Friday, November 06, 2009

Cost Overuns and the Denver Rail System

I am not surprised that the Denver rail's FasTracks is vastly over budget. I am often "railed" against the rising total cost of such public works projects. Voters do have a right to know the final cost of a project before they vote on it. Unfortunately, this type of thing does not help in generating "trust in government". In the middle of this NY Times article , there is a quote from Arthur Nelson who optimistically says that all else equal that if a home is closer to rail transit that its probability of going into foreclosure is lower. So, he is positing that new urbanist homes are less risky investments. Is this true?

Arthur, have you read my 2007 Real Estate Economics paper on community gentrification near new rail transit lines? The largest home price gains are near new "Walk and Ride" stations. Think of Davis Square on the Boston Red Line.

My question for Dr. Nelson is what is his control group? To tease out a causal effect of proximity , he needs to answer what would these homes' foreclosure rates have been if they had not been close to rail transit. Is he simply looking at homes equi-distant to the city center that are not near rail transit (so looking at a common radius around a city's center)?

When we make causal claims to the media, I'd ask us to be clear about what is the comparison group. How do we know that what we are telling the reporters is "true" versus is wishful thinking?

Nelson has made an interesting claim that merits further research.