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MEDILL/Andrea Mayeux

Passengers hustle to catch their train at Chicago's Union Station. The station will soon be home to high-speed service shuttling passengers toward St. Louis at 110 miles per hour.

Researchers say high-speed rail could fuel U.S. real-estate, economic booms

by Andrea Mayeux
May 29, 2013


Brad Basham Photography

High-speed rail passengers are expected to fill the seats at the new Uptown Station in Normal, Ill.


International Union of Railways/Andrea Mayeux, Medill

While Amtrak trains in the U.S. hit 241 kilometers per hour, or 150 miles per hour, many other countries' trains are running faster or soon will be.


Brad Basham Photography

Uptown Station in Normal, Ill., is ready for high-speed Amtrak service. City Manager Mark Peterson says the widespread anticipation of coming Amtrak upgrades helped attract private investment around the transportation hub.

New high-speed rail lines are credited with sparking a real estate and housing boom, among other economic benefits, in smaller cities in China. Now experts are debating whether rail modernization can have the same effects in the U.S.

A study by researchers at the University of California-Los Angeles and China’s Tsinghua University found that by connecting “second tier” cities to global hubs, more people move to the smaller cities where housing costs are lower, creating a real-estate boom, among other unplanned benefits. 

In 2007 China built new, 185-miles-per-hour bullet train lines to connect Beijing, Shanghai and Guangzhou to nearby cities, some of the construction coinciding with the 2008 Beijing Olympic Games. Based on the real estate appreciation recorded between 2006 and 2010, the researchers estimated that when "market potential," defined as access to goods, services and labor, is boosted 10 percent by a new bullet train line, housing prices rise 4.5 percent.

Matthew Kahn, co-author of the study, believes the same could apply in California where high-speed rail is planned, more specifically smaller communities becoming connected to “superstar cities”, as he calls them, like San Francisco.

“The bullet train offers the possibility,” Kahn said, “that they effectively become suburbs of those communities. And become desirable to a subset of people who live there.”

Small cities need to be too far to drive to but too close to fly to the nearest “megacity.” Kahn used Philadelphia as an example. Right now, he said, a trip to New York City takes 80 minutes by high-speed Amtrak, which averages 150 miles per hour.

“If that became a half hour away because of the high-speed rail, I think Philadelphia home prices would jump sharply,” Kahn said. “There’d be much more demand to live there.”

Kahn and his co-author Siqi Zheng found bullet trains unintentionally created new suburbs called “sweet spots” about 60 to 470 miles from mega cities. Bullet trains provide big-city benefits despite the distance without “downsides like high housing costs, overcrowding, or air and water pollution,” Kahn said.

“It really comes down to," Kahn said, "is there a train that moves at 150 miles per hour" and are there good local connections to it? "Then there's certainly some potential there."


For instance, he added, “if the train moved fast enough between Cleveland and Chicago, I think there’d be similar gentrification in Cleveland.”

Some experts question the theory. Comparing China and the U.S. is like comparing “apples and oranges,” said Stephen Schlickman, executive director of the Urban Transportation Center at the University of Illinois at Chicago.

"We have a much better interstate system and a robust aviation system,” Schlickman said. “That discounts any comparison between the two."

Kahn acknowledged the differences in transportation systems, citing it as a potential reason why high-speed rail hasn’t taken off here. Some question whether ridership can recoup the billions of dollars required to build high-speed rail.

“In China there’s already the density in their cities to support such investments,” Kahn said.

In Illinois a portion of Amtrak’s 284-mile corridor linking Chicago and St. Louis is undergoing a $1.1 billion overhaul to bring train speeds up to 110 miles an hour. The Federal Railroad Administration is funding the project. Instead of five-and-a-half hours, passengers will make the trip in four hours.

Given the Chicago-St. Louis corridor’s speed, Kahn expects cities along the line could experience revitalization of downtowns and add multi-family units near Amtrak stations.

Some of those cities are already seeing benefits.

Normal, Ill., which is about 130 miles from Chicago and 170 miles from St. Louis, received $22 million from the federal government to build a transportation center as a result of plans to upgrade the line. Since then, City Manager Mark Peterson said, development in the uptown area has taken off. A new $80 million conference center sits across the street. A $30 million development near construction will include a hotel, luxury apartments and retail shops.

Peterson said that just “the possibility of high speed rail helped us attract private investment to our central business district. We think we have just scratched the surface on what is the potential economic development implications of being right on that high-speed rail corridor.”

Peterson said corporations may not move in and real estate prices won’t grow until high-speed rail service starts. He predicts Normal will become an attractive place to live for people who work in Chicago but like the “downstate lifestyle.” Or perhaps the high-speed service will attract Chicagoans to commute to work in Normal.

“If I could, I would be buying anything I could get along the corridor,” Peterson said. “There is no question in my mind that property values are going up once this service is up and running.”

In Lincoln, Ill., about 167 miles from Chicago, 20,000 passengers get on and off every year, according to Mayor Keith Snyder.

In preparation for additional traffic, Lincoln is partnering with the Illinois Department of Transportation to buy and renovate the city’s historic depot.

“It’s going to be a great gateway for people who are coming into town,” Snyder said. With added streetscaping, Snyder hopes it draws passengers downtown to do some shopping or dining or enjoy local entertainment.

Lincoln hasn’t seen a spike in housing construction but Snyder thinks that could happen down the road. On-time performance and better departure times are key in making the line a more reliable form of transportation.

Chicago-St. Louis corridor construction is expected to end in 2017. In November 2012 trains started running at faster speeds – 110 miles an hour – along a small portion of the line, about 20 miles between Dwight and Pontiac.

More people are opting for train travel than ever before. Amtrak's March ridership set a record for the single best month ever with more than 2.8 million passengers, a 1.9 percent increase. In the first sixth months of Amtrak’s 2013 fiscal year, October to March, ridership grew 0.9 percent compared with the same period in 2012 even though Hurricane Sandy and other severe weather-related events caused significant service disruptions.

For the full fiscal year, Amtrak expects ridership to hit or surpass 2012’s record 31.2 million passengers.

Although Schlickman doesn’t necessarily think China’s data will be duplicated here in the U.S., he expects “very good local and positive economic effects” in cities outside Chicago. If high-speed rail lines radiated in every direction from Chicago, connecting to cities like Cleveland, Milwaukee and Minneapolis, Schlickman predicted, it could create another transportation hub.

“If we had that type of service coming into Union Station, you’re talking about a possibility of seeing a level of activity similar to Midway [International Airport],“ Schlickman said.