Home MTA Economics The ties that bind subway service and real estate values

The ties that bind subway service and real estate values

by Benjamin Kabak

Cutting bus lines can depress real estate values along the entire route.

Prior to last night’s reportedly tame fare hike hearings, the MTA made a pledge to the City Council. While speaking with the council’s Transportation Committee, officials promised that, despite debt levels that will continue to rise, the agency will not cut service to the extent they did this June any time soon. “There are no,” Hilary Ring, the MTA’s head of government affairs, said, “future service cuts on the table.”

For New Yorkers who need their subway system but are wary of the MTA’s always-impending financial doom, this promise is good news indeed, but for one subsection of the city, it’s even more welcome. That group consists of those who are buying and selling homes and are searching for certainty in the city’s ever-changing transit landscape. Earlier this year, sellers saw value plummet while buyers saw good deals disappear as subway lines were rerouted and buses slashed. Now, with stability from the MTA, the location-based market can settle.

It’s no secret that the city’s real estate values are tied in with transit. Any apartment listing will feature proclamations that the place is “just steps” from the nearest subway, and real estate values decline as homes are further away from the nearest subway stop. Last week, Melanie Lefkowitz tackled just this topic in The Wall Street Journal. She explores how the MTA’s June cuts left the real estate market in flux:

Location, location, location lies at the core of any real-estate transaction. In New York City, mass transit is an equally essential factor. The loss of the V and W subway lines and the scaling back of bus service in all five boroughs hit commuters hard, for sure, but also appears to be affecting the property values of homes in their now-abandoned paths.

Real-estate data compiled by StreetEasy.com show a dropoff in sales in some neighborhoods along the bus routes since they ended this summer. In Kensington and Ditmas Park, Brooklyn, where condo buildings along Coney Island Avenue and Ocean Parkway can be a half-mile walk from the nearest subway, the X29 stops on Coney Island Avenue could mean a quick ride into Manhattan. That bus was cut. The number of home sales dropped 60% in Kensington and 83% in Ditmas Park between July 2009 and June, when bus service ended, but that is likely due to a spike in June when the first-time home-buyer tax credit expired.

Not every neighborhood where the buses ran is affected. For example, Jackson Heights, where the QM22 culminated, has been relatively untouched because of easy proximity to several subway lines. Other neighborhoods farther from Manhattan already appeal primarily to those who commute by car to jobs in the other four boroughs or nearby suburbs. But in more far-flung, gentrifying areas, where buyers were willing to accommodate longer commutes in exchange for bargains, brokers say they are already feeling some pain.

“The buyer who buys in Astoria is looking for a cheaper price and to get into Manhattan quickly,” said Ms. Palmos, adding that she is having the same problem with a condominium building in Upper Ditmars, north of Astoria. Apartments there that she said would have easily sold for $500,000 with the express bus nearby are now languishing on the market at prices about $420,000.

Some real estate brokers in Lefkowitz’s piece clearly have no knowledge of the topic. Matthew Giordano, a vice president at Massey Knakal, says, “The N and the R, they’re older trains—the Never and the Rarely. They just don’t seem to have that frequency.” Knakal clearly hasn’t seen the R160s even if his gripes about less frequent service — especially along Brooklyn’s 4th Ave. where the R is now the sole local train — may inadvertently ring true.

But overall, real estate brokers recognize a simple fact of life in New York City. As Charles Sciberras, an Astoria broker said, “The closer to the train the higher the demand. Two to three blocks away from transportation is very easy for me to rent.”

For New York City, these real estate fluctuations represent the law of unintended consequences at its finest. The MTA doesn’t mean to depress property values by cutting service; it’s just trying to meet its own budget demands. In fact, the MTA says it doesn’t consider the market impact of its potential service changes. Yet, something as simple as a bus cut can knock nearly 20 percent off of an apartment’s price. It is yet again a remainder of how New York City operates because of the subways, and even as the state’s transit policy languish, the subways will rule the city.

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13 comments

Stephen Smith September 14, 2010 - 2:15 am

Many places (including the US back about a century ago) solve this problem by allowing joint ownership of transit systems and real estate, either by public or private entities. If you’re interested I’ve got a post about it here at my blog.

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Jay B. September 14, 2010 - 1:19 pm

Joint ownership a solution that might help change the situation for better, but it has to serve both sides – I don’t think that would be a problem as such deal would be probably made easily – but the bigger problem is that this isn’t going to change overnight. It’s a very good idea, though.

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Al D September 14, 2010 - 9:37 am

The Brooklyn portion of that article is highly flawed.

