Apartment Values Increase Near 2nd Ave Subway Extension, Leading to MTA Funding Potential
By: Hadassa Kalatizadeh
Residential real estate close to the MTA’s Second Avenue subway expansion, saw their values increase significantly, which may help the ailing transportation agency with its next phase construction.
As reported by Crain’s NY, apartment values jumped by roughly 33 percent on average, controlling for other market factors. The findings were for buildings along the new Q corridor as well as those along the 1 line on Manhattan’s Upper West Side. The heartening price patterns can help the cash-strapped MTA to fund the remaining expansion plans. Capturing tax proceeds from such gains could help pay for the $6 billion project.
Transit officials are gearing up to break ground in East Harlem for the second phase of the Second Avenue subway expansion, but money is tight. The MTA has been suffering from falling revenue led by declining ridership since the COVID-19 pandemic. It is forecasting a budget deficit of $1.4 billion in 2025. By that time, construction of the new subway continuing from the Upper East Side’s Q line should be in progress. One idea for funding includes: “value capture”. This would include taxing those who benefit the most from newly arrived subway service. Building owners and developers are often among the big winners in such an expansion, as the value of their properties can be calculated based in part on the convenience of transit access.
“We know there is a real relationship between increased transportation access and increased property values. We just need to be more intentional about how we can capture that value,” said Thomas Wright, president of the Regional Plan Association. The advocacy group found that every minute saved in commutes to New Jersey train stations increased the value of a NJ home by roughly $3,000, based on home prices in the early 2000s, when the study was done.
Currently, taxpayers as a whole, as well as commuters who ride on the trains, have been on the hook to pay for most of the cost. Economists, transit advocates and urban planners have been thinking about getting landlords and developers of buildings in subway-served zones to shoulder more of the project costs by introducing a tax on the added property values for buildings which benefit from the new subway stops. Those taxes would be used to pay off debt from the subway’s construction, probably by retiring bonds. Such a system may become vital in finally completing the Second Avenue subway project, which was first proposed a century ago.
This “tax-increment financing,” or TIF, is not a new concept, but was actually developed in California in the 1950s, and has already been put to use in 2015 to extend the 7 train to the Hudson Yards development. In order to implement a TIF, more research would be needed on the effect of the new lines on NY’s real estate. One difficultly of doing so would be to find a control group, which would not have other factors affecting the change in values. The new broad Crain’s analysis, which found that values appreciated by a third by the new subway lines, was the first study of its kind.