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Transportation Planning and Technology

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The impacts of an urban light rail

system on residential property values:
a case study of the Houston METRORail
transit line
a
Qisheng Pan
a
Department of Urban Planning and Environmental Policy , Texas
Southern University , 3100 Cleburne Street, Houston , TX , 77004 ,
USA
Published online: 01 Nov 2012.

To cite this article: Qisheng Pan (2013) The impacts of an urban light rail system on residential
property values: a case study of the Houston METRORail transit line, Transportation Planning and
Technology, 36:2, 145-169, DOI: 10.1080/03081060.2012.739311

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 Transportation Planning and Technology, 2013
Vol. 36, No. 2, 145
169, http://dx.doi.org/10.1080/03081060.2012.739311

The impacts of an urban light rail system on residential property values:

a case study of the Houston METRORail transit line
Qisheng Pan*

Department of Urban Planning and Environmental Policy, Texas Southern University, 3100
Cleburne Street, Houston TX 77004, USA
Downloaded by [University of Nebraska, Lincoln] at 17:29 28 December 2014

(Received 18 January 2012; accepted 18 July 2012)

Though the impact of rail transit service on property values has been investigated
for transit rail lines in a number of cities, the effects of the Houston light rail
transit (LRT) line have not been examined since it began service. This study
utilizes the 2007 InfoUSA household data-sets to analyze the impacts of the
Houston’s LRT line on residential property values. In addition to the traditional
ordinary linear regression models that have been widely used in transit impact
studies, a multi-level regression model is adopted in this study to identify the
effects of the METRORail on the Main Street Corridor. The results from both
models suggest that the opening of the light rail has had significant net positive
effects on some residential property values. However, immediate proximity to
light rail stations and bus stops has significant negative impacts on properties
located within a quarter mile of rail stops.
Keywords: light rail transit; residential property values; ordinary linear
regression; multi-level regression; Houston

Introduction
Rail transit systems in the USA have been acknowledged as offering the possibility of
alternative transportation service to commuters, extending employment and social
opportunities to the transit dependent population, alleviating traffic congestion, and
motivating higher densities of development. In this view, rail transit lines may
increase the values of residential properties near transit stations by improving
accessibility and reducing travel costs, whilst simultaneously generating nuisance
effects such as noise and crime. Empirical studies of rail transit systems in many
metropolitan areas have not reached agreement on the impacts of rail transit lines on
residential property values.
Houston Metro’s Main Street Light Rail Transit (LRT) Line, the so-called
METRORail, running 7.5 miles from Downtown Houston to the South Fannin Park
and Ride Lot, opened on 1 January 2004. It has 16 stations, which provides frequent
service for riders to access two regional employment centers, Downtown Houston in
the north and Texas Medical Center in the middle of the transit rail line. Most of the
stations are located in the median of the service boulevard. All stations have both
northbound and southbound platforms.

*Email: pan_qs@tsu.edu
# 2013 Taylor & Francis
 146 Q. Pan

Each METRORail transit train provides 72 seats, spaces for standing, and areas
for wheelchairs, which adds up to a capacity of 200 riders. Typically two trains are
hooked together to provide a total capacity of 400 passengers per trip. The areas
between Downtown Houston and the Texas Medical Center are mainly commercial

retail and office properties and the other areas between the Texas Medical Center
and Fannin South at the south end of the rail line include high-density apartment
complexes, a sport arena, and recreation centers.
After several years of operations, data from a variety of sources have become
available to examine the effects of the Houston METRORail. While it may be
premature to carry out a comprehensive study on urban development, land use
change, population, and employment impacts of the new light rail line, it is plausible
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and meaningful to analyze the effects of light rail on nearby property values after the
relatively short time span. This is because residential property values are sensitive to
and anticipate notable changes of the physical environment in nearby areas.
There are a number of studies examining the effects of rail transit plans before the
opening of a rail transit line, including heavy rail in Washington, DC (Damm et al.
1980), Miami (Gatzlaff and Smith 1993), and Chicago (McDonald and Osuji 1995),
and light rail in Vancouver (Fergusan et al. 1988) and Portland (Knaap et al. 2001).
As Cervero and Landis (1997) have pointed out, it is extremely difficult to separate
the influence of market forces from the effects of planning efforts, making it a
complex issue and a difficult task to examine the impact of light rail systems.
Differing from many other metropolitan areas with rail transit service, the City of
Houston is well known for its lack of traditional planning approaches, such as
zoning. These exceptional characteristics make Houston a unique laboratory for
studying the land market effects of rail transit service.
Similar to the case of the Bay Area Rapid Transit (BART) scheme in the San
Francisco Bay area and other transit rail systems, Houston’s METRORail was
expected to have impacts on urban development, land use, population, and
employment but only along with various supportive policies and efforts, such as
incentive zoning, strong citizen participation, and complementary investments, etc.
However, unlike the Metropolitan Transportation Commission (MTC) of San
Francisco and various other transit planning agencies, Houston’s transit planning
agency, i.e. METRO Houston, and Metropolitan Planning Organization, i.e.
Houston Galveston Area Council (H-GAC), have less governmental authority and
have lacked the means to offer financial incentives to complement urban planning
interventions, such as zoning or associated land use planning measures in the
vicinities of a rail line. The Houston planning agencies had expected the light rail
system to accelerate urban development and strengthen employment centers along
the rail line but they implemented few if any effective policies or economic incentives
to promote commercial businesses and land use development in station areas.
However, even without strong government intervention, the land adjacent to the light
rail line has attracted some high-density residential developments, including the large
apartment and condominium complexes near the Reliant Park station. Therefore, we
can plausibly expect that market forces, e.g. in the form of increased accessibility, can
play a strong role in encouraging economic development and changing residential
property values in the light rail corridor.
A variety of models have been applied to examine the impacts of rail transit
stations. The most widely used method is the hedonic price model that estimates the
 Transportation Planning and Technology 147

impacts of rail stations on property values (Nelson and McCleskey 1990, Bowes and
Ihlanfeldt 2001). There are also time series analyses of land use and urban
development (Dvett et al. 1979), matched pair analyses of land use, population
and employment changes (Cervero and Landis 1997), and a general equilibrium
model that simulates the mutual interaction between population and employment
(Bollinger and Ihlanfeldt 1997). Though some of the models recognize spatial
differences in the data, none of them treat the hierarchical structures of spatial data
in their models explicitly.
Rail transit lines can generate impacts at multiple spatial levels. At the regional
level, rail transit’s impacts could be captured as regional economic growth or as
productivity increases due to rail transit development. At the local level, they come
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from the improved accessibility in the vicinity of stations (Bollinger and Ihlanfeldt
1997). Rail transit lines can impose both positive and negative effects on the values of
individual properties. Therefore, the net effects of the rail system have to be examined
at different spatial levels, from individual properties to local or regional development
units. Simple regression models like ordinary least squares (OLS) analysis have
difficulty in analyzing various impact levels simultaneously and treating autocorrela-
tion among different factors appropriately.
This study utilizes a multilevel regression (MLR) model to analyze the impacts of
Houston METRORail on residential property values. It separates hierarchical data
at two levels, the individual property level and at the more aggregated transportation
analysis zone (TAZ) level. This approach brings multiple advantages over simple
regression models in rail transit impact analysis by taking into account individual
developments, coping with heterogeneous data that represent objects with different
spatial detail, modeling the covariance between the repeated measures, and extending
functions straightforwardly to higher levels to find more aggregated effects. The
results from both MLR and OLS are compared to each other in the discussion below.
The modeling results are also valuable for a possible comparison of light rail effects
between Houston and other metropolitan areas with more elaborate accompanying
planning efforts.
The rest of the paper is organized as follows. Part 2 reviews the relevant literature;
Part 3 describes the modeling framework; Part 4 explains the empirical study; and
Part 5 discusses findings and conclusions.

