In the Boston metropolitan area, walkable urbanism adds value. On average, all of the product types studied, including office, retail, hotel, rental apartments, and for-sale housing, have higher values per square foot in walkable urban places than in low-density drivable locations. These price premiums of 20 to 134 percent per square foot are strong indicators of pent-up demand for walkable urbanism.
Walkable urban places are now gaining market share over drivable locations for the first time in at least half a century in hotel, office and rental apartment development. This is good news for people moving to those locations, since households in walkable urban places spent less on housing and transportation (43 percent of total 5household budget) than households in drivable locations (48 percent), primarily due to lower transportation costs. In addition, property tax revenues generated in walkable urban places are substantially higher than in drivable locations on a per acre basis.
Previous research has demonstrated the correlation between walkable urban places and both the education of the metropolitan work force and the GDP per capita. The current research confirms this finding: for example, since 2000, 70 percent of the population growth of young, educated workers has occurred in the walkable urban places of the Boston region.
Despite the strong momentum toward a more walkable urban future for the region, there are challenges and causes for concern. In many walkable urban places, proximity to transit is a major requirement for households and employers. However, increasing congestion in the core transit system and system fragility in the face of extreme events (such as was experienced during the blizzards of 2015) diminish the value of the system and present substantial risks that may deter investors. As a result, public sector investments in MBTA capacity and resiliency are prerequisites for the billions of dollars of private sector capital seeking to flow into walkable urban places over the coming decades.
Public transit, especially rail transit, activates walkable urbanism’s potential for adding real estate value, and as this report demonstrates, that potential is ample. Therefore, policymakers must weigh the costs of funding transit against its power to increase tax revenues. With the right value capture tools in place, the increased value that transit supports could be used to fund at least a portion of the system’s maintenance and future expansion.
We should also be concerned that, given the flow of capital into walkable urban places and the price premiums, the affordability of these places may be diminished. The resulting increased displacement of low-income residents to less accessible suburban locations would likely have substantial negative impacts on social equity, the environment and opportunity. As a result, it is critical to establish policies that will preserve existing affordable housing in walkable urban places and leverage private sector investments to enhance opportunities for disadvantaged families to live in high opportunity/high accessibility places. However, the ultimate solution to high housing and commercial costs is more walkable urban inventory, which will occupy less than 10 percent of the metro area’s landmass. This new inventory will eventually drive down land costs, the primary reason for the price premiums.
This report is published by the Center for Real Estate and Urban Analysis at the George Washington University School of Business and the Northeastern University Dukakis Center for Urban and Regional Policy, with the assistance of the Metropolitan Area Planning Council. This research was done in conjunction with Cushman and Wakefield, a Leading Global Real Estate Advisor, and LOCUS: Responsible Real Estate Developers and Investors, a program of Smart Growth America.