Public policies at the federal, state, and local level play a large role in facilitating or hindering equitable transit oriented development. Transportation, housing, and economic development policy can include goals, incentives, and requirements for critical equitable TOD issues such as the development of affordable housing near transit, transit access for low-income people, and displacement prevention.
The federal government lags behind regional and state policy in facilitating TOD, but plays an important role in financing transportation improvements that may lead to TOD, establishing criteria for transportation and affordable housing projects, monitoring policies and tools, funding research on best practices, and promoting collaboration between the public and private sector and among different levels of government.
The Federal Transportation Bill: SAFETEA-LU and the 2009 Reauthorization. In August 2005, Congress reauthorized the federal transportation bill (TEA-21), as the Safe, Accountable, Flexible, and Efficient Transportation Act (SAFETEA-LU). SAFETEA-LU provides $286.4 billion in transportation funding for the next six years—$52.9 billion of which (a significant increase over TEA-21) supports public transit maintenance and development. The Federal Transit Administration (FTA) and the Federal Highway Administration (FHA) administer 108 separate programs funded by SAFETEA-LU. Although none of these programs are specifically oriented toward TOD or joint development, the federal transportation bill supports TOD planning and development through:
The upcoming reauthorization of the federal transportation bill provides an opportunity to increase federal support for equitable TOD by removing barriers to and creating incentives for the development of mixed-income TODs. Advocates can play an important role in pressing for policy reforms. For example, the criteria for selecting projects could award extra points for the production of affordable housing near transit.
Low-Income Housing Tax Credits (LIHTC) Allocation Criteria. The federal LIHTC is the most important source of funding for affordable housing in the United States providing states with the ability to issue tax credits to equity investors in affordable housing acquisition, rehabilitation, and construction. Each state sets its own criteria for allocating these tax credits to developers, making it possible to reward TOD projects. Twenty-eight states require transit access in their allocation. California’s LIHTC allocation committee, for example, scores developers higher if their project is close to transit, especially stations and lines that offer frequent service.
States can play an important role in promoting equitable TOD through their smart growth, transportation, housing, and infrastructure policies and funding sources. The following examples describe innovative state policies to incentivize TOD planning and development.
Transit Oriented Development (TOD) Housing Program. In November 2006, California voters approved Proposition 1C, the Housing and Emergency Trust Fund Act of 2006, which authorized bonds for new and existing affordable housing programs, including $300 million for mixed-income housing in TODs across the state. The funds will be distributed over three years, and the first awards will be made in June 2008. The program provides three different types of assistance: low-interest loans for gap financing for rental housing developments of 50 units or more; mortgage assistance for homeownership; and grants for infrastructure improvements necessary for mixed-income TOD housing. Housing developments must be within a half-mile of transit stations and 15 percent of units must be affordable to low- or very-low-income households. Each project may qualify for a maximum of $17 million in funds.
Community-Based Transportation Planning (CBTP) Grants. CalTrans (the California Department of Transportation, responsible for highway, bridge, and rail planning, construction, and maintenance) allocates $3 million annually for planning activities that encourage livable communities throughout the state. The one-year grants—comprised of 80 percent federal and state funds and a 20 percent local match—help local agencies pay for community-based transportation planning.
Transit Village Development Planning Act. In 1994, California passed legislation that encourages cities and counties to plan for transit villages located within a quarter-mile of transit stations, and provides incentives such as priority transportation funding, density bonuses, and expedited permits for projects. A 2006 amendment allows a city or county to declare a previously adopted specific plan or redevelopment plan to qualify as a transit village plan if it meets the requirements. Unfortunately, the legislation did not include a funding mechanism. Proposed legislation would expand the size of the TOD district to one-half mile and allow local officials to use tax increment financing to pay for the transit village plan. Cities or counties could issue infrastructure bonds to pay for the transit village plan, which would then be repaid by property tax increment revenues collected within the transit village. These TIF-financed transit villages would be affordable subject to the same affordable housing requirement (a 20 percent set aside for low- and moderate-income households) as found in redevelopment districts.
Smart Growth Zoning. In 2004, the Massachusetts legislature enacted Chapter 40R, referred to as the "smart growth housing" law. Designed to substantially increase the state’s supply of housing, and decrease its cost, the law offers financial incentives to communities that create dense residential or mixed-use zoning districts near transit stations and in existing urban centers. In these districts, housing must be allowed "as of right" and 20 percent of the units in each residential project must be affordable to low-income households (at or below 80 percent of area median income). In return for adopting the zoning and streamlining the development process for 40R districts, cities and towns can get between $10,000 and $600,000 in state funding, plus an additional $3,000 for every new home created. In 2005, the legislature enacted companion legislation (40S), which provides additional funds for school districts within Chapter 40R zoning districts.
Transit Oriented Development Infrastructure and Housing Support Program. The state provides financial support for compact, mixed-use, walkable development within a quarter-mile of public transit stations through this grant program, known in short as the TOD Bond Program. Mixed-income housing projects (including 25 percent of units that are affordable to households earning 80 percent of the median income) and parking facilities can receive up to $2 million in funds, bike and pedestrian improvements can receive up to $500,000, and preliminary design for bike and pedestrian projects can receive up to $50,000. The program is administered by the Executive Office of Transportation and Public Works in consultation with the Department of Housing and Community Development. Advocates would like the program to include deeper levels of housing affordability.