Literature review
The impacts of heavy rail or commuter rail lines on population, employment,
accessibility, and property values have been examined for many US and Canadian
metropolitan areas, including San Francisco (Landis and Loutzenheiser 1995,
Cervero and Landis 1997), Atlanta (Bollinger and Ihlanfeldt 1997, Bowes and
Ihlanfeldt 2001), Washington DC (Green and James 1993), Miami (Gatzlaff and
Smith 1993), and Toronto (Haider and Miller 2000), etc. There are also a number of
studies that investigate the impacts of light rail lines on regional economic
development and nearby property values in Portland (Al-Mosaind et al. 1993,
Chen et al. 1998, Knaap et al. 2001), New York City (Lewis-Workman and Brod
1997), Dallas (Weinstein and Clower 1999), and Buffalo (Hess and Almeida 2007),
etc. Huang (1994) reviewed a number of empirical studies and concluded that there
are widely different estimates of the values and effects of transit station proximity.
 148 Q. Pan

Cervero and Landis (1997) analyzed the impacts of the BART on urban
development and land use patterns. They found fairly modest effects of the BART
heavy rail system on shaping regional growth in the San Francisco Bay Area.
Similarly, Bollinger and Ihlanfeldt (1997) employed a general equilibrium model to
estimate the effects of heavy rail of the Metropolitan Atlanta Rapid Transit
Authority (MARTA) on population and employment in rail station areas at Atlanta.
They concluded that rail transit has had no significant impact on either population
or employment in the vicinity of station areas, but it had changed the composition of
employment in favor of public sector jobs. On the contrary, Green and James (1993)
found significant differences for changes of employment levels between station and
non-station areas in Washington DC’s METRO heavy rail service areas. However,
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Bollinger and Ihlanfeldt (1997) argued that this significant difference possibly
resulted from the lack of control of other factors influencing land use, population,
and employment.
A majority of recent empirical studies found that rail stations have positive effects
on nearby property values, which is consistent with the standard urban economics
theory on the relationship between accessibility and property values. This argument,
of course, depends on how many people seriously view improved transit service as an
option for them. And improved accessibility of proximity to rail transit service itself
may not be enough to increase property values because the positive impacts of rail
transit lines may also rely on other factors such as economic stimulus, land use
policies, and development subsidies (Gatzlaff and Smith 1993, Cervero 1996,
Giuliano 2004). Proximity to rail transit stations can also impose nuisance effects
like crime and noise to nearby neighborhoods. The combined effects can be mixed
and it becomes a question of which ones dominate. A summary of results from
available empirical studies of rail transit impact on residential property values in
North America is shown in Table 1.
In the study of the BART system in San Francisco, Cervero (1996) found that
some residents, especially young professionals with middle income salaries, tend to
live close to rail stations to enjoy higher job accessibilities and some multi-unit
complexes within a quarter mile of the BART stations, which have about US$34
higher monthly rent than comparable units farther away. Landis et al. (1994) found
minor positive capitalization effects of BART stations on home sales in Almeda
(US$2.29 per meter) and Contra Costa Counties (US$1.96 per meter) of the San
Francisco area but these positive effects are only limited to the areas with no
accessibility to a freeway interchange. They also found that rail transit has negative
effects or no discernable effects in the areas with limited service (CalTrain in San
Mateo County), in a limited market (San Jose Light Rail), or in areas with a lack of
parking (Sacramento Light Rail). They concluded that accessibility to light rail
stations does not increase home values as significantly as accessibility to heavy rail.
The studies of the MARTA heavy rail system in Atlanta also reported mixed
results. Bowes and Ihlanfeldt (2001) utilized a hedonic analysis to examine the
impact of MARTA rail stations on residential property values. The analysis consists
of two models: (1) a hedonic price model to study the direct impacts of accessibility
and negative externalities; and (2) a neighborhood crime and retail employment
model to investigate the indirect effects of rail stations on property values by drawing
retail development and crime. They found large positive effects in high-income
neighborhoods situated between one-quarter and three miles from a station, negative
 Table 1. Summary of studies on the impacts of transit rail lines on nearby residential property values in the USA and Canada.
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Study Study area Transit rail type Effects of transit rail line on residential property value

Bowes and Ihlanfeldt Atlanta Heavy rail Property values within one-quarter mile of stations are 19% less than
(2001) those beyond three miles. Property between 1 and three miles from a
station has significantly higher value than those beyond three miles.
Large positive effects in high-income neighborhoods between one-
quarter and three miles of a station, negative direct effects beyond

Transportation Planning and Technology

one-quarter mile to low-income neighborhoods, and negative crime
effects in downtown.
Nelson and McCleskey Atlanta Heavy rail Property values increases over US$1000 for each 100 feet closer to a
(1990) and Nelson rail station in low-income neighborhood but slightly negative effects
(1992) in high-income communities.
Al-Mosaind et al. (1993) Portland Light rail Positive capitalization of 10.6% higher values for properties within
500 meters of the LRT stations. Average property values are US$4.32
higher within 500 meters to station than outsiders and decrease
US$2175 for every 100 meters away from station.
Chen et al. (1998) Portland Light rail Net positive effect. Starting at a distance of 100 meters from the
station, property values decline US$32.2 for each meter away from
station.
Lewis-Workman and Brod New York City MTA Heavy rail Significant positive effects in one mile radius to rail station in New
(1997) York City. Property values decline by US$2300 for every 100 feet
further from station.
Lewis-Workman and Brod San Francisco BART Heavy rail Significant positive effects in one mile radius to BART station.
(1997) Property values decline by US$1578 for every 100 feet further from
station.
Cervero (1996) San Francisco Heavy rail US$34 higher rent within a quarter mile of the stations
Landis et al. (1994) San Francisco Heavy rail and Property values increase significantly closer to a rail station.
commuter rail US$2.29/meter in Alameda and US$1.96/meter in Contra Costa
Landis et al. (1994) Sacramento, San Diego, Light rail Light rail stations has positive effects on home price to San Diego
and San Jose Trolley (US$2.72/meter), negative effects in San Jose (1.97/meter),

149
and indiscernible effects in Sacramento.
 150
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Table 1 (Continued )

Study Study area Transit rail type Effects of transit rail line on residential property value

Hess and Almeida (2007) Buffalo, New York Light rail Positive in high-income station areas and negative in low-income
station areas. Property values increase US$2.41 for every foot closer to
a light rail station measured by straight-line distance and US$0.99 by
network distance.
Voith (1991, 1993) Southern New Jersey and Commuter rail Properties with commuter rail service have over 6% higher values than
Suburban Philadelphia (PATCO and others.
SETPA)

