Yu Huang, Dawn Cassandra Parker, Paul Anglin
Executive summary
Building upon Dr. Yu Huang’s Ph.D. thesis (supervised by Professor Dawn Parker), this research aimed to investigate the housing demand structure impacted by the new LRT development. Transit-oriented development (TOD) has become a prominent planning strategy in North America to promote smart growth. The success of TOD relies on the development of suitable housing to meet a variety of demand. Thus, it is essential to understand the residential location choices of different households and their preferences for TOD. The study was published in Environment and Planning B: Urban Analytics and City Science.
Using Kitchener-Waterloo (KW), Canada, as a case study, we address the following questions: (1) Do households in this mid-sized region show preferences for TOD neighbourhoods? How do preferences for transit accessibility vary across space? (2) What household characteristics are associated with the demand for housing and neighbourhood characteristics? With a combined dataset of household survey (357 homebuyers) and housing transactions (11,361 population-level observations), we present a novel application of the two-stage hedonic model for demand estimation. This study provides evidence of demand for TOD and LRT accessibility by households with a range of socio-demographics. We thus recommend the region build complete TODs to satisfy a variety of housing needs.
Key findings
Strong preferences for TOD in KW existed in anticipation of LRT
This study first estimates how market transaction reflect households’ willingness to pay (WTP) for TOD and transit accessibility. Using a Geographically Weighted Regression (GWR) model, we find that properties within the central transit corridor (CTC, roughly 800 meters from LRT stations) were about 1.4% higher in price (based on the median estimate from GWR), suggesting that people were willing to pay more for living in the CTC even when the LRT was under construction. This evidence supports that TOD has been seen as an urban amenity in our case-study region, if not for every household, for many and diverse households. It also confirms our hypothesis that strong preferences for TOD in KW existed in anticipation of LRT.
The model results also indicate that people in KW were willing to pay more for living closer to the future LRT, but not to buses (especially within 500 m). Spatially, we find the impact varies , with the two urban core areas seeing significant and positive price premiums associated with the LRT and the suburban station areas showing insignificant signs of value uplift. The positive impact of LRT proximity on housing prices gradually fades away as the distance gets over about 2 km from the LRT.
A variety of households preferring potential transit accessibility
We estimated a two-stage hedonic model to better understand how household characteristics contributed to observed home price differences.
Our analysis finds that preference for proximity to LRT did not significally vary with differences in household type, income, age or education. This indicates that people in KW who had developed particular preferences for transit accessibility were not significantly different in socio-demographics. In other words, transit accessibility is not only demanded by young professionals and seniors—the target of the current TOD projects in KW—but by families with children.
Regarding the demand for other housing and neighbourhood attributes, we find that the presence of children, age and income played a more crucial role in determining the choices for home size, yard size and open space. Specifically, couple families with children were willing to pay significantly more for an increase in home size, lot area and the number of garages compared to those without children. Households under 35 showed a weaker preference for larger home sizes and yards, as expected. The highest income group showed the strongest preference for larger home space, more garages, and nearby open space access. Residential preferences were also differentiated by educational attainment. Households with a graduate degree held a significantly higher WTP for larger homes and more neighbourhood open space.
Mismatch between TOD demand and supply
The demand analysis in this study provides evidence of demand for TOD by households with particular TOD preferences and a spectrum of income, age and education levels. However, developers may not perceive, or be convinced about evidence of the latent market demand for family-sized housing in TOD areas, or market conditions may not support such construction. They prefer to build denser, more compact projects and see obstacles to realizing affordable family housing. In KW, evidence from other case-study resarch indicates a corresponding supply deficit of suitable housing along the corridor for larger households with low-to-moderate incomes. Our results support the need to build complete TODs in KW and to satisfy the demand for TOD by a range of households.
Conclusion
In brief, our findings suggest that homebuyers in KW put higher values on LRT accessibility and transit-oriented development neighbourhoods, which is consistent with several similar studies in North American cities. The demand analysis suggests that not only young professionals and seniors showed preferences for TOD but families with children, whose housing needs for larger home space are neglected by current developments and policies. The mismatch between TOD demand and supply heightens the need to increase the supply of missing middle housing for larger families and bridge the gap.
This work provides important insights into the housing demand structure before the LRT was operational. We recommend a repeat study to estimate the shift after its operation commenced and pandemic transit declines have been resolved. This method can be applied to other cities to identify housing demand shifts associated with other large changes.
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