UBC research shows impact of rapid transit expansion on housing prices

Recent UBC research finds the expansion of rapid transit generally benefits households from all income groups, but higher income households benefit the most.

Dr. Andrea Craig is an assistant professor of economics in UBC Okanagan’s Irving K. Barber Faculty of Arts and Social Sciences. Her latest research examines the effects of rapid transit expansion on neighbourhood prices, income and household welfare.

Dr. Craig, alongside Bank of Canada economist Dr. Alex Chernoff, analyzed the expansion of Vancouver’s SkyTrain system, including the Millennium and Canada lines, using Statistics Canada data covering a 10-year period.

“Public transit infrastructure is often characterized as a government expenditure that improves the welfare of predominantly low-income households,” explains Dr. Craig. “But by examining years of data spanning the multi-billion-dollar expansion of rapid transit, we estimate that eventually, higher-income households benefit more from this rapid transit expansion than lower-income households.”

By modelling each household’s choice of where to live, the researchers found the rapid transit improvement eventually increased the monthly dwelling prices in both new and previously SkyTrain-connected neighbourhoods.

The research determines two opposing effects of transit expansion on prices in these pre-connected neighbourhoods. The neighbourhoods originally on the rapid transit line are now connected to more work locations, making them desirable to more people. This, in turn, causes an increase in prices. At the same time, with more neighbourhoods having access to rapid transit, this lowers the demand for homes in pre-connected areas—bringing those prices down. Study results indicates that the first effect dominates and the rapid transit expansion increased prices by an average of $14.61 per month in these pre-connected neighbourhoods.

“When housing prices stay the same, expansion of rapid transit increases the average well-being of lower-income households more than higher-income households. However, the opposite occurs when we allow prices and neighbourhood incomes to adjust to the presence of the new rapid transit line,” says Dr. Craig.

“In 2001, our estimates indicate that people in lower-income households valued rapid transit access more than those in high-income households,” she says. “However, in subsequent census years, we found that access to rapid transit became more equally valued by high- and low-income households alike.”

Researchers found that the increased demand for rapid transit access by higher-income households and the expansion increased prices in neighbourhoods with rapid transit access. This impact is self-reinforcing because higher-income households are more tolerant of higher prices. Lower-income households become less likely to choose neighbourhoods with good transit access due to cost.”

“We looked at whether people can commute to work via rapid transit and how changes to the public transit network impact prices. In the future, I hope extensions of these models will be taken into consideration by transit authorities to help inform rapid transit expansion plans.”

Dr. Chernoff and Dr. Craig’s research was published recently in the International Economic Review journal.