Self-driving Cars Will Kill Transit-oriented Development
【Summary】Transit-oriented development is all the rage in many cities, but self-driving cars will eliminate premium pricing for housing units located near rapid transit stops.
Transit-oriented development is all the rage in many cities, but self-driving cars will eliminate premium pricing for housing units located near rapid transit stops. Self-driving cars will lower the cost of shared-ride services such as UberPool and Lyft Line, speed up car traffic, and thus eliminate premium pricing for transit-oriented development.
It seems more likely that transit will be provided by Uber and Lyft than the legacy taxi companies, but the crucial factors are that drivers won't be needed, and that electronic apps will make car-pooling more common.
Uber and Lyft now offer shared-ride services. If you are willing to ride with someone nearby who is headed in your general direction, you can get a break on you fare. The key limitation on this feature is that ride services are fairly "thin," meaning that there are not many close matches. That's changing quickly, though. The New York Times reports that "in many cities, UberPool now accounts for more than half of Uber trips taken." Self-driving cars will lower costs, thus increasing the number of trips demanded by consumers. Increased use of shared-ride services will further increase the convenience, reinforcing the demand for shared rides.
Traditional car-pooling is just one-eighth the size of driver-alone commuting, according to a Census Bureau report. The typical carpool requires two or more people leaving from the same place at the same time. Because those folks are dependent on a particular car, they must return at the same time. Many people find this impractical. Sometimes they want to travel earlier or later, or they get frustrated when one of the carpool members is late. Want to stop off to pick up groceries or dry-cleaning or the kids at soccer practice? Carpooling is not for you, at least not every day. With new ride-sharing, though, you can leave 20 minutes later one day, stop off at the library on the way home, and not have to negotiate the trip with your regular co-riders.
As a result, rush-hour car trips will drop, lessening traffic. As traffic speeds up, the incentive to leave the rails will increase. Those apartments and condos located next to the rail stop will lose their premium value. One study found rents 90 percent higher in transit-oriented developments. (Other studies found little or no premium, probably because the rail usually avoids high-rent neighborhoods. On an apples-to-apples basis, transit-oriented development typically commands premium rents.)
The value of transit-oriented development depends on highway congestion. The prospect for much faster rides in shared, self-driving cars will kill premium home prices and rents.
More generally, urban land values may fall as parking lots will be hugely downsized. This was noted by theRich Thoughts blog. (Hat tip to Funspirit who provided the link in a comment on my earlier post Self-Driving Cars Won't Kill Demand For New Automobiles.) Although estimates of land area devoted to parking lots are soft, 30 percent is mentioned a lot based on the work of Eran Ben-Joseph. Imagine most of that land being made available for new development. Real estate prices should head down in the most parking-oriented parts of town.
How soon will real estate value change? The transition to self-driving ride-share transit may well take 20 years, but asset values are based on prospective supply and demand. Once it becomes clear the direction in which we are moving, property values will immediately adjust.
resource from: Forbes
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