...proximity stations in the late 1980s and early 1990s--after the plans for the line were well known. The difference between the increase in the value of homes within the sample area as compared with properties farther away from the new transit stations was approximately $216 million between 1986 and 1999.

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The Midway Rapid Transit Line opened in Chicago on October 31, 1993. Also known as the Orange Line or Southwest Side Rapid Transit Line, it connects downtown Chicago to Midway Airport, a distance of 11 miles. The purpose of this paper is to measure the effects of the new line on the market for single-family houses. The data for the study are 17,034 single-family house transactions within 1.5 miles of the line that took place over the 1983-1999 period. This data set is far more comprehensive than data sets used previously to study the effects of transportation improvements. Use of data over the 17-year period permits us to estimate the effect of the line on house prices as it varies over time. Our study is also unique in its use of both the hedonic approach and the repeat sales estimator to track temporal variations in transit station gradients, and in using the repeat sales method to obtain estimates of the aggregate benefit of the new transit line. (1)

We find that the anticipated benefits of the new transit line began to be capitalized into house prices as early as 1987, 6 years before construction was completed. The house price gradient with respect to distance from the nearest transit station rose in absolute value from 4.2% before 1987 to 19.4% during 1991-1996. However, we also find a decline in the gradient to 9.8% during 1997-1999 as home prices rose more rapidly in locations farther from the transit stations. On average, homes in our sample area increase in value by about $6,000 as compared with similar properties at the sample boundary, 1.5 miles from the new transit line. We estimate the aggregate increase in property values to be $215.9 million in 1997 dollars, which is nearly half the cost of constructing the transit line.

The Midway Line

The Midway Line provides the first rapid transit service to the southwestern quadrant of the city of Chicago. The other sectors of the city have all had rapid transit service since the turn of the 20th century, but the southwest side had been omitted. Although discussions of a possible southwest side elevated line had taken place since the 1940s, the transportation plan produced in 1962 by the Chicago Area Transportation Study (CATS, 1959, 1961, 1962) once again omitted the southwest side line. Instead CATS proposed express bus service for the Stevenson expressway, the highway that serves the southwest side, and an elevated line that would have run due east from Midway Airport to the old line that runs from downtown to the south side of the city. See McDonald (1988) for a retrospective examination of the original CATS plan.

New discussions of a southwest side line were initiated in 1977, and the intention to build a line was announced by Mayor Jane Byrne of Chicago in 1979 at the same time she announced the cancellation of an expressway project known as the "Crosstown Expressway." At the time, it was presumed that federal funds that had been earmarked for this expressway project would be transferred to the transit line, but this transfer of funds did not begin for another 5 years. As Krueger et al. (1980) and Anas (1982, 1983) discuss in detail, several alternative alignments for the proposed line were under consideration during the 1980-1983 period. The effects of various proposed alignments on the housing market were simulated by Anas (1982, 1983); this study is discussed below. A decision on the alignment was made, and on June 26, 1984, the first $32 million for property acquisition was received from the federal government.

The Midway Line was constructed at a cost of $410 million, and the expense for rolling stock was an additional $111 million. The Federal Transit Administration provided 85% of the cost, and the State of Illinois provided the remaining 15%. The line is 11 miles in length, of which 9.2 miles are newly built track (including 2.7 miles of elevated structure). The line has eight stations outside the downtown area, and the fare is $1.50 for a one-way trip. Parking is available at the five stations located the greatest distances from downtown. The demand for these spaces immediately exceeded the supply at the original price of $1.50 per day. Typical travel time from Midway Airport to downtown is 30 minutes. Express bus service for the same trip during peak periods requires 45-50 minutes. Ridership on the line (i.e., passengers entering the system at one of the Midway Line stations) was projected to be about 25,000 riders per weekday. Actual ridership in the first year was 28,000 per weekday, and average weekday ridership in 2000 by station is listed in Table 1. Note that 48% of the riders entered at one of the two stations that are most distant from downtown, and 30% of the passengers entered at Midway Airport.

Theoretical Considerations

The Midway line is a new transit line that replaces bus service to and from Midway Airport and other locations and also draws commuters who used the private auto. Does a transportation improvement of this magnitude require the construction of a general equilibrium model of transportation and the housing market, or will a partial equilibrium model be sufficient? Some earlier studies, such as those by Boyce et al. (1972) and Allen and Mudge (1974), have concluded that increases in property values near a new transit line are accompanied by noticeable property value decreases in other locations. The interpretation of the empirical results in this study is based on the presumption that only a partial equilibrium model is needed. The Midway Line creates improved access to downtown Chicago and other destinations around eight station sites. The housing market in the vicinity of the stations adjusts, and it shall be assumed that the general equilibrium effects on the rest of the metropolitan area can be ignored. The general equilibrium effects on the housing market are likely to be small and diffuse within a metropolitan area of over seven million people.

The validity of the assumption that a partial equilibrium model is sufficient in this case was, in effect, tested by Anas (1982, 1983). Anas develops a large-scale general equilibrium model of transportation, housing and residential location for metropolitan Chicago that is used to simulate the effects of the Midway Line on the housing market (and on modal choice as well). One of the options for the Midway Line that is tested is very similar to the one that was actually built. The simulations for this option (known as the IHB project) show negligible effects on housing rent beyond a distance of 1.5 miles from the stations. (2)

Another theoretical question concerns the effect of the transportation improvement on house prices prior to the opening of the transit line. Assume that the transit project is announced at some point in time, and it is completed j years later. In the simplest case the change in value P due to the transit line of a particular house at a time prior to opening is

[DELTA][P.sub.t-k] =...

NOTE: All illustrations and photos have been removed from this article.



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