Q. Pan
Armstrong (1994) Boston Commuter rail Single family properties located within a community with commuter
rail stations have a market value about 6.7% higher than others. But
property values lose 20% for homes within 400 feet of freight/
commuter rail right-of-way.
Gatzlaff and Smith (1993) Miami Heavy rail Weak impact of the new heavy rail system. Slightly positive effects in
high priced neighborhoods but insignificant in low-income
communities.
Haider and Miller (2000) Toronto Heavy rail Positive but not as strong as other factors like neighborhood
characteristics, and structure attributes.
Bajic (1983) Toronto Heavy rail Saving of commuting costs (US$2237 per household) using rail transit
are capitalized to property values.
 Transportation Planning and Technology 151

direct effects in low-income neighborhoods beyond one-quarters of a mile from a

station, and negative crime effects close to the downtown, especially in the station
areas with parking. They also reported that property values within one-quarter of a
mile form a station are 19% less than those beyond three miles and property values
between one and three miles from a station have significantly higher value than those
beyond three miles. Nelson and McCleskey (1990) and Nelson (1992) used a simple
hedonic regression model to analyze the effects of elevated heavy rail transit stations
on single family home values in the neighborhoods at different income levels. Their
studies found that proximity to rail service has positive effects in low-income
neighborhoods. Property values increase over US$1000 for each 100 feet closer to a
rail station in low-income neighborhoods but the effects in high-income communities
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are slightly negative. The authors noted that the positive effects of transit station
accessibility may more than offset nuisances for low-income families but not for
high-income groups.
Light rail in Portland has also been examined extensively. Al-Mosaind et al.
(1993) used a hedonic price approach to examine the impacts of light rail systems on
single-family home values. They found positive capitalization of proximity to the
LRT stations for homes within 500 meters of walking distance but the price gradient
for homes within the quarter-mile zone is weakly negative. Their results showed that
property values are US$4.32 higher within 500 meters of stations than beyond and
decrease US$2175 for every 100 meters away from stations. In an updated study,
Chen et al. (1998) applied a hedonic approach using GIS techniques to measure
the effects of Portland LRT on the values of single-family homes. They found that
property values decline US$32.2 for each meter further away from stations,
beginning at a distance of 100 meters from the station. Their results confirmed the
idea that light rail has positive effects on home values due to improved accessibility.
The positive effects outweigh the negative effects.
In addition to San Francisco, Atlanta, and Portland, transit rail lines have also
been found to have a wide range of effects on residential properties in New York City
(Lewis-Workman and Brod 1997), Buffalo (Hess and Almeida 2007), Southern New
Jersey and Philadelphia (Voith 1991), Boston (Armstrong 1994), Miami (Gatzlaff
and Smith 1993) and Toronto (Haider and Miller 2000). Lewis-Workman and Brod
(1997) used a hedonic price function to estimate the effects of proximity to heavy rail
transit stations on property values in New York City. They found that rail stations
have significant positive impacts on home prices, and property values decline by
US$2300 for every 100 feet further away from a station.
Hess and Almeida (2007) reviewed a number of empirical studies and found that
properties near heavy or commuter rail stations gain much higher premiums than
properties near light rail stations due to faster train speeds, more frequent service,
and larger service areas. They constructed a hedonic model to assess the impact of
proximity to light rail transit stations on residential property values in Buffalo. Their
results showed that property values increase US$2.41 for every foot closer to a light
rail station measured by straight-line distance and US$0.99 by network distance.
Proximity effects are positive in high-income station areas and negative in low-
income station areas. Their modeling results also suggested that three other property
descriptors, i.e. the number of bathrooms, size of parcel, and other measures of
spatial location of the property dominated proximity to rail stations in influencing
residential property values. Voith (1991, 1993) reported that commuter rails in
 152 Q. Pan

Southern New Jersey (PATCO) and suburban Philadelphia (SETPA) have some
minor positive effects on the values of homes proximate to rail stations. They found
that properties with commuter rail service have over 6% greater values than others,
other things remaining equal
Armstrong (1994) also found that commuter rail in Boston has significant
positive impacts on single-family residential property values: single-family residential
properties located in communities with commuter rail service have market values
about 6.7% higher than residences in other communities. However, property values
lose 20% of their value for homes within 400 feet of freight or commuter rail rights-
of-way. Gatzlaff and Smith (1993) applied hedonic regression methods and
compared repeat-sales indices for the Miami Metro rail system. They found that
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the heavy rail system have only weak effects on the values of residential properties
close to rail stations.
Haider and Miller (2000) employed a Spatial Autoregressive model to estimate
the impacts of location element of transportation infrastructure including rail
stations on the prices of residential properties in Toronto. They found that
transportation location factors, including a nearby rail transit line, have positive
influences on housing values; a combination of location factors, neighborhood
characteristics, and structure attributes explained 83% of the variance of home
values. However, they also pointed out that transportation location factors are not
strong determinants of housing values in the presence of other explanatory factors.
In addition to the US and Canada, there are also some relevant studies on the
effects of accessibility to transit railway stations from other countries. Most of the
studies find significant positive effects of transit rail stations on residential housing
values. However, there are also some studies that report weak or mixed impacts of
rail stations on property values.
For the case of South Korea, Bae et al. (2003) utilized a hedonic pricing
regression model to investigate the impacts of the construction of a new subway line
on nearby residential property values in Seoul. Their research found that distance to
the new subway line has statistically significant effects on residential prices only prior
to the opening of the line, which is consistent to the anticipatory effect reported in
other studies. They concluded that accessibility to transit has less impact on
residential housing prices than the size of the unit, proximity to nearby subcenters,
and various neighborhood attributes, such as the quality of school district and the
accessibility to recreational resources.
For Hong Kong, So et al. (1997) employed a hedonic price model to analyze the
effects of public transport on housing prices. They found that proximity to subway
stations produces significant positive effects on nearby housing prices but it is
smaller than the effects of accessibility to minibuses.
In summary, the majority of existing studies find positive impacts of transit rail
on residential property values. However, the positive effects are sometimes weak and
vary with income, distance to local job centers, and proximity to rail stations, etc.
The research also shows that light rail has lesser significant effects on residential
property values than heavy rail and commuter rail. The negative effects of
accessibility to light rail were identified in the study by Landis et al. (1994).
Hedonic regression models are the most popular approach adopted to estimate
the effects of rail transit on residential property values in surrounding areas. The
physical characteristics of properties, transit proximity, neighborhood designation,
 Transportation Planning and Technology 153

and accessibility and locational characteristics are widely employed as explanatory

variables to property values in the various empirical studies. However, few of the
studies have recognized the spatial heterogeneity and hierarchical structure of the
data, which may contribute to the widely different estimates of the effects of rail
station proximity reported in the literature. These disparate results suggest the
importance of an innovative approach that incorporates the hierarchical or spatial
nesting structure of the impact factors to model the effects of transit rail systems.

