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ECONOMIC BENEFITS of TRAILS

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Not only do open spaces, recreation areas, and walkable neighborhoods strongly influence how active people are, they provide fiscal benefits to municipal governments as well as nearby residential property values.

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Physical activity facilities have economic as well as health benefits

From Economic Benefits of Open Space, Recreation Facilities and Walkable Community Design

photo of "new apartments sign by trail

Developer advertises homes along Highline Canal Trail in
Aurora, Colorado (photo by Stuart Macdonald, November. 2009)

 

ABSTRACT

Walkable neighborhoods, parks and open spaces are believed to generate economic benefits to local governments, home owners and businesses through higher property values and correspondingly higher tax assessments. The economic benefits of open, walkable spaces can play an important role in policy-makers’ decisions about zoning, restrictions on land-uses, government purchase of lands for parks and similar initiatives.

This research synthesis reviews the sizable body of peer-reviewed and independent reports on the economic value of outdoor recreation facilities, open spaces and walkable community design. It focuses on “private” benefits that accrue to nearby homeowners and to other users of open space. While parks may also generate “public” benefits to the whole community, such as alleviating traffic congestion, reducing air pollution, flood control, wildlife habitat, improved water quality and facilitating healthy lifestyles, the literature estimating the economic value of these types of benefits is not reviewed.

INTRODUCTION

Overweight and obesity rates have risen dramatically in the United States since the 1970s, and, during a similar time period, physical activity rates have declined in both children and adults. Being physically active is more than a personal decision; community design and the availability of open spaces and recreation areas strongly influence how active people are. The Guide to Community Preventive Services created by the Centers for Disease Control and Preventionidentifies community designs in which residents can walk or bicycle to nearby destinations (often called compact, walkable or traditionally designed communities) as effective ways of promoting physical activity for adults, and other studies demonstrate similar findings for youth. People living in walkable neighborhoods get about 35–45 more minutes of moderate-intensity physical activity per week, and are substantially less likely to be overweight or obese, than do people of similar socioeconomic status living in neighborhoods that are not walkable.

Living close to parks and other recreation facilities also is consistently related to higher physical activity levels for both adults and youth. One national study found that adolescents with easy access to multiple recreation facilities were both more physically active and less likely to be overweight and obese than were adolescents without access to such facilities. The Institute of Medicine has stated that improving the walkability of neighborhoods and increasing access to recreation facilities are essential strategies for preventing childhood obesity.

Key Research Results

Open spaces such as parks and recreation areas can have a positive effect on nearby residential property values, and can lead to proportionately higher property tax revenues for local governments (provided municipalities are not subject to caps on tax levies).

1. The economic impact parks and recreational areas have on home prices depends on how far the home is from the open space, the size of the open space and the characteristics of the surrounding neighborhood.

2. Open space in urban areas will increase the level of economic benefits to surrounding property owners more than open space in rural areas.

3. Open space, recreation areas and compact developments may provide fiscal benefits to municipal governments.

4. Compact, walkable developments can provide economic benefits to real estate developers through higher home sale prices, enhanced marketability and faster sales or leases than conventional development.

Details on Key Research Results

 

1. Positive effects on residential property values

A pair of studies conducted in 2000 and 2001 analyzed the same set of more than 16,400 home sales in Portland, Ore., using two different methods. The first found that the 193 public parks analyzed had a significant, positive impact on nearby property values. The existence of a park within 1,500 feet of a home increased its sale price by between $845 and $2,262 (in 2000 dollars). Additionally, as parks increased in size, their impact on property value increased significantly.

The second study found that large natural forest areas had a greater positive impact on nearby property prices than did small urban parks, specialty parks such as playgrounds or skate parks, and golf courses. Homes located within 1,500 feet of natural forest areas enjoyed statistically significant property premiums, an average of $10,648, compared to $1,214 for urban parks, $5,657 for specialty parks and $8,849 for golf courses (in 1990 dollars).

Studies in Howard County, Md.; Washington County, Ore.; Austin, Texas; Minneapolis-St. Paul, Minn., and other areas, have used data from residential sales, the census and Geographic Information Systems (GIS) to examine the marginal values of different types of parks, and confirmed that different types of open space have different effects on property values.

The studies found that, in general, urban parks, natural areas and preserved open spaces showed positive effects on property values. Some types of open space can reduce nearby property values, an outcome sometimes called ‘the nuisance effect.’ Studies have confirmed that parks that are excessively busy, located in highly desirable or undesirable neighborhoods, or unattractive or poorly maintained have a negative impact on home values. In these instances, parks detract from property values due to the perception that they are unsafe, unnecessary or unused. One study conducted in Greenville, S.C., found that attractively maintained small and medium parks have a positive influence on neighboring property values. However, it also found that such parks that are not improved or well maintained had negative impacts on residential property values.

