Streetsblog Capitol Hill

New construction projects that are within a half-mile of transit stations and exceeding national energy-efficiency standards would be eligible for a tax credit under legislation introduced today by Sen. Robert Menendez (D-NJ), the senior member of the Banking Committee's transit panel.

Menendez's "green buildings" tax credit is aimed at spurring denser development in both rural and urban areas, particularly mixed-use properties that allow residents to walk between home, work, and other daily errands.

Construction projects claiming the 30 percent credit would have to meet several criteria, including the half-mile proximity to transit, the energy-efficiency minimums, and a requirement that at least 5 percent of any apartment properties be more affordable housing.

The credit could not be claimed until the year the development in question is completed, leaving the bill without an immediate cost to the Treasury.

The bill was immediately endorsed by the non-profit transit advocacy group Reconnecting America. The group's president, John Robert Smith, said in a statement that Menendez's plan "will help to meet this growing demand" for more transit-oriented, walkable development.

Boston mayor Thomas Menino joined Rep. Stephen Lynch (D-MA) today for the release of a new Urban Land Institute (ULI) report that maps the combined housing and transportation burden of living in the metro area's various neighborhoods.

Using a method similar to the "H+T" cost index unveiled last month with the support of Obama administration officials, the ULI report calculated how Bostonians' area of residence affected their commuting and housing costs. Overall, the ULI found that the average Boston household spends 54 percent of its annual income, or $34,300, on housing and transportation.

Not surprisingly, the center city was found to be a hotbed of lower transport spending, thanks to denser development and a thriving transit system -- and when housing and transport bills were combined (see above chart), the city remained a more affordable option than any of the suburbs in its immediate vicinity.

The ULI was careful to note that lower "H+T" costs in the center of Boston were made possible by more than just walkable urban design. From the report (emphasis mine):

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The home-building industry scored a big win last year when Congress voted to double the tax credit for new home buyers and extend the break until next month. But that's not the only legislative move that's leaving smiles on home builders' faces.

A tax break included in the Obama administration's stimulus law is helping pad their profit margins to the tune of at least $2.6 billion, the Wall Street Journal reports today:

Home builders, hit with big losses in the housing slump, are getting the biggest lift from the law. Sixteen builders estimate they’re due refunds totaling over $2.6 billion. The tax break propelled builders Lennar Corp., Hovnanian Enterprises Inc. and KB Home to profits in recent quarters. ...

“We were able to dispose of lots, generate cash, take advantage of [the tax break], improve our balance sheet,” KB Chief Executive Jeffrey Mezger said. “It was a very nice move for us.” Booking the $192 million tax benefit propelled KB Home to a $100 million profit in its fiscal fourth quarter ended Nov. 30.

The tax benefit at issue is formally called the "net operating loss carry-back." In practice, it allows corporations to apply operating losses from the past five years to their current tax filings, putting many in line for significant refunds.

Some of the home builders reaping the benefits of the "carry-back" played a central role in the cheap mortgage-fueled housing boom that collapsed during last year's financial crisis. KB Home was accused of defrauding home buyers alongside now-defunct Countrywide in a recent class action lawsuit.

In 2003, at the height of the boom, Lennar sought to build a new South Florida housing development within land slated for Everglades restoration. The project was killed years later after environmental groups rebelled.

One potential loser in the wake of the stimulus is smaller home-building firms, some of whom view the "carry-back" and other business tax breaks as a federal handout to their bigger counterparts. As one small builder told the AP last month:

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In the debate over how -- and whether -- to set measurable performance standards for determining where federal transportation money gets spent, real estate developers are a quiet but powerful player. In a report released today, the Center for Public Integrity (CPI) tracked the broad reach of land-use interests and found more than 100 groups spending $5.5 million on transport lobbying last year.

CPI's research, collected in the interactive map pictured above, serves as a case study of the muddled system that currently exists for funding worthy transportation projects on both the state and local levels. Reporter Matthew Lewis begins with a look at one road earmark added to the 2005 transport law by Sen. Charles Schumer (D-NY):

The relatively small earmark came after the developer, Concord Associates’ Louis Cappelli, and his team opened their wallets and donated a combined $100,000 to the Democratic Senatorial Campaign Committee, then headed by Schumer. None had ever contributed to that political action committee (PAC) before. Some of the same executives gave an additional $64,000 to the committee over the next few years, after the bill with the earmark was signed into law.

But the New York Department of Transportation did not claim this specific million-dollar earmark. Its intended purpose — to study widening Route 17 from two to three lanes in each direction over a 43 mile stretch — did not appear to be a priority for the state. The stretch of road in question starts near the village of Harriman and extends northwest to Sullivan County, where Cappelli envisions a huge “Entertainment City” to restore the Catskills to its former fame as a vacation destination and generator of much-needed local jobs.