Methodology
Most of the relevant empirical studies employed hedonic price models to investigate
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the effects of transit rail lines on residential property values. Examples include the
simple hedonic regression model utilized by Bowes and Ihlanfeldt (2001), Nelson
(1992), and Nelson and McCleskey (1990) to study MARTA in Atlanta, the hedonic
approach with GIS techniques developed by Chen et al. (1998) to analyze light rail in
Portland, and the hedonic price model employed by Gatzlaff and Smith (1993) to
examine heavy rail in Miami.
The hedonic price models widely used in these studies employ traditional linear
regression approaches, i.e. OLS estimation, to evaluate the impacts of transit rail
lines on residential property values. A general hedonic regression model for
analyzing the effects of transit rail study on residential property values is shown as
follows:

X
I X
J X
K
Y ¼ a0 þ b1i Hi þ b2j Nj þ b3k Ak þ e (1)
i¼1 j¼1 k¼1

where: Y is the dependent variable, i.e. the value of an individual property

Hi refers to physical characteristics variables of the property, such as home size,
home age, and the number of bathrooms, etc.
Nj are the variables describing neighborhood characteristics where the property is
located, such as population density.
Ak are the accessibility and location variables, such as job accessibility.
o is the residual.
a and b are parameters.

The OLS models examine fixed effects but ignore spatial difference in property-
related variables. However, some variables like property values are measured at the
individual point level while the others are available at more aggregated levels, such as
census tract, TAZ, city and county, etc. MLR models or hierarchical regression
models are thought to handle property related data more adequately because they
take into account the nesting structure that incorporates unexplained variability at
each nesting level.
In their study of the migration decision-making process, Chi and Voss (2005)
summarized the advantages of MLR models over traditional OLS models as follows.
First, it includes advantages from spatial econometrics, the ability to account for
geographic heterogeneity, because MLR models can include spatial analysis when
one of the hierarchical levels is geographic. Second, it can easily estimate cross-group
variations. Third, the reliability of the coefficients (i.e. the ability of independent
 154 Q. Pan

variables to explain the strength of relationships with moving probabilities) can be

estimated because the variations for within- and across-groups can be estimated.
Fourth, the MLR approach combines both individual characteristics and aggregate-
level characteristics in the model, allowing the analyst to avoid both ecological and
atomistic fallacies in the interpretation of analysis of results.
Bryk and Raudenbush (1992) further summarized the advantages of the MLR
approach as follows: (1) it takes into account characteristics of individual objects by
modeling regression coefficient at the occasion level; (2) it handles heterogeneous
data that represent objects with a number of repeated measures and different spatial
details; (3) it models the covariance between repeated measures by designating a
specific structure for the variance and covariance at different level; (4) it is able to
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derive analysis of variance-based F-tests and t-tests from the MLR results by
employing a balanced data-set and restricted maximum likelihood estimation; and
(5) it is easy to add higher levels to identify the effects of aggregated groups on
individual objects. In addition, it is fairly simple to incorporate time constants or
time varying explanatory variables into the model (Hox 2002).
The MLR model requires assumptions about the linear dependence of the
dependent variable Y on the explanatory variables and the random effects. A two-
level regression model with multiple variables is shown as follows:
X
P
Level-one model :Yij ¼ b0j þ bpj xpij þ eij (2)
p¼1

X
Q
Level-two model :bpj ¼ cp0 þ cpq zqj þ upj (3)
q¼1

where: Y is the dependent variable,

x is a level-one explanatory variable,
z is a level-two explanatory variable,
b is a group dependent coefficient,
g is a coefficient,
e is the level-one residual,
u is the level-two residual.

The full model is a combination of level-one and level-two models as follows:

X
P X
Q P X
X Q X
P
Yij ¼ c00 þ cp0 xpij þ c0q zqj þ cpq zqj xpij þ u0j þ upj xpij þ eij (4)
p¼1 q¼1 p¼1 q¼1 p¼1

Equation (4) is usually simplified via two assumptions: (1) not all x variables are
considered to have random slopes; and (2) not all z-variables are used to explain the
variability, which leads to some random residual coefficients for z-variables that are
either not significantly different from 0 or are estimated to be 0. These simplifications
lead to a general formula as follows:
X
R X
P
Yij ¼ c0 þ cp xpij þ u0j þ upj xpij þ eij (5)
p¼1 p¼1
 Transportation Planning and Technology 155
P
R P
P
where: c0 þ cp xpij represents the fixed effects of the model, and u0j þ upj xpij þ eij
p¼1 p¼1
represents the random effects of the model.
Whether this MLR regression model is more appropriate than the traditional OLS
regression model depends on the dependence of the residuals.
To examine the effects of light rail on residential property values, this study
adopts the MLR model described in Eq. (5) to analyze the importance of various
explanatory factors at two spatial levels, i.e. the individual property level and the
aggregated zonal level. The factors at the first level or individual property level
include physical characteristics of homes, e.g. size, age, access to rail stations, access
to bus stops, distance to job centers, and a dummy variable about home transaction
before or after the opening of the rail line. The factors at the second level or TAZ
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level include population density, job density, job accessibility, and job density and
accessibility by industrial sectors, etc.

Empirical study
This study implements the MLR model to analyze the impacts of Houston
METRORail transit line on residential property values and compares the results
from the MLR model and the traditional OLS model. The study area is defined as
the TAZs intersecting with the METRORail stations in a quarter-mile, one-mile,

Figure 1. Properties in the Houston study area.

Note: This figure also illustrates the location of residential properties and rail stations, TAZ,
and the alignment of the METRORail transit line and highways.
 156 Q. Pan

two-mile, and three-mile radii, shown in Figure 1. Figure 1 also illustrates the
location of residential properties and rail stations, TAZ, and the alignment of the
METRORail transit line and highways in the region.

Change of transit model share between 1990 and 2000

In a previous study, Pan and Ma (2004) employed the 2000 Census Transportation
Planning Package (CTPP) journey-to-work flow data to study the change of mode
shares of work trips in and out of METRORail transit station areas between 1990
and 2000. The station areas are defined as a 0.3-mile radius around the light rail
stations, which is the minimum Euclidean distance intersecting with most major
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TAZs at Downtown Houston and also falling within walking range of a quarter- to
half-mile distance. The journey-to-work trips are separated by the origin and
destination of the trip ends. The internal-to-internal trips have both trip ends within
the station areas. Internal-to-external trips have origins within the station areas while
external-to-internal trips have destinations within the station areas. The external-to-
external trips have both trip ends outside of the station areas. Because this study
concentrates on the trips originating from or destined to the station areas, the
external-to-external trips are not included in mode share comparisons, although
some of them may pass through the station areas.
Table 2 shows the mode shares for drive-alone, carpool, bus, bicycle, walk, and
other trips. The bottom row of the Table also shows the shares of three trip-end
types. The mode-shares of drive-alone trips have steadily increased in all trip
categories between 1990 and 2000 while the other modes lose more or less of their
shares except that internal-to-internal bus and walk trips gain in shares.
In 1990, bus mode-shares were lower than drive-alone and carpool for all three
trip-end types. Between 1990 and 2000, an obvious change was that bus mode share
in internal-to-internal trips increased from 7.2 to 14.4% while carpool model share
decreased from 12.4 to 9.9%. This may have resulted from the improvement of bus

Table 2. Mode Shares of Work Trips In and Out of Station Areas, 1990 and 2000.

