Does new public transit boost home prices? If it's underground, the answer is usually yes

Haider-Moranis Bulletin: Land and property owners can't always expect windfall gains, though

A subway tunnel in Toronto.Ernest Doroszuk/Toronto Sun/Postmedia Network files

Billions of dollars are being spent on the construction of new public transit across Canada and the leading political parties have promised even more transit funding during the current election campaign.

While new infrastructure is bound to reshape the mobility landscape in cities where such investments are made, it also can influence property values, especially those in the vicinity of newly constructed stations.

Existing research shows that housing located near rail-based urban transit fetches higher prices than comparable homes located farther away.

But with new transit lines being extended deeper into suburbia, should land and property owners expect windfall gains? The answer to this question is not that simple. Even though academic and professional literature demonstrates that property values appreciate when efficient and reliable transit service becomes available nearby, the increase in values is not necessarily uniform.

Besides, proximity to transit lines can have some downsides as well. First, during the construction of new transit infrastructure, which often takes years to complete, access to nearby properties and businesses is compromised. Second, construction-related disturbances, such as noise, dust and vibrations, affect the well-being of neighbours. Third, post-construction, homes located on streets leading to and from transit stations experience more traffic and noise because of buses and other vehicles headed to the stations.

Despite the nuances, proximity to rail-based transit operating on a dedicated right-of-way, such as subways, often comes with a premium.

Writing in the journal Urban Studies in 1983, Vladimir Bajic was one of the first to explore the sources of that premium in an analysis of the impact of Toronto’s Spadina subway line (now known as the University Line), which started operating in 1978. Bajic, whose study has served as a template for future scholarship on the subject, found that the commuting time savings from the improved transit service contributed to the increase in neighbouring housing prices.

The study concluded that the “savings in commuting costs which accrue to the commuters have been transferred to the home owners through the complex workings of the urban housing market,” resulting in a higher value of nearby properties.

Numerous studies in Canada and elsewhere have reached similar conclusions. A study published in 2019 in Real Estate Economics investigated the impact of a new subway line on housing prices in Shanghai. The study found that the commuting benefits from the new subway line contributed to an average increase of 3.75 per cent in housing prices.

Similarly, a Masters thesis completed in 2018 at Concordia University explored whether proximity to elevated transit stations in Toronto and Vancouver carried a lower price premium than proximity to below-grade transit. The research found that properties listed near the “elevated TTC subway and SkyTrain stations had, on average, lower listing prices while properties located in proximity to underground stations had higher listing prices.”

Above-grade rail transit generates noise and is often not visibly appealing. Thus, the price premium was found to be lower for properties near above-grade stations compared to below-grade stations.

Can one assume that any rail-based transit infrastructure investment will lead to higher property values? The answer depends upon the benefits of the new transit service. If the new transit delivers travel time savings and comfort, it will attract new riders, induce real estate development on nearby undeveloped land, and contribute to higher house prices of neighbouring properties.

But when the transport benefits are not realized, housing price premiums can fail to materialize as well.

Gary Wagner and co-authors analyzed the impact of light-rail transit on residential properties in Hampton Roads, Virginia. Their findings, published in Regional Science and Urban Economics in 2017, revealed that light-rail transit “experienced disappointing levels of ridership compared to other light-rail systems.” Consequently, the new light-rail line, instead of boosting house prices, was associated with a decline of eight per cent in the price of nearby properties.

For suburban and urban communities across Canada eagerly awaiting the launch of new rail-based transit systems, the implications are clear: price gains are likely in the long run, but never a sure thing.

Murtaza Haider is a professor of Real Estate Management at Ryerson University. Stephen Moranis is a real estate industry veteran. They can be reached at

