Last week the
DC Department of Transportation DC Office of Planning released a Streetcar Land Use Study describing the impacts that the proposed DC streetcar network will have for the city. Greater Greater Washington accepts the study as proof that the streetcar will be great for DC. The report is full of the feel-good economics that really bothers me about Smart Growth in general, and I think that this sort of treatment of the trade offs of public policy hurts the urban agenda in the long run.
The study finds that the streetcar will pay for itself by raising the property tax base. From a Smart Growth perspective, though, this is a problem because it will make housing less affordable. The study suggests that inclusionary zoning will provide the necessary affordable housing after the streetcar raises property values. Current zoning laws require new multifamily buildings with 10 or more units to comply with inclusionary zoning requirements for low-income housing. As Stephen has pointed out before, inclusionary zoning is just a more complicated policy that ultimately has many of the same unintended consequences as rent control or subsidized housing. Subsidizing the cost of housing for a select group necessarily makes it more expensive for those of all income levels who are not lucky enough to secure this subsidy. Forcing developers to provide this subsidy does not change its economic impact on those who are left paying market rate.
DDOT The Office of Planning predicts that by far the greatest gains in real estate value will accrue to property owners within one quarter of a mile of the stops along K Street (see graph on page 24 of the study). It’s important to note that the vast majority of these gains will be realized in higher per-square-foot prices rather than new square footage since that area is just about built up to what the Height Act will allow. Are K Street building owners really a group that we DC taxpayers want to be subsidizing? If in fact this project would create over $3 billion in value for these property owners by raising the value of existing buildings and spurring new development, the Downtown DC BID should be clamoring for the opportunity to build it. This should present an opportunity for the city to lease the rights to the BID to construct and operate a streetcar that would be profitable, benefit downtown transit users, and raise the property tax base as a result. The study does allude to potential opportunities to seek financing help from developers, but it’s shy on specifics. Additionally, private funding for a public project carries the risk that the project will take on the “monstrous hybrid” characteristics of a public private partnership that Jane Jacobs warns against in Dark Age Ahead, benefiting private interests at public expense.
In lower-income areas where private funding will not likely be available, this public investment amounts to picking winners and losers among neighborhoods; what makes H Street more deserving of the first line over other transit-starved neighborhoods? By allowing private streetcars to determine the placement of lines, we can be sure that better incentives are in place to determine where these lines will be most useful, and the profit and loss mechanism will provide feedback along the way.
The study emphasizes DC’s history with streetcars that operated from the 1800s through 1962 but downplays that these lines were operated by private companies that were gradually regulated out of existence. A new publicly operated system represents a significant break from this history. Privately operated streetcars internalize the risk and reward of this investment, whereas a publicly funded project disperses the risk among DC taxpayers.
Conspicuously missing from the study is any evaluation of DDOT’s performance in building and running streetcars thus far. The H Street line is currently way behind schedule, and the project’s Buy America requirement is complicating even the procurement of the cars. The years long construction project was welcomed by many along the H Street corridor as it has resulted in private investment pouring into the neighborhood; however, if streetcar construction experiences such extreme delays on K Street or M Street in Georgetown, two of the most congested streets in the city, public opinion could easily turn completely against the project.
I certainly think that the District can support improved transit options, especially in light of growing frustration with WMATA. However, I’m not convinced that DDOT is a more competent bureaucracy based on the H Street results. If the study’s predictions of the economic impacts that a streetcar could have are correct, this project represents an opportunity for DC to really turn back to its transit roots in the form of private streetcar companies operating profitably.