1990 2000

Internal
Internal
Internal
Internal

internal external External
internal external External

Mode (%) (%) internal (%) (%) (%) internal (%)

Drove-alone 52.9 73.0 68.8 58.9 79.3 71.1

Carpool 12.4 14.0 16.7 9.9 13.2 14.6
Bus 7.2 9.2 13.1 14.1 4.7 13.3
Bicycle 1.9 1.1 0.3 3.5 0.9 0.2
Walk 24.7 1.8 0.3 13.3 0.0 0.3
Others 0.9 1.0 0.8 0.2 1.9 0.5
Share of trip 3.3 4.4 92.3 6.1 1.4 92.5
end types*
*The percentage of internal
internal, internal
external, and external
internal trips in the summation of
all these trips.
Source: Author calculation on the basis of CTPP 1990 and 2000, Part 3, Tabulations of area of residence
by area of work.
 Transportation Planning and Technology 157

services and increasing highway congestion in station areas adjacent to Downtown

Houston and the Texas Medical Center. The significant increase of mode share for
internal-to-internal bus trips denotes significant demand for transit service in the
corridor area. The mode share of bus in external
internal trips also came closer to
that of carpool trips in 2000, i.e. 13.3 vs. 14.6%. However, the mode share of internal-
to-external bus trips decreased from 9.2 to 4.7% between 1990 and 2000. This
decrease was partially due to the relatively slower growth of population in the station
areas, moderate improvement of bus services, lagged extension of bus systems to fast
growing population in the outskirt of the city or the suburban areas.
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Data
The dollar values and physical characteristics of properties in the Harris County are
obtained from the property transaction data in InfoUSA’s 2007 household database,
which includes sales price, date on home sale, home size, home age, and contact
information for the household, etc. The InfoUSA database includes a total of
2,028,880 properties in Harris County. After removing redundant records, limiting
transactions to ones after 1983 (the oldest year Houston CPI data is available from
the Bureau of Labor Statistics), and selecting records with sales price information,
the sample had 529,734 properties with valid home size, age, and sales price between
1983 and 2007. This sample included 800 properties located within one-quarter-mile
radius, 1890 within one-quarter and one-half mile, 5390 within one-half and one
mile, 12,250 within one and two miles, and 16,292 within two and three miles from
the light rail stations (Figure 1). Home sales price in different years was converted to
2007 comparable values using the Consumer Price Index (CPI) obtained from the US
Bureau of Labor Statistics.
Employment by sector and by TAZ in the study area is obtained from the CTPP
2000. Census CTPP 2000 also provides geographic maps of the TAZs and average
travel time by origin
destination pairs. Base GIS maps of the study area were utilized
to facilitate the identification of employment centers, calculation of job accessibility,
examination of spatial relationship between objects, and improvement of computa-
tional efficiency, etc.
Table 3 summarizes the variables employed in the MLR estimations. The
dependent variable is the logarithm of home sale prices in 2007, with the values
obtained from the InfoUSA’s 2007 household data-set and adjusted using the CPI.
The explanatory variables are separated into two spatial levels. The variables at the
first level or individual property level include home structure attributes, such as the
logarithms of home size and home age, a dummy variable for home sale before or
after the opening of the light rail line, access to rail stations, access to bus stops, and
access to employment. Access to rail stations is categorized into five groups
measured by the distances to stations, within one-quarter mile of a rail stop, within
one-quarter to one-half mile of a rail stop, within one-half to one mile of a rail stop,
within one to two miles of a rail stop, and within two to three miles of a rail stop.
Regarding the dummy variable for home sale before or after the opening of the
light rail line, it is interesting to examine home value trends for the Houston area as
well for the corridor of the rail transit line. These are shown in Figure 2. Corridor
residences had experienced steady price appreciation in the years before and after the
 158
Table 3. Variables used in the models.
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Variables Description Source

Dependent Lgval Log (home sale prices ($1000)) InfoUSA

Independent First level lghomesize Log(home size (square feet)) InfoUSA
Lgage Log(home age (year)) InfoUSA
Raillineop Home sale before (0) or after (1) MetroRail line open GIS map
RailQMI Within one-quarter mile of metro rail stop GIS map
RailHMI Within one-quarter to one-half mile of metro rail stop GIS map
Rail1MI Within one-half to one mile of metro rail stop GIS map
Rail2MI Within one to two miles of metro rail stop GIS map
Rail3Mi Within two to three miles of metro rail stop GIS map
BusStQMI Within one-quarter mile of metro bus stop GIS map
lgdistcbd Log (distance to CBD) GIS map
lgdistmed Log (distance to medical center) GIS map

Q. Pan
Second level Popdens Population density CTPP/GIS map
JobDens Job density CTPP/GIS map
JobAccess Job accessibility CTPP/GIS map
Job density by Agriculture & Mining (Agrmin_jobden), Construction (Const_jobden), CTPP/GIS map
sector Manufacturing (Manuf_jobden), Wholesale (Wholes_jobden), Retail (Retail_jobden),
Transportation (Transp_jobden), Information (Inform_jobden), FIRE (Fire_jobden),
Professional (Profes_jobden), Educational (Edu_jobden), Entertainment
(Enter_jobden), Other (Other_jobden), Public Administration (Pubadm_jobden), and
Arm force (Armfor_jobden).
Job accessibility Agriculture & Mining (Agrmin_jobacc), Construction (Const_jobacc), Manufacturing CTPP/GIS map
by sector (Manuf_jobacc), Wholesale (Wholes_jobacc), Retail (Retail_jobacc), Transportation
(Transp_jobacc), Information (Inform_jobacc), FIRE (Fire_jobacc), Professional
(Profes_jobacc), Educational (Edu_jobacc), Entertainment (Enter_jobacc), Other
(Other_jobacc), Public Administration (Pubadm_jobacc), and Arm force
(Armfor_jobacc).
 Transportation Planning and Technology 159

Unit Sale Prices (US$/sq ft)

120

100

80 2004

60
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40

20

0
1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007
Year
Corridor Region

Figure 2. Unit home sale prices in Houston, 1979
2007.

opening. This corroborates the idea that any effects of the dummy variable should
not be ascribed to general area real estate market trends.
Table 4 shows the average home sales price and home year at different distances
to the light rail stations. It is clear that the average sales prices measured in dollar per
square foot and the age of the home sold within the three-mile study area, especially
the ones between a quarter-mile and three miles to the nearest light rail stations, are
higher than the other properties in the county. It is also apparent that the properties
along the light rail line have higher unit price but are relatively older than the
regional average.
Access to bus stops is measured via a dummy variable, i.e. within one-quarter
mile of a bus stop. Access to employment centers is measured as the logarithm of
Euclidian distance from property location to the two regional job centers that are
connected by the light rail, i.e. Downtown Houston and the Texas Medical Center.

Table 4. Home sale prices and year by distance to light rail station.

Distance to light rail stations Sales price ($/sqft) Home year

Less than 1/4 mile 55.24 31

1/4
1/2 mile 70.98 35
1/2 to 1 mile 68.66 40
1
2 mile 70.19 44
2
3 mile 69.91 45
Beyond three miles 39.23 27
Regional average 41.31 28
Source: Author calculation using InfoUSA 2007 household database.
 160 Q. Pan

The second-level explanatory variables are neighborhood characteristics and

accessibilities at an aggregated zonal level, including population density, total job
density, total job accessibility, job density by industrial sector, and job accessibility
by sector. Job accessibility is measured using the general form of Hansen’s (1959)
accessibility measurement as follows:

X
Ai;s ¼ Oj;s f ðCij Þ (6)
j

where: Ai,s is accessibility from zone i to job in type s.