The positive effect natural open space has on nearby property values can result in higher assessments and thus higher property tax revenues for local governments. In one Boulder, Colo., neighborhood, the overall value of the greenbelt was approximately $5.4 million, which contributed potentially $500,000 annually to the overall neighborhood property tax revenue. The purchase price of this greenbelt for the city was approximately $1.5 million and, thus, the potential property tax revenue alone would allow a recovery of initial costs in just three years.

A study conducted in three Maryland counties calculated the economic benefits of preserved agricultural land to homeowners and estimated the property tax revenues generated from a 1 percent increase in permanent open space. It found that for a 1 percent (148 acre) increase in preserved agricultural land in Calvert County, Md., the increase in housing values within a one-mile radius generated $251,674 — enough tax revenue to purchase an additional 88 acres of parkland in one year.

At the same time, municipal governments must be aware that the level of property tax revenues will depend on the built environment around the park. An analysis of a 7.9 mile greenbelt in Austin, Texas found that the incremental tax base increases from properties in neighborhoods adjacent to the park were less than the cost of acquiring the greenbelt ($14.89 million in 2004 dollars). Unlike the City of Boulder, which recovered the park purchase price in three years, the City of Austin met only 28.4 percent of the annual debt charges with property tax increases, in large part because substantial sections of the park had no adjacent private properties.

The impact parks can have on property values may actually underestimate the value of open space, by excluding the nonmarket values associated with passive uses, such as just knowing that open space exists. Stated preference surveys, similar to hedonic pricing methods, attempt to value nonmarket benefits by asking respondents about their willingness to pay for an amenity. Residents in one Boulder, Colo., neighborhood were willing to pay $234 per household (in 1995 dollars) to keep a 5.5-acre parcel of undeveloped land preserved forever. Extrapolating to the whole neighborhood within a mile of the parcel, the total value was $774,000, more than the $600,000 cost of the land. Another method for calculating the recreational benefits of parks and open space estimates the travel costs associated with visiting a park in order to estimate the total benefit to all park users. A study of the Monon Trail in Indianapolis / Marion County, Ind., found that the average property price premiums for 1999 home sales could total $140.2 million, with an additional net present recreational benefit of $7.6 million.

 

2. Economic impact or recreational areas on home prices

A review of over 60 studies on the impact open spaces have on residential property values showed that most do increase property values but the magnitude depends on the size of the area, its proximity to residences, the type of open space and the method of analysis. The review found that increases in property value existed up to 500–600-feet away from the park.39 For community sized parks over 30 acres, the effect may be measurable out to 1,500 feet, but 75 percent of the premium value generally occurs within the 500–600-foot range.

One study estimated that the average household living half a mile from open space would be willing to pay $4,104 more for a home (in 1992 dollars) to live a quarter mile closer to the open space. While the distance between a park and homes is important, park size also is a key determinant of the magnitude of a park’s impact on home prices. So, a small park located close to residential
areas may have a larger impact on more houses than a large park located farther away. In Portland, Ore., house prices increased with the size of the natural area, leading the authors of the study to conclude the optimal size of parks and natural areas to be similar to that of a golf course.

Increasing the percentage of open space land surrounding a property can increase average house prices by up to 1 percent of the total property value. A study conducted in 2001 also found that large parks are more valuable to residents than small parks. However, because the property value premium is small relative to the value of proximity, creating a series of small parks with more total houses in their vicinity may produce a greater economic benefit to the overall community.

Increasing the visibility and accessibility of parks can help maximize their value to the surrounding community. Indirect paths from nearby homes into a park detract from the proximity value boost and decrease the level of benefit that could be experienced. Similarly, parks bordered by roads are substantially more valuable to the surrounding neighborhood than green space only bordered by private lots. Access to open space can also play an important role in the magnitude of the effect. Homes located in a Dallas, Texas subdivision that had publicly usable open space between houses generally sold at a premium, but the effect of the open space was statistically insignificant, and much smaller than the effect of the size of the private lots themselves. Indeed, an additional square foot of private backyard space is estimated to be worth $384 (in 1985 dollars), while an additional foot of open space is found to be worth less than $4.48

 

2. Open Space benefits to urban vs. rural areas

How much economic value open space provides to surrounding property may depend on its location. For instance, the value of open space may be higher in urban areas than in suburban ones, with parks, greenways, forests and other natural areas providing greater economic benefits as population density increases. Broadly speaking, urban residents in dense neighborhoods located near downtowns place substantial value on proximity to open space, while suburban and rural residents do not appear to value open space as highly.

A study of four large, regional parks in Bastrop County, Texas confirms that open spaces in rural areas may have less of an impact on property values. In the largely rural county near Austin, Texas, the parks — both individually and as a group — had no statistically significant impact on property prices in the rural county in which they are located. The authors cite the relatively large amount of undeveloped land (whether publicly or privately owned) in the area, as well as the rather large size of lots compared to those in the typical American city as reasons why the price premium associated with living close to a public open space in a predominantly rural area might be limited.

