Housing USA: Transit-Oriented Development and Affordable At the Same Time?

6 min read

For several decades, U.S. cities have been building extensive light rail and bus rapid transit networks. In recent years, such expansions have included intentional plans to promote development around lines, implementing a strategy known as transit-oriented development (TOD). The goals are typically to increase ridership, enhance economic vibrancy and decrease reliance on private automobiles and the externalities they create. But an additional benefit, at least in theory, is to provide affordable housing for lower-income renters who can’t afford car-dependent lives. To what degree are such affordable TOD projects actually being built, and should this be a goal in the qualified allocation plans for Low Income Housing Tax Credit (LIHTC) projects? 

TOD’s affordability advantage would seem intuitive, because car ownership is expensive. Over a five-year period, the owner of a 2016 Toyota Camry in the Phoenix area can expect to pay $35,534, including depreciation, fuel, taxes and maintenance, or $7,610 per year (23 percent of the annual income of someone earning $35,000 a year), according to Edmunds car guide. A fare policy brief shows residents of lower-income cities in Massachusetts, typically, spend around 25 percent of their median household income on auto-related expenses. In contrast, a briefing by the San Diego Association of Governments (SANDAG) finds that residents of walkable and transit-accessible neighborhoods spend nine percent of annual income on transportation. Further, if residents need less parking, that can improve affordability by freeing up space that would’ve gone for expensive stalls to go for housing instead. 

Substantial light rail construction and accompanying TOD pushes have materialized in many metros, particularly in the fast-growing Sunbelt. Charlotte, Houston, Dallas, Atlanta, Phoenix, Portland and Miami are all examples of cities that built robust systems, rezoned land near stations and saw, in some cases, whole TOD neighborhoods rise up.   

Separate from intentional government policy, transit-adjacent developments are being built as a market preference, with the explicit goal of car-free or car-light living. The most prominent of these is Culdesac Tempe in Tempe, AZ. Located along the Valley Metro light rail corridor, it’s slated to launch this summer. Residents cannot park in or around the complex (but they are able to participate in a car sharing program); in exchange, the development brands itself as a “five-minute city” with traditional town center amenities on-site. While not framed as an affordable project, initial rents for Culdesac Tempe’s one-bedroom apartments are far cheaper than Tempe’s median, due in part, according to Culdesac Tempe’s marketing department, to the savings enjoyed from not building parking.  

A particularly fascinating TOD project, in the heart of downtown Miami, is the aptly named MiamiCentral. The mixed-use development is being undertaken by Brightline, the first major private passenger railroad in the U.S. in over 50 years, which is building two TOD megatowers around the station as a revenue generator. In addition to intercity service, Brightline aspires to operate commuter rail service to Miami’s suburbs, meaning that future development could well accommodate affordable housing targeted at local workers using the trains.   

Now, whether or not affordable units are a meaningful share of the TOD market is hazy. On one hand, there are several examples of TODs that include affordable units, and LIHTC is the most common means of financing such projects. For instance, a project near rapid transit in Chicago’s South Side, Woodlawn Station, was undertaken by the affordable developer Preservation of Affordable Housing. It includes 70 apartments and was financed through a nine percent allocation. Minnesota allocated $32 million in grants for TOD projects that “interrelate affordable housing and employment growth areas,” as well as development near transit, including 108 affordable units in one case. A report by the National Council of State Legislatures observes that many state level tax credit programs have promoted affordable TOD.  

But rents at non-subsidized TOD projects trend upwards. Research by the National Institute for Transportation and Communities and Portland State University finds that very few TOD projects are entirely affordable, and “60 percent of the projects offer either less than ten percent or none of their units as affordable housing.” That said, the report also notes that most of the time, there are “naturally occurring affordable units” in TODs, meaning that with time they filter down for use by lower-income groups. Research by Florida Atlantic University found that denser projects with the best transit proximity had a lower median income than those that were less proximate, though their property values increased faster. This shouldn’t be surprising: access to transit is viewed as an amenity that can increase rents. 

“The introduction of new transit service in a neighborhood is often accompanied by increasing local property values,” note the SANDAG report authors, and echoed by the Department of Housing and Urban Development  report, “How Can the LIHTC Program Most Effectively Be Used To Provide Affordable Rental Housing Near Transit?” This has led some housing activists to oppose efforts to build more densely near transit, fearing that it will worsen gentrification.  

But this is where LIHTC allocation could come through, ensuring that more TOD projects are affordable. According to HUD, the majority of state housing agencies as of 2013 include a TOD component in their affordable housing plans, but not all allocated points based on transit proximity. Maryland’s housing agency is one that does, allocating eight points to projects, which the state’s transportation department designates as TOD projects; is situated half a mile from a rail station or two bus routes; or provides subsidized access to private paratransit, carshare or rideshare service. In an email interview, Greg Hare, with the Maryland Department of Housing and Community Development (DHCD), says that introducing these criteria into the QAP increased the number of transit-proximate LIHTC projects.  

“DHCD has an expanded definition of TOD designed to promote housing in communities of opportunity, and applicants looking for state funding typically meet our definition,” Hare writes.  

It may be good if other state agencies follow Maryland’s lead, but frankly, the existence of TOD and its affordability levels will hinge on cities’ willingness to allow it. The Woodlawn Station project, for example, happened because of an ordinance expanding the reach of transit-adjacent density bonuses in Chicago, and looser zoning is what often facilitates TOD elsewhere. If these regulations change and state QAPs adapt, maybe TOD could become a larger component of the affordable housing sphere. Culdesac Tempe’s parking-free project could be a blueprint, particularly in cities where transit systems are more built-out. This would help LIHTC tenants who can’t afford spending large chunks of their income on car ownership.  

This article featured additional reporting from Market Urbanism Report content manager Ethan Finlan.