Oj,s is the number of type s job in zone j.
f(Cij) is impedance function for observed or estimated travel cost Cij (time or
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distance) from zone i to zone j.

This study uses a negative exponential function (ebCij , b 0) developed by Wilson
(1971) to measure travel impedance f(Cij) The parameter b is set as 0.03 based on
our previous empirical studies on the Houston urban form. The travel cost variable is
the travel time between zonal pairs obtained from Census CTPP 2000 Part 3 data-set.
Job by zone by sector comes from CTPP 2000 Part 2 data-set. Based on the
definition in Census CTPP 2000, there are a total of 2639 zones and 14 industrial job
sectors employed in this study. The 14 industrial job sectors include: Agriculture &
Mining, Construction, Manufacturing, Wholesale, Retail, Transportation, Informa-
tion, FIRE, Professional, Educational, Entertainment, Other, Public Administra-
tion, and Armed Forces.
As Heikkila (1988) has pointed out, with respect to spatial multicollinearity
among spatial variables, it is possible to have multicollinearity problems between the
explanatory variables listed in Table 3. Most of the empirical studies on the impact of
rail transit on property values did not consider or discuss these issues, perhaps based
on the view that multicollinearity is not a problem with statistical techniques like
OLS (Blanchard 1987). Bae et al. (2003) addressed the issue in their study on the
subway line in Seoul and employed the generalized least square rather than OLS
method to correct the problem. Hess and Almeida (2007) calculated Pearson’s
correction coefficient values and used the results to eliminate multicollinearity
among explanatory variables. In this study, we develop a series of models with
different sets of explanatory variables to limit the effects of multicollinearity.

Analysis and results

To consider the possible effects of multicollinearity, this study develops seven models
with multiple sets of variables and employs MLR and OLS models to examine the
effects of light rail on property values, step by step. Model l has no explanatory
variables. It is used as the base model to assist with the calculation of a pseudo R2
value for the following models. Model 2 tests the explanatory power of home physical
characteristics, including home size and home age. Model 3 adds transit access
variables, including a dummy variable for home sale before or after rail line opened,
access to light rail stations, and access to bus stops. The distances to the central
business district (CBD) and to the Texas Medical Center are added in Model 4.
Population and job density are included in Model 5. Model 6 adds total job
 Table 5. Comparison of results from MLR and OLS, Models 1
6.
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Model 1 Model 2 Model 3 Model 4 Model 5 Model 6

Model MLR OLS MLR OLS MLR OLS MLR OLS MLR OLS MLR OLS

Fixed effects
Level 1
Intercept 4.0774*** 4.21874*** 0.2949*** 2.6274*** 0.3010*** 2.6826*** 0.2887*** 1.9382*** 0.3481*** 2.6848*** 1.1827*** 1.4906***
lghomesize 0.6511*** 0.9319*** 0.6439*** 0.9399*** 0.6448*** 0.9522*** 0.6443*** 0.9398*** 0.6449*** 0.9403***

Transportation Planning and Technology

lgage 0.1586*** 0.0895*** 0.1567*** 0.1258*** 0.1579*** 0.1545*** 0.1568*** 0.1221*** 0.1577*** 0.1415***
Raillineop 0.0773*** 0.0556*** 0.0771*** 0.0505*** 0.0773*** 0.0550*** 0.0772*** 0.0507***
RailQMI 0.1830*** 0.6551*** 0.0490 0.2241*** 0.0876* 0.2787*** 0.1184** 0.0782***
RailHMI 0.2416*** 0.5608*** 0.0373 0.1068*** 0.1995*** 0.5290*** 0.0144 0.0573***
Rail1MI 0.1909*** 0.4925*** 0.0090 0.0657*** 0.1642*** 0.4887*** 0.0019 0.0587***
Rail2MI 0.1303*** 0.4933*** 0.0097 0.1544*** 0.1164*** 0.4886*** 0.0072 0.1441***
Rail3Mi 0.0426*** 0.3936*** 0.0135 0.1551*** 0.0368*** 0.3801*** 0.0141 0.1340***
BusStQMI 0.0186*** 0.1410*** 0.0245*** 0.0154*** 0.0193*** 0.1358*** 0.0243*** 0.0070***
lgdistcbd 0.0121 0.0637*** 0.0227 0.0622***
lgdistmed 0.2529*** 0.1989*** 0.2888*** 0.2296***
Level 2
Popdens 0.0057*** 0.0028*** 0.0121*** 0.0115***
JobDens 0.0031*** 0.0057*** 0.0027*** 0.0043***
JobAccess 0.0004*** 0.0001***
Random effects
Level 1
Intercept 0.3794*** 0.3183*** 0.3168*** 0.3168*** 0.3168*** 0.3168*** 0.0006
Level 2
Intercept 0.3252*** 0.1422*** 0.1323*** 0.1092*** 0.1271*** 0.1023*** 0.0041
R2 0.3188 0.3587 0.3723 0.3619 0.3763
Pseudo R2 0.3464 0.3626 0.3954 0.3700 0.4052
Obs. of 529,734 529,734 529,734 529,734 529,734 529,734
Level 1
Obs. of 1427 1427 1427 1427 1427 1427
Level 2

*p 0.1, significant at the 0.1 level, **p0.05, significant at the 0.05 level, and ***p 0.01, significant at the 0.01 level.

161
 162 Q. Pan

accessibility. Table 5 summarizes the results of MLR and OLS from Model 1 to
Model 6.
Model 7 includes all the variables used in this study, including the physical
characteristics of properties, transit access, neighborhood characteristics, and
location variables. These also include job density and job accessibility by industrial
sector. Physical characteristics of the property including home size (lghomesize) and
home age (lgage) are variables at Level 1. Level 1 variables also include the dummy
variable with the value 1 for sales occurring after the opening of the MetroRail
(Raillineop), rail station proximities (RailQMI, RailHMI, Rail1MI, Rail2MI,
Rail3MI), bus stop proximity (BusStQMI), and location amenities, such as the
logarithm of the distances to Downtown Houston (lgdistcbd) and Texas Medical
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Center (lgdistmed). Neighborhood characteristics and accessibility measurement like