Bay Ridge has had, for the longest time, only the R. The N does not run to Bay Ridge proper. At best, it skirts it at Sunset Park. And, yes, for a neighborhood that has subway service, Manhattan is quite a journey, unless you want to go Dowtown which is tolerable by the R. The service changes have no impact on this.

Kensington and Ditmas Park are served by 2 good subway lines, the F and Q. The x29 ridership, pittance anyway, was concentrated in Midwood on south. Residents of Kensington and Ditmas Park use these 2 subway lines, and even the author notes that the expiring homebuyer credit is the cause. As the property values decline, buyers in these neighborhoods will choose previously unaffordable neighrborhoods closer to Manhattan, such as Windsor Terrace and the ‘South Slope’ actually part of Sunset Park. Ironically, the South Slope is served by the R.

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Edward September 14, 2010 - 10:17 am

Exactly. Also, the “V” and “W” lines were cut, but were then surplanted by the “M” and “Q” lines, so residents in those areas still have viable subway service. And I very much doubt that the ten people per bus on the X29 were buying homes left and right prior to June 2010. It’s a bit of a stretch to say that one less bus is responsible for plummeting home sales. More like unemployed home buyers and the expired tax credit are to blame.

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Joe September 14, 2010 - 6:16 pm

You are correct about the R train when it comes to Bay Ridge. Where the loss of the M has been most acute is in Gowanus, Park Slope, Greenwood Heights and northern Sunset Park, essentially the space between the Pacific and 36th Street express stops. Without the M, train frequencies at these stops have fallen at a time when housing construction west of 5th Avenue (and on 4th Avenue) is still going strong. On top of waiting a long time for the R train at Pacific Street, the train is now hopelessly overcrowded running between Pacific and 36th Street. It’s a crappy situation indeed.

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Andrew September 15, 2010 - 7:51 am

Service in that corridor is obviously less frequent than it used to be, and trains are a lot more crowded than they used to be. I’m sure regular riders think of their trains as hopelessly overcrowded – but they’re still a lot less crowded than rush hour trains elsewhere in the city. During rush hours, most riders aren’t supposed to be sitting! Once the average car on the average train reaches 175 passengers, then you have every right to complain about overcrowding. Until then, sorry, you’re going to have to put up with what the rest of us have been putting up with for years.

As for Bay Ridge itself, I never thought of 59th as being in Bay Ridge until a resident of the neighborhood described it as being at the northern edge of Bay Ridge. In either case, obviously, most of Bay Ridge is south of there, with only R service – but R passengers going to Midtown have easy transfers to the N at 59th and to the D at 36th. They certainly have shorter trips to Midtown (let alone Downtown) than riders at the northern ends of the 1, 2, and 4 do, and their trains are far less crowded, even without the help of the M.

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John September 14, 2010 - 10:45 am

It would be interesting for someone over the next couple of years to chart the housing values along the Fourth Avenue local stop corridor in Brooklyn and compare them to the values along the Myrtle Avenue/Broadway-Brooklyn corridor, with the shift of the M train to Sixth Avenue. There already have been stories on how happy real estate brokers were with properties in the Ridgewood-Middle Village areas at finally having a one-seat ride to Manhattan, while the local stations in Brooklyn between Pacific and 36th Street are obviously going to suffer due to riders (especially Manhattan-bound in the mornings) having less frequent train arrivals with the Nassau-Sixth Avenue swap.

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Edward September 14, 2010 - 11:38 am

Of course “suffering” is a relative term. Maybe condos on 4th Ave will cost $450K instead of $500k. Not exactly dirt cheap by anybody’s standards. Even with the last round of cuts, subway service is about the same as it was in the 1990s (prior to addition of “V” ans “W” lines and the return of express service on Broadway BMT). If memory serves me, home prices were soaring in the ’90s.

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Brian September 14, 2010 - 8:26 pm

Once property values increase to a point that people can’t afford to live there, those who could afford it won’t give a hoot about having subway service. Having a one-seat ride from Ridgewood to Middle Village will lead to plenty of people getting priced out.

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Alon Levy September 14, 2010 - 9:45 pm
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Alon Levy September 14, 2010 - 9:46 pm

Death to anti-hotlinking scripts.

Here.

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JAzumah September 14, 2010 - 11:22 pm

The QM22 issue was caused by the city. We started providing charter bus services for the affected passengers and the city sued us over it. The blame does not belong with the MTA as it was “fixed” in that community.

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Andrew September 15, 2010 - 7:44 am

It should come as no surprise that transportation drives real estate. Developers and property owners in Astoria were welcome to step up to the plate and subsidize operations of the QM22 if doing so would have furthered their real estate goals. This simply isn’t the MTA’s problem.

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