David King on the Co-Development of Subways and Real Estate in JTLU

The Journal of Transport and Land Use always has good things in it, and this time out is no exception. I’ll pull out two papers to discuss this week.

The first is from fellow UCLA alumni and now assistant professor at Columbia University, David King. His manuscript is

King, D., 2011, Developing Densely: Estimating the Effect of Subway Growth on New York City Land Uses The Journal of Transport and Land Use, 4(2), pp. 19-32.

From the abstract:
Abstract:In the early twentieth century, New York City’s population, developed land area, and subway network size all increased dramatically. The rapid expansion of the transit system and land development present intriguing questions as to whether land development led subway
growth or if subway expansion was a precursor to real estate development. The research described in this article uses Granger causality models based on parcel-level data to explore the co-development of the subway system and residential and commercial land uses, and attempts to determine whether subway stations were a leading indicator of residential and commercial development or if subway station expansion followed residential and commercial construction. The results of this study suggest that the subway network developed in an orderly fashion and grew densest in areas where there was growth in commercial development. There is no evidence that subway growth preceded residential development throughout the city. These results suggest that subway stations opened in areas already well-served by the system and that network growth often followed residential and commercial development. ăe subway network acted as an agent of decentralization away from lower Manhattan as routes and stations were sought in areas with established ridership demand

This is a wonderfully written paper, and I can’t claim any particular objectively because I think David is the shizzle. However, it’s worth chatting about the paper in some depth.

In this introduction, King notes three factors that reinforced the idea that the subway followed people rather the other way around:

1. The subways were developed by private transit companies with public financing. These companies were not real estate developers: they relied on fares alone for their business. I strongly suspect that this is the biggest single factor in the story he has to tell. If you are a private company, you don’t pour capital investment into places unless you are pretty clear that there are going to be passengers. Contrast this behavior with the behavior of pork-barrel, get-my-slice-of-the-capital-funding-pie-no-matter-how-few-passengers-there-are temptations of public funding for capital improvements.

2. There was no real zoning prior to the 1960s, so developers could cram as many units as they could pencil out into the parcels they owned.

3. Land values were on the rise, which would reinforce #2, and which drove manufacturing off Manhattan in favor of offices–so that we today can stroll around Manhattan and oooh and aaaah at its sustainable urban form populated by, among others, billionaire I-bankers holding the reigns of a capitalist machine that is currently eating the entire universe. But they live in apartments and walk more than everybody else, so they must be The Better Environmental People.

Anyhoozily, I am not the world’s biggest fan of Granger models, but King’s application of them is clever here. To make a long story short, the models look for a first period change in a variable that correlates with a second period change in different variables. King sets up the analysis to look at both possible directions: subway supply change lagged against real estate development (the subway following the people hypothesis) and the alternative, development lagged against subway supply (the people follow the subway hypothesis).

He tests against both commercial and residential development, and he finds that there is no support for the belief that the subways were speculative–that is, that they came before the development. Instead, subways followed development, and commercial real estate most importantly.

One quibble is that I wish he’d left Staten Island in the analysis. He drops it because it’s not a part of the subway network, but I think that makes for an interesting control. Another swing at the questions King brings up concerns whether there is a change in the rate of development once the station appears.

David King blogs about transportation over at Getting From Here To There.