Denver FasTracks is slated for completion by 2019 and already impacting our lives in many different ways. There is a lot of information being disseminated about the impact that light rail may have on the Denver Metro region and, specifically, the residential real estate market. To truly understand how our new light rail may impact our housing market, it is telling to review studies conducted around the country on the impact light rail has had in other cities.
Interestingly, more than 50 cities have constructed some form of rail transit. Recent studies conducted in Boston, Massachusetts; Buffalo, New York; Philadelphia, Pennsylvania; Washington D.C.; Atlanta, Georgia; San Diego, California; San Francisco, California; and, Portland, Oregon all reported significant increases in property value with close proximity to light rail. For the most part, these studies showed that, if property is within a 1/4 mile of a light rail station, then they experienced increases in value within a relatively short time of the station construction. Studies in Miami, Florida; San Jose and Sacramento, California did not show higher property values with close proximity to light rail. The studies suggest the reason was tied to ridership. In other words, if the cities’ population did not use the light rail system in fairly high numbers, then the impact on real estate was smaller. Also, the increases in value were measured in terms of median property value so that high or low valued properties did not overly influence the results.
In Boston, property close to commuter rail increased in value approximately 6 ½% more than similar properties not close to commuter rail. In Buffalo, the increase was between 2-5%. In Dallas, that number surged to between 25% and 39%. In Portland, the number was about 10%.
I do not want to bore you with a bunch of statistics; however, it seems important to mention that one cross-study of 12 rail projects suggests cities could reasonably expect that home prices would increase around 6% to 7% for those properties no more than a quarter mile from a transit station.
What will the impact be in Denver? No one knows for certain, but the odds are good that we will see a boost to real estate values near light rail stations. As a result, many of our clients want an opinion about whether they should buy a home near a light rail station. Quite frankly, buying your primary residence near light rail, if it fits with your lifestyle, is a great idea and can have an additional benefit of appreciated home value. However, that is only one factor to consider. If you have children, a good school district is probably more important. Moreover, the type of neighborhood you desire may not be close to light rail. You need to keep in mind that expected appreciation is not always the controlling factor when buying your home. We are fortunate in the Denver area in that most of our real estate values have remained fairly strong. When buying your primary residence, it is far more important to buy a home that meets your family’s needs than it is to be close to light rail on the belief that your property value may go up. In no way am I a suggesting that appreciation should be ignored. I am merely suggesting that being near light rail is only one consideration.
If you are buying an investment property, being near a light rail station may be a very wise decision. Again, buying near light rail should be only one factor that is considered; however, I would weigh the potential for faster appreciated value heavier for a rental property than for my primary residence. What has been clear from most of the studies conducted is that gentrification occurs with the construction of light rail. In other words, we expect to see an increase in median household income and a population growth near light rail. With an increase in median income almost always comes an increase in rents. What I am more suspect about is how quickly we may see an increase in property values. As some studies have suggested, the cost of moving is sometimes higher than the perceived advantage of living close to transit.
There is such a thing as too close to light rail. If a property is affected by noise and perhaps vibration, light rail could be a nuisance. While we do not expect too much impact of this type from FasTracks, be cautious of how close a property is to the tracks.
As a parting thought, it is important to keep in mind that other factors affect value. For example, in Los Angeles, they discovered that properties with an ocean view or reside in a certain zip code, like 90210, was far more significant than being close to transit. Of course, in Denver, having an incredible mountain view will always be an important factor to consider. There is nothing like looking out your window to take in the beautiful snow-capped Rocky Mountains. With all other factors being equal, if you have the opportunity to buy something that has a gorgeous snow-capped view and is within a quarter mile of light rail, I would jump on it.
Alaris Properties, LLC