Commercial Area Transit Node Housing Program (CATNHP). Funded with $10 million from the 2002 Housing Bond Bill and administered by the Massachusetts Department of Housing and Community Development (DHCD), CATNHP provides financial incentives to municipalities, nonprofit, and for-profit developers who build rental and homeownership housing in commercial areas located within a quarter-mile of existing or planned public transit stations. Initially, the program will assist housing projects of 25 units or less that target 51 percent of units to households at or below 80 percent of median income, and priority is given to projects within TIF zones. The program will provide up to $750,000 (or $50,000 per unit) in zero interest loans, 30-year deferred payment loans at zero interest for rental housing projects, and 30-year deed riders for homeownership projects.
New Jersey Transit Village Initiative. Initially launched in 1999 as a component of former governor Christine Whitman’s smart growth initiative, the Transit Village Initiative promotes the development of compact, mixed-use neighborhoods around public transit stations. The initiative is administered by the New Jersey Department of Transportation (NJDOT) and NJ TRANSIT, and guided by a multi-agency task force that also includes the departments of economic development, commerce, community affairs, housing finance, smart growth, main streets, environmental protection, and the redevelopment authority and the arts council. The task force recommends municipalities to be designated as transit villages, which then receive priority funding and technical assistance from some state agencies and become eligible for $1 million annual NJDOT’s transit village grants. There are currently 19 transit villages in the state.
Urban Transit Hub Tax Credit. In January 2008, New Jersey passed landmark smart growth legislation to encourage private investment and increase employment around urban rail stations in nine municipalities (Camden, East Orange, Elizabeth, Hoboken, Jersey City, Newark, New Brunswick, Paterson, and Trenton). A business that makes a capital investment of $75 million or more in a business facility that employs a minimum of 250 full-time employees and is located within a half-mile of a transit hub can qualify for tax credits equal to the capital investment that can be applied toward its corporate business tax, insurance premium tax, or gross income tax liability.
Transit Revitalization Investment District (TRID) Act. Passed in 2004, this act authorizes state public transportation agencies to work cooperatively with counties, local governments, transportation authorities, the private sector, and Amtrak to create and designate Transit Revitalization Investment Districts. The TRID Act promotes intergovernmental and public/private cooperation and encourages regional planning and implementation of TOD. The state's Department of Community and Economic Development provides counties and local governments with a 25 percent funding match.
Housing Incentive Programs. States, regional planning and transportation agencies, and localities can provide incentives for the building of new housing near transit.
Housing Requirements. The Metropolitan Transportation Commission’s TOD Policy for Regional Transit Expansion Projects, adopted in the Bay Area in 2005, requires that all transit expansion projects meet minimum transit corridor-level targets for housing (existing or included in adopted station area plans) to receive funding. To encourage affordable housing, the policy incentivizes affordable units by lowering the threshold for number of units if more of the existing or planned units are affordable.
TOD Affordable Housing Acquisition Funds. Localities can also set up dedicated funds for the purchase of land or houses within a TOD district or corridor for the purpose of building or preserving affordable housing early, before speculation drives up the price.
Property Tax Abatements for TOD Housing. Portland, Oregon offers a 10-year TOD Property Tax Abatement to projects that include housing above a certain density and include community benefits like affordable units or neighborhood meeting space. The tax exemption applies only to the residential and community-oriented non-residential components of a development.
Metropolitan Planning Organization TOD Programs. Portland’s Metropolitan Planning Organization (Metro) has a TOD implementation program that provides financial incentives and uses public/private partnerships to facilitate higher density mixed-use projects served by transit. Metro was the first regional agency to employ used federal transportation Congestion Mitigation and Air Quality (CMAQ) dollars to acquire and re-sell land to developers with the condition that the land be used for TOD, generally with an affordable housing component. The program has been in existence since 1998 and has funded 29 projects, helped bring 17 projects to construction or completion, and has 9 more in design and development.
TOD Zoning Incentives and Housing Requirements. The city of Austin, Texas, offers a number of incentives for equitable TOD. When the Austin Texas, City Council proposed a TOD ordinance to create special zoning to support a planned commuter rail expansion, a coalition organized to ensure that housing affordability would be written into the zoning. The resulting TOD ordinance, adopted in November 2005, requires station area plans that "include a housing affordability analysis and potential strategies for achieving housing goals." At the same meeting, the city council adopted a resolution setting the goal that 25 percent of new rental and ownership housing in each station area is affordable to low- and moderate-income households (affordability targets are 60 percent of area median income for rental units, for 30 years, and 80 percent for ownership units, for 10 years). The SMART (Safe, Mixed-Income, Accessible, Reasonably-Priced, Transit-Oriented) Housing program provides development fee waivers and expedited permit reviews to TOD projects with affordable homes. The percentage of fees waived increases with deeper levels of affordability. For example, 25 percent of fees are waived for projects if 10 percent of units are affordable, and 100 percent of fees are waived for projects if 40 percent of units are affordable.