Greenbelts, urban growth boundaries and open spaces in clustered subdivisions also appear to have value to the community, but the relationship is difficult to distinguish from the effect of the supply of buildable land. A land containment program in Salem, Ore., added about $1,200 more per acre (1979 dollars) to the value of urban land near the greenbelts than urban land located 1,000 feet away from the boundary. The impact greenbelt land has on urban land value extends about 5,000 feet inward from the urban growth boundary.

Preserved farmland in rural and suburban areas has a greater impact on surrounding real estate values than land that may be developed. Because many studies on the subject have been conducted in specific geographic areas, there is mixed evidence about how much households are willing to pay to preserve the farmland. However, studies do show there is a price premium when farmland perceived to be under the threat of development is preserved. A 2002 study found that people in Maryland were willing to pay $3,307 more for a house near permanently preserved open space rather than pastureland that could be developed at some point in the future, suggesting that people value open space because it is not development.

 

4. Fiscal benefits to municipal governments.

Compact, walkable development, which preserves open space and concentrates development on smaller lots, also provides financial benefits to municipalities related to lower infrastructure costs. Large-lot suburban development patterns require roads, water supply and sewer services that become more costly when extended over greater distances. One study found that a half acre lot in a centrally located, compact development costs $198 less in annual water and sewer service and $72,000 less in additional costs over 30 years than a comparable lot in the suburbs.

Locating a compact, walkable subdivision where there is existing infrastructure may also increase benefits of associated open space. A study conducted in Prince William County, Va., located outside Washington, D.C., found that providing municipal services to a house on a large lot far from existing infrastructure costs the county $1,600 more than is returned in taxes and other revenues. A study in Rhode Island found the state could save more than $1.4 billion over 20 years, or $71.6 million per year, if the state’s next 20,000 housing units were built within existing urban areas instead of in undeveloped areas. The study showed savings on roads, schools and utilities and calculated the benefits of agricultural lands not lost and urban centers not decayed.

Fiscal impact studies estimate the public costs and revenues associated with residential or nonresidential growth to determine the net fiscal impact of development. A review of fiscal impact analyses found that: Residential development typically resulted in a fiscal deficit; nonresidential development generated a fiscal surplus but attracted residential development; and open space was fiscally preferable to residential development and equal to or better than commercial and other nonresidential development.

Using a process pioneered by the National Park Service, studies in 125 communities have used a type of fiscal impact study, the Cost of Community Services, to develop a revenue-to-expenditure ratio for residential, commercial, industrial and open space land use categories. While fiscal impacts to local governments do not represent the same type of economic benefit as increases
in property value, the cost savings or revenue to jurisdictions though open space and parks may benefit a community through long-term infrastructure cost savings.

Open space and recreational facilities can require fewer public amenities and municipal services than new land development, offering a cost-effective alternative. The Northeastern Office of the American Farmland Trust, which has frequently used the Cost of Community Services approach, studied six rural towns in Connecticut, Massachusetts and New York and found that, on average, open space lands required only 29 cents in services per dollar of revenue generated. A number of communities have reportedly elected to purchase park and open space land, rather than allow it to be used for residential development, because in the long term this results in less tax burden on existing residents than if new homes were built on the land. Additionally, investment in parks and open space does not incur some of the costs that often accompany residential development, such as traffic congestion, noise, pollution, infrastructure deterioration and changes in community character.

 

4. Benefits of walkable developments to real estate developers

Traditional neighborhood development, also known as compact or walkable development, concentrates neighborhood density, allowing room for large open space areas. Neighborhoods that feature open spaces, parks and greenbelts have higher home sale prices, enhanced marketability and often faster sales or leases than conventional development. A national survey of developers found that they have noted considerable consumer interest in alternatives to conventional, low-density, automobile-oriented suburban development — including support for higher density, mixed use, pedestrian-oriented places.

This demand is expected to continue in the coming decade as demographic changes and consumer preferences shift toward denser, more compact residential environments. One recent study listed additional factors that could support the market for walkable urban places, including: urban job growth, tight urban housing markets, preferences for urban amenities and support for public policies and investments that favor revitalization, alternative transportation modes, historic preservation and urban parks and open space. Open spaces enhance the value of nearby developable lands, allowing compact development to command a premium in the residential real estate market.

Developers who take into account the desire for compact development and the protection of natural areas may spend less on marketing because such projects can have a high profile within the community, solicit high community involvement in their development and design, and generate significant media interest. Compact developments featuring open space, trails and greenways have sold more quickly than similar properties elsewhere and often have a high rate of presold units.

