Here's How Light Rail Trains Can Save Real Estate And The American Economy In One Bold Move

Light Rail

Photo: Wikimedia Commons

Right now, the pursuit of a cure-all for the American economy seems like the hunt for the Philosopher’s Stone to turn any metal into gold.The New American Foundation (non-partisan) claims to have it though: light rail trains.

Before you laugh, Patrick C. Doherty and Christopher B. Leinberger of the foundation have some good points.

  • Demand for housing will rise as the baby-boom generation downsizes and so-called millennials seek urban housing, closer to where they work and want to play.
  • The current exurban supply gut isn’t of interest to these buyers: it’s too big, too far away, and too expensive due to heavy fuel demands.
  • Light rails could be organised as public-private partnerships, where private companies get guaranteed returns (via taxes on fares) on their upfront investment.

The author’s note the difficult political environment as a reason why this won’t work. But they argue that it worked in Republican Salt Lake City, and could work in other parts of the country.

That may be true, but it ignores several key problems that are going to be impacting the real estate market for sometime.

  • Supply gut: prices will have to fall on homes as buyers have been scarce; millennials might be tempted into these exurbs, especially if more fuel efficient cars are developed and they are allowed to telecommute from home.
  • Location: The key housing market crises are in Florida, Nevada, and California. Development companies there are so far in the red they can’t suddenly start buying up urban space and rebuilding it.
  • Where will the investment capital come from: The article mentions over $1 trillion sitting on the sidelines. That’s fine, but why would an investor suddenly buy into, or make a bet on, future housing demand when yields are so low right now they make emerging markets the only attractive option?

It is an interesting idea, but like any, light rail is not the solution to a national problem. It may help fix Northern California’s real estate problem, or inspire growth in urban centres with jobs growth, but it isn’t going to drive a massive amount of capital back into the market, or construction job growth, overnight.

Read their argument here >

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