population density (Popdens), total job density (JobDens), job density by sector,
total job accessibility, and job accessibility by sector are employed as Level 2
variables. Table 6 reports the results of Model 7 estimated by MLR and OLS.
Model 7 does not completely eliminate correlated variables because it involves to
comparisons of the performance of MLS and OLS with all the explanatory variables.
Consistent with precursor empirical studies in the literature, such as Haider and
Miller (2000) and Bae et al. (2003), this study indicates that the physical
characteristics of properties, including home size and home age, are the dominant
contributors to home sales price. The R2 value of the OLS model with the log values
of these two explanatory variables, is 0.3188 and the Pseudo R2 of MLR model is
0.3464 (see Model 2 in Table 5), which implies that 30% of the variance of the
natural log of property values can be explained by the two explanatory variables, i.e.
home size and home age.
The opening of the light rail line has significant positive effects on residential
property values, which is consistent with the findings by Knaap et al. (2001) in
Portland. Distances to both rail station and bus stop have significant effects on
residential property values. Without controlling for the effects of other variables such
as the distance to job centers, population density, and job density, the MLR model
shows that light rail service has positive effects on residential properties located
within three miles of rail stations while bus stop access has negative impacts on the
values of properties located within one-quarter mile of rail stops. OLS model
estimates show that both light rail station and bus stop proximities have significant
positive effects on home values. The total effects of transit access are minor in terms
of R2 values (only 0.04 surpassing the R2 estimated by OLS in Model 2) and Pseudo
R2 values (only 0.02 more than those reported by MLR in Model 2) (see Model 3 in
Table 5).
Distances to the two largest employment centers, Downtown CBD and Texas
Medical Center, connected by the light rail line are added as two dimensions of
location to Model 4. Based on the results of MLR in Model 4, the CBD does not
have significant effects on residential property values while the Texas Medical Center
has significant positive effects on property values. The OLS in Model 4 reports that
both centers have significant positive effects on property values. This result is
consistent with the urban economics theory with respect to higher property values in
areas closer to job centers. The total impacts of the two job centers are minor
according to the R2 values (only 0.01 higher than the R2 estimated by OLS in
 Transportation Planning and Technology 163

Table 6. Comparison of results from MLR and OLS, Model 7.

Model 7

MLR OLS

Coefficient SE Coefficient SE

Fixed effects
Level 1
Intercept 1.6790*** 0.4762 1.5259*** 0.0504
lghomesize 0.6434*** 0.0026 0.7589*** 0.0024
lgage 0.1577*** 0.0013 0.1598*** 0.0011
Raillineop 0.0773*** 0.0016 0.0684*** 0.0016
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RailQMI 0.1712*** 0.0458 0.2966*** 0.0249

RailHMI 0.0088 0.0315 0.0216 0.0146
Rail1MI 0.0106 0.0243 0.0027 0.0096
Rail2MI 0.0000 0.0173 0.0513*** 0.0065
Rail3Mi 0.0173 0.0114 0.0585*** 0.0055
BusStQMI 0.0237*** 0.0030 0.0094*** 0.0025
lgdistcbd 0.0665*** 0.0175 0.1569*** 0.0038
lgdistmed 0.1915*** 0.0175 0.1247*** 0.0036
Level 2
Popdens 0.0004 0.0017 0.0041*** 0.0003
JobDens
JobAccess
Agrmin_jobden 0.0094 0.0172 0.0143*** 0.0038
Const_jobden 0.0370*** 0.0081 0.0287*** 0.0024
Manuf_jobden 0.0043 0.0104 0.0054*** 0.0018
Wholes_jobden 0.0037 0.0178 0.0052 0.0050
Retail_jobden 0.0058*** 0.0018 0.0049*** 0.0006
Transp_jobden 0.0001 0.0141 0.0229*** 0.0035
Inform_jobden 0.0157*** 0.0058 0.0062** 0.0031
Fire_jobden 0.0083* 0.0049 0.0064*** 0.0011
Profes_jobden 0.0209* 0.0092 0.0017 0.0021
Edu_jobden 0.0031 0.0047 0.0007 0.0012
Enter_jobden 0.0111 0.0066 0.0057*** 0.0020
Other_jobden 0.0639*** 0.0180 0.1416*** 0.0046
Pubadm_jobden 0.0072 0.0091 0.0347*** 0.0036
Armfor_jobden 0.1382 0.2909 0.4196*** 0.0531
Agrmin_jobacc 0.0036 0.0061 0.0048*** 0.0006
Const_jobacc 0.0017 0.0053 0.0003 0.0006
Manuf_jobacc 0.0001 0.0020 0.0023*** 0.0002
Wholes_jobacc 0.0089 0.0085 0.0082*** 0.0009
Retail_jobacc 0.0021 0.0049 0.0019*** 0.0005
Transp_jobacc 0.0002 0.0016 0.0016*** 0.0002
Inform_jobacc 0.0155* 0.0092 0.0172*** 0.0010
Fire_jobacc 0.0031 0.0042 0.0021*** 0.0005
Profes_jobacc 0.0084** 0.0033 0.0051*** 0.0004
Edu_jobacc 0.0020*** 0.0006 0.0002** 0.0001
Enter_jobacc 0.0162* 0.0096 0.0131*** 0.0010
Other_jobacc 0.0207 0.0143 0.0078*** 0.0015
Pubadm_jobacc 0.0172** 0.0053 0.0142*** 0.0006
 164 Q. Pan
Table 6 (Continued )

Model 7

MLR OLS

Coefficient SE Coefficient SE

Armfor_jobacc 0.0640 0.1148 0.0699*** 0.0125

Random effects
Level 1
Intercept 0.3169*** 0.0006
Level 2
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Intercept 0.0507*** 0.0021

R2 0.4115
Pseudo R2 0.4783
Obs. of Level 1 529,734
Obs. of Level 2 1427
*p 0.1, significant at the 0.1 level, **p0.05, significant at the 0.05 level, and ***p0.01, significant at
the 0.01 level.

Model 3) and Pseudo R2 values (just 0.03 more than Model 2 reported by MLR in
Model 3) (see Model 4 in Table 5).
It is notable that all rail station proximity variables are significantly positive when
estimated by the OLS model but insignificant when estimated by the MLR model
after including the variables of access to employment centers in the model. The
results of the MLR model imply that the significantly positive effects of the light
rail stations may come from the improvement of access to regional employment. It is
also interesting to find that the effects of the proximity to bus stops within a quarter-
mile estimated by the OLS model changes from positive in Model 3 to negative in
Model 4. This may be caused by multicollinearity.
The two neighborhood characteristic variables, population density and job
density at the second level (TAZ), also have significant effects on property values (see
Model 5 in Table 5). Population density has negative effects and job density has
positive effects on property values in the OLS model while both population density
and job density have significant positive effects in the MLR model. Their total effects
on property values are less than those of the two job centers. R2 values estimated by
OLS are almost the same between Model 3 and Model 5. Similarly, Pseudo R2 values
reported by MLR in Model 5 are slightly less than 0.01, higher than that in Model 3.
All the transit access variables are significant in Model 5 and they keep the same
positive or negative effects as Model 3.
Total job accessibility has significant negative effects on property values although
the overall effects reported by both R2 and Pseudo R2 values in MLR and OLS are
minor (see Model 6 in Table 5). However, the effects of job accessibility are diverse
across sectors. Based on the estimates of the MLR model, job accessibility in a few
industrial sectors has significant effects on property values. Job access to information
services, education services, and public administration has significant positive effects
while job access to entertainment and professional services has significant negative
effects. In contrast, OLS reports that job accessibility in all the industrial sectors
except construction has a significant impact. Job access to manufacturing, wholesale,
 Transportation Planning and Technology 165

retail, information services, education services, other services, public administration