Consumers also seem willing to pay a premium to locate in walkable developments featuring open space. Sites that are more walkable command higher property values across property type, including office, retail, apartment and industrial. Depending on the property type, a 10 percent increase in walkability increases property values by between 5 percent and 8 percent. Lots in a compact, walkable subdivision in South Kingston, R.I., sold for $122,000 to $125,000 per acre, while lots in conventional subdivisions sold for $107,000 to $109,000 per acre. This translates into premiums ranging from $13,000 to $18,000 per acre for lots in walkable subdivisions over lots in conventional subdivisions.

For developers, these economic benefits can translate into reduced financial liability, faster sales and ultimately higher profits. A recent development in Lake Elmo, Minn., highlighted by the Urban Land Institute, demonstrated a similar principle by offering a high density alternative in an area of large-lot development. The developer used only 40 percent of the 241-acre site for the development of 111 homesites, leaving 60 percent of the land to permanent open space composed of farmland, a tree nursery, horticultural gardens, wooded slopes, two ponds and restored native prairie. Close to 80 percent of the homes sold within six months of their offering in two phases.

The design elements of compact developments may also present cost savings to developers. Watershed areas have been used in some developments as a form of natural drainage protection and open space, reducing construction and maintenance costs from storm water drainage systems. In one development, surface stormwater drainage through the use of swales that direct water over porous soils to irrigate agricultural areas saved $800 per lot when compared to conventional storm sewer construction. Because people can walk to more destinations, reduced parking ratios and shared parking have also been used to offset the increased costs of structured parking.

Finally, as the density of development in these neighborhoods increases, the per-unit cost to developers to supply infrastructure services decreases, with some estimates of the average savings around 32 percent. As developers are often called upon to pick up a significant portion of the tab for the sewer and water capital expenditures associated with their projects, these cost savings have been passed onto them through changes to fee structures.

Conclusions and Implications

In addition to providing opportunities for physical activity, recreation areas and parks located in metropolitan areas provide economic benefits to residents, municipal governments and private real estate developers. Parks tend to increase the value and sale price of homes and property located nearby. In addition, the amount of local tax dollars required to operate and service recreation areas may be less than for other types of land use, such as residential developments, further increasing the fiscal impacts they have on municipal governments. Neighborhoods designed to preserve open space through compact development patterns may result in savings to private developers through reduced construction and maintenance costs, while communities designed for walkability can command price premiums in the marketplace.

Other than the potentially negative economic effect of the “nuisance” factor associated with overly busy or unattractive parks, recreation areas and compact developments were found to produce positive economic outcomes for developers, homeowners and local governments. The implications of these findings are important, particularly given recent fluctuations in the real estate market, changing demographics and variable consumer demands for housing. The limitations associated with these conclusions are clear. Many of the studies included in the literature rely upon local conditions and may not be widely generalizable to other areas.

Evidence on real estate market prices are subject to a variety of local factors, such as schools, crime and accessibility, which can impact the applicability of conclusions in one area to conditions elsewhere. Thus, it is difficult to make conclusions about specific economic impacts.

Although all reasonable studies were examined for this synthesis, to provide the first comprehensive look at the subject and identify priorities for further study, many of the studies cited were not from peer-reviewed sources, so their rigor could be questioned. Self-selection, or the tendency for certain residents to gravitate towards particular types of places, may also limit the findings. Some residents will place a higher value on open space and recreation areas and will pay significantly more to be located near these amenities than others.

Areas Where Additional Research is Needed

Research into citizens’ preferences for urban parks and their impacts on the local real estate market has been ongoing in the United States since the 1960s. While research continues, the hedonic pricing method has proven to be a useful indicator of willingness to pay for natural, green space amenities. However, this approach may not take into account the recreational benefits open space may provide to people who do not own property near the facility but do use it for physical activity purposes. Other methods, such as the travel cost method, may capture these values, but more research is needed to explore these effects.

Further research into the costs and benefits of parks, with respect to local government, regional economic development and private developers, is needed. Policy-makers and community members may need additional evidence of the types of parks, landscape elements and locations where parks can be expected to generate the largest economic benefits while also considering physical activity impacts. These studies should be used to inform decisions about land development patterns and zoning decisions. While this review focuses on direct economic effects through property values and fiscal impacts, it is important to note that open spaces can also provide indirect economic and non-economic benefits.

Ecological services, greenhouse gas reductions, and mental health benefits, as well as recreational benefits, should also be considered as indirect effects of parks. These indirect benefits can be evaluated using the Travel Cost Method or Stated Preference Surveys such as Contingent Valuation. Finally, gaps in the research quantifying the price premium of compact developments make conclusions about the expected increases difficult to determine. While past research suggests that compact communities designed to preserve green space may result in savings to private developers through reduced construction and maintenance costs, recent changes in the finance and construction industries require updates to the existing research.

 

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