboken billion (graduating the gains for stations (walk time, wait time) 4 4 4 4 farther than 70 minute-equivalents from New transfer from diesel line to electrified - 3 - 3 Midtown after the improvements). line (walk time, wait time) At 2009 property tax levels, that Improvement in transfer penalty 0 0 5.3 3.3 5.3 3.3 0 0 0 0 represents an additional $250 million Improvement in frequency penalty varies by station a year in property tax revenue for all municipalities affected, in both New Jersey and New York.

What might be the effect of ARC on home values and municipal property tax revenues?

Average gains in property values for each station area were estimated based on each station’s estimated future service improvement from ARC. (These gains were Anticipated time savings graduated for stations that were located generated by ARC (in minute-equivalents) PV M/B/PJ Mo-Bo to MSU Mo-Bo past MSU M&E to Dover M&E past Dover RV NEC NJCL to Long Branch NJCL past Long Branch more than 70 minute-equivalents from Improvement in scheduled trip times 6 6 8 11 8 11 11 8 8 11 Midtown after ARC.) These estimated gains in property values were then multiplied by Faster travel time crossing the Hudson (less congestion, fewer trains stopping at 6 6 6 6 6 6 6 6 the number of homes within each half-mile Secaucus) distance band of each station. No more transfer at Secaucus 4 4 Cumulatively, all homes within two (walk time, wait time) miles of train stations along all lines that No more transfer at Newark 3 will benefit from ARC could gain $17.9 (walk time, wait time) billion in value. At 2009 property tax No more transfer from diesel line (walk time, wait time) 3 3 3 levels, that represents an additional $374 Crowding relief at PSNY/34th St terminal million a year in property tax revenue for all (over no-build condition) 2 2 2 2 2 2 2 2 2 2 municipalities affected. Improvement in transfer penalty 5.3 5.3 0 2 0 2 5.3 0 0 2 The average time savings from ARC was calculated to be nearly 10 minutes, Improvement in frequency penalty varies by station representing an average per-home increase of $19,000 for homes within 2 miles of stations less than 70 minutes away from Midtown. Homes within one half-mile of those stations could gain $29,000 in value.

The ARC Effect: How better transit 8 boosts home values and local economies the time; today, ARC is NJ TRANSIT Better train service increases local Implications of and Metro-North’s lowest-hanging fruit. and state tax bases, and will reduce Other improvement projects (extending pressure to increase tax rates. these findings service to Midtown East, providing service on discontinued lines, and other As transit increases the value of land and projects) cannot be pursued until ARC is built properties near stations, and as new Investing in transit pays off. implemented. residents and new businesses move into the transit-served communities, so will Construction costs for Midtown Direct, Higher property values municipal and state tax bases. This new Montclair Connection and Secaucus are a reflection of a more property, income and sales tax revenue Junction neared $900 million, and they efficient economy and could help to improve municipal and state added more than $11 billion to home values improved access to jobs. services, and reduce pressure to increase tax within two miles of stations (both values rates. in 2009 dollars) – an exceptional bang for More efficient commuter travel means that the buck. ARC will cost $9 billion and employers have access to a larger workforce, The economic development and add nearly $18 billion in value to those and that workers have access to more jobs. quality-of-life-improving potential homes. This ratio, while not as high, is Improving New Jersey and New York State of improved transit can best still a substantial gain, and an increase in residents’ access to Manhattan from west of be harnessed by building new, home values is only one of several long- the Hudson River is particularly important transit-oriented, mixed-use, term economic benefits of ARC, which since average wages in the region’s economic economically diverse development also include new jobs on both sides of the hub are 60% higher. Reduced commuting around train stations. Hudson, higher personal incomes, higher times also mean more hours in the day that commercial property values, and reductions can be spent either for work or leisure. That the greatest gains in value happened in driving, congestion and air pollution. closest to stations is an indication that the The past three projects were most effective way to harness the economic NJ TRANSIT’s lowest-hanging fruit at benefits of transit is to build densely around stations. New districts of housing, office and retail that are tightly knit around The number of New Jersey and New The median wage earned in Manhat- stations would revitalize downtowns, boost York residents near stations that are tan is 60% higher than in New Jersey local economies, increase tax revenues, within a reasonable commute to Mid- (Source: Bureau of Labor Statistics, 2009) and generally have a larger positive town by train is increasing steadily economic impact with smaller traffic and infrastructure costs. Minute-equivalents Manhattan to Midtown Manhattan $80,000 71- 90 NJ TRANSIT, Metro-North and 51-70 municipalities should work together < 50 to optimize ARC’s benefits for 3m 70,000 the most residents possible.

25% more 60,000 The additional trans-Hudson capacity residents that ARC provides can be distributed under New 2m 70 min Jersey throughout the rail network in an infinite 50,000 number of ways, as service plans are defined in the future. Decisions about how to allocate additional service to particular lines 100% more residents 40,000 and stations should be based on existing under and future ridership and on other efficiency 1m 50 min considerations, and not on political 30,000 factors. The transit agencies should reward municipalities that attract new dense development around station with better 20,000 service. ’95 2010 post- ARC 10,000

The ARC Effect: How better transit 9 boosts home values and local economies 4 Irving Place, 7th  oor Two Landmark Square, Suite 108 179 Nassau Street, 3rd  oor New York, NY 10003 Stamford, CT 06901 Princeton, NJ 08542 212.253.2727 203.356.0390 609.228.7080

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Chairman Bradley Abelow Vicki O’Meara Elliot G. Sander* Hilary M. Ballon, Ph.D. Kevin J. Pearson Laurie Beckelman James S. Polshek Vice Chairman, Co-Chairman, New Jersey Stephen R. Beckwith* Gregg Rechler Christopher J. Daggett* Edward J. Blakely, Ph.D. Michael J. Regan Tonio Burgos* Thomas L. Rich Vice Chairman Paul Camuti Denise M. Richardson Douglas Durst Frank S. Cicero Rebecca R. Riley* Judith D. Cooper Michael M. Roberts Vice Chairman, Co-Chairman, New Jersey Kevin S. Corbett* Claire M. Robinson The Honorable James J. Florio Alfred A. DelliBovi Elizabeth Barlow Rogers Brendan P. Dougher Lynne B. Sagalyn Vice Chairman, Co-Chairman, Connecticut Ruth F. Douzinas Lee B. Schroeder John S. Griswold, Jr. Brendan J. Dugan* H. Claude Shostal Fernando Ferrer Susan L. Solomon* Treasurer and Co-Chairman, Long Island Committee Barbara Joelson Fife* Thomas J. Stanton III Matthew S. Kissner* Paul Francis Luther Tai* Timur F. Galen* Marilyn J. Taylor Chairman Emeritus and Counsel Jerome W. Gottesman* Sharon C. Taylor Peter W. Herman* Maxine Griffi th Richard T. Thigpen John K. Halvey Timothy J. Touhey President Dylan Hixon Karen E. Wagner Robert D. Yaro* David Huntington William M. Yaro Adam Isles John Zuccotti* Kenneth T. Jackson Marc Joseph Directors Emeriti Richard D. Kaplan* Roscoe C. Brown, Jr., Ph.D. Executive Director Robert Knapp Robert N. Rich Thomas K. Wright John Z. Kukral Mary Ann Werner Richard C. Leone Charles J. Maikish* Joseph J. Maraziti, Jr. J. Andrew Murphy Jan Nicholson* Bruce P. Nolop *Member of Executive Committee Michael O’Boyle