services, and armed forces has significant positive impacts while job access to
transportation, FIRE, professional services, and entertainment has negative effects
on property values (see Model 7 in Table 6).
As the results for Model 5 and Model 6 reveal, job density as a whole has
significant positive impacts on home values. Nonetheless, job density by industrial
sector has a variety of impacts, shown in Table 6. Both MLR and OLS report
significant positive effects of job density in construction, retail, and other services
and significant negative effects of job density in information sector. MLR also
reveals significant positive effects of job density in FIRE and significant negative
effects in professional services sector while OLS results show significant effects of job
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density in more industrial sectors, although some of them have positive and the
others have negative effects.
In Model 7, the MLR and OLS estimates reveal similar effects of physical home
characteristics, i.e. the significant positive effects of home size and negative effect of
home age on property values, and the significant negative effects of distance to job
centers (or the positive effects of proximity to the centers) on home values. Both
Models report that the opening of the light rail line has significant positive impacts
and access to bus stops within a quarter-mile distance has significant negative effects
on home values. However, they result in obviously different estimates of the effects of
access to light rail stations. MLR results show that the values of the properties within
a quarter mile distance to a rail station decrease while those located beyond a quarter
mile distance to a rail station are not significantly impacted. OLS also estimates
negative effects of proximity to a rail station within a quarter-mile distance. However,
it estimates that the values of the properties located between one and three miles to
rail station will increase.
Being aware of the possible multicollinearity problems between transit access,
employment density, and employment accessibility, it is not surprising to observe
changed values and signs of the coefficients. However, it is more important to
discover consistent results and have reasonable explanations for the effects of the
explanatory variables. In comparing the results of MLR and OLS, it is interesting to
note that almost all of the explanatory variables with significant effects reported by
both MLR and OLS get the same positive or negative signs. This provides a measure
of confidence in the effects of the variables that have the similar parameters
estimated by both models. However, MLR and OLS yield different estimates for the
effects of the bus station proximity, i.e. BusStQMI. In all seven models, MLR
consistently reveals that proximity to bus stops within a quarter-mile has
significantly negative effects. In contrast, OLS reports that it has significantly
positive effects in Model 2 and 5 and significantly negative effects in Model 4, 6,
and 7. It is also unrealistic for OLS to estimate job accessibility and job density
effects in almost every industrial sector with significant effects on property values.
MLR seems to result in more meaningful outcomes by selecting a few major factors
with significant impacts. A possible explanation is that the OLS model does not
account for spatial differences among the explanatory variables. Therefore, it is more
reasonable to emphasize the findings from the application of MLR.
It is not a big surprise to find that proximity to light rail stations and bus stops
has negative effects on nearby properties, e.g. within a quarter mile distance. The
7.5-mile light rail line of Houston MetroRail has provided limited services to
 166 Q. Pan

residents within a small geographic area. It operates at slower speed, i.e. less than
20 miles per hour. A large portion of the land near to the rail line is commercial,
especially in Downtown Houston in the north end, Texas Medical Center in the
middle, and Reliant Park close to the south end. It is also true that the new light rail
line opened only a few years ago. According to studies by Landis et al. (1994), Bowes
and Ihlanfeldt (2001), and Hess and Almeida (2007), etc., a light rail system of short
distance and a small service area like Houston Metrorail line is unlikely to generate
significant capitalization effects and the properties near light rail stations are unlikely
to develop large premiums. On the other side, the negative externalities or nuisance
effects of noise, congestion, and increased crime, etc. may become the dominant
factors in generating negative net effects, especially on the properties within a
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quarter-mile distance. Beyond a quarter mile, light rail stations have insignificant
effects on home values because neither the positive nor negative externalities are
dominant, as shown in the results of the MLR in Model 7 (see Table 6).

Discussion and conclusions

Light rail transit in US metropolitan areas has the potential for extending essential
socioeconomic opportunities to the transit dependent population and provided
alternative transportation services for some commuters. However, these projects have
also been criticized for high costs in construction and operations, low ridership and
revenue, noises, crimes, and numerous safety problems. There are mixed effects of rail
transit lines on residential property values in existing empirical studies. This research
contributes to the growing literature on the relationship between light rail and
residential property values in two unique respects: first, it examines the effects of the
Houston MetroRail Transit Line, a new light rail line opened in 2004 that had to date
not been studied extensively; and second, it employs a new method, the MLR model
with the widely used ordinary linear regression (OLS) to investigate the impacts of
light rail system on residential property values.
The MLR approach has advantages over OLS approaches used in traditional
hedonic price functions by incorporating the hierarchical structures of spatial data to
the model explicitly. The study also includes a comparison of the results from both
MLR and OLS in a series of models employing different sets of variables, including
home building characteristics, the opening event of light rail line, proximity to light
rail stations and bus stops, neighborhood characteristics, and location variables, etc.
The modeling results from both MLR and OLS show that the physical
characteristics of the residence, including home size and age play the dominant
role influencing residential properties values. Home size has significant positive
effects while home age has significant negative effects, which is consistent to the
results from other studies.
The opening of the light rail also has significant positive effects on residential
property values. In the case where all the explanatory variables are included, both
MLR and OLS models show that access to light rail stations has significant negative
impacts on the values of residential properties located within a quarter-mile of rail
stops and the effects become insignificant between a quarter mile and one-mile
distance from rail stops. The OLS estimation reveals that the light rail line has
positively significant effects on properties located between one-mile and three-mile
distance from rail stops while the MLR model only shows insignificant effects of
 Transportation Planning and Technology 167

light rail on those properties. Access to a bus stop has significant negative effects on
the values of properties located within one-quarter mile of bus stops. The results of
the MLR estimation, especially for the effects of access to bus stops, are more
consistent than those of the OLS model.
Neighborhood characteristic and locational amenities such as population density,
job density, and access to local job centers are also found by both MLR and OLS to
have significant impacts on property values. Population density has significant
negative effects on property values in most cases. Without controlling neighborhood
characteristic at Level 2, MLR finds that Houston CBD does not have significant
effects on property values while Texas Medical Center has significant positive effects
on property values. In contrast, the OLS model reveals that both centers have
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significant positive effects on property values and property values increase at the
locations closer to the centers. When all the explanatory variables including job
density and job accessibility by sector are utilized, the two job centers (Downtown
Houston and Texas Medical Center) that the light rail line has connected have
significant positive effects while job density and job accessibility by sector have
diverse effects on residential property values.
Both MLR and OLS model results show that total job density has significant
positive effects while job accessibility as a whole has significant negative effects on
property values. But these two models also come up with very different estimates of
the effects of job density and job accessibility by industrial sector. Both MLR and
OLS report significant positive effects of job density in construction, retail, and other
services and significant negative effects of job density in information sector. MLR
also reveals significant positive effects of job density in FIRE and significant
negative effects in professional sector while OLS reports significant positive or
negative effects of job density in more industrial sectors.
Different from the OLS model that reports significant impacts of job accessibility
in almost every industrial sector on property values, the MLR models found the
major factors to have significant impacts. They show that job access to information
services, education services, and public administration has significant positive effects
while job access to entertainment and professional services has significant negative
effects. Job access to other sectors does not have significant effects on residential
property values. The results of MLR seem to be more meaningful, showing selected
major factors to have significant impacts.

Acknowledgements
I would like to express my gratitude to Peter Gordon and Genevieve Giuliano for their
valuable comments on this research. I also wish to thank Jiyoung Park for providing SAS
programs to calculate the MLR. My special appreciation goes to the Houston Galveston Area
Council (H-GAC) and Metropolitan Transit Authority of Harris County for providing light
rail data.

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