Of course, Schumer is far from the only member of Congress using the legislative process to leapfrog home-state bureaucracy and win dedicated funding for a favored project. CPI goes on to identify an array of other lawmakers targeted for campaign contributions by real-estate executives with a stake in local infrastructure decision-making.

The report illustrates a transportation earmarking process that is ripe for misuse, but it also takes a risk by using state priority lists as an impartial standard to judge the usefulness of individual projects. In the case of New York, the widening of Route 17 was not on the state's radar, but widening the Bronx's Major Deegan expressway was -- until local opposition killed the proposal.

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Even as the Obama administration ramps up its work on a sustainability initiative that treats transportation, housing, and energy efficiency as interconnected aspects of development policy, the effort remains without an official congressional authorization -- a situation that Senate Banking Committee Chairman Chris Dodd (D-CT) vowed to fix yesterday.

During an appearance in his home state with Ron Sims, chief of the administration's inter-agency Office of Livable Communities, Dodd vowed to work for passage of his legislation authorizing $4 billion in grants for Sims' work.

"I only have about eight to 10 months," he said, according to the Hartford Courant. "My goal is to see the Livable Communities Act become law before I retire."

Dodd, whose panel has jurisdiction over housing and urban development, is working with that 10-month deadline as he anticipates retiring from Congress at year's end. His push to create a long-term foundation for the administration's sustainability effort also could run into resistance from rural lawmakers whose states have tended to benefit from a transportation spending system based on road-mile formulas.

The first stirrings of rural skepticism came on Thursday, when Sen. Mark Begich (D-AK) questioned the administration's move to emphasize "multi-modal" transport projects that would combine roads, transit, and bike-ped access.

Begich asked the U.S. DOT's No. 2, John Porcari, to make sure that rural states are "not lost in the mix." That sentiment was echoed later in the day by Sen. John Thune (R-SD).

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At today's debate on conservative support for transit, developer Chris Leinberger had a modest proposal for lawmakers who are desperately seeking new transportation financing strategies in an era of diminishing gas tax returns: Ask real-estate developers to pay for projects that will increase their profits.

The concept is often referred to by the wonkish term "value capture," evaluated by the University of Minnesota in a groundbreaking study last fall. But Leinberger, an active player on land-use issues who founded the group Locus to help make urban planners part of the federal transportation debate, kept his case simple and accessible.

Many developers are willing to "share part of our financial upside" to ensure continued local investment in transit and mixed-use development, Leinberger said. "We in the private sector need to be at the table because, a) we need these systems, and b) we have the financial means to pay for it."

Leinberger's approach, which attracted vocal interest today from House transportation committee chairman Jim Oberstar (D-MN), would not solve the problem of uneven federal support for roads -- which are funded through an 80-20 split between Washington and local governments -- and transit, which tends to receive a lower 50-50 federal match.

"If we need to lower the federal match, that's fine," Leinberger said, as long as private-sector buy-in could be counted as part of a locality's contribution to transit.

Yet despite value capture's increasing presence in transportation financing debates, it has a long way to go before members of Congress could consider enshrining it in legislation. Increased property taxes are one established method of requiring land owners to contribute to transit construction, but cities such as Portland have attempted a largely opposite approach by offering property-tax exemptions to developers who build up in walkable areas.

The Congress for the New Urbanism (CNU), an advocacy group working to reform local development practices, is seizing on House Financial Services Committee Chairman Barney Frank's (D-MA) recent call for a new system of housing finance to replace government-controlled Fannie Mae and Freddie Mac.

The CNU's concerns about Fannie and Freddie, which the government has used for more than 40 years to promote home ownership by backstopping trillions of dollars in mortgage loans, predate the government's takeover of the two entities in 2008.

Urbanists' frustrations with Fannie and Freddie stem from a key fact: both mortgage guarantors will not deal in home loans for properties with more than 20 percent of space set aside for non-residential use. Plans for walkable, mixed-use complexes that combine housing, retail, and office space, therefore, are often out of luck.

"Every Main Street in America violates Fannie Mae's and Freddie Mac's rigid standards," CNU President John Norquist said in a statement yesterday reiterating his group's support for housing finance reform.

Citing "plenty of mixed-use streets" in major cities where Fannie and Freddie have played no role in development, Norquist added: "These neighborhoods often have impressive purchasing power, transit-service and the potential to be sites of new opportunity and green redevelopment, but this flawed government-subsidized lending approach works to keep them locked in a pattern of disinvestment."

Norquist and fellow urbanists have reason to hold out hope for government housing support to take on a more pro-urban cast in the coming years. The Obama administration's new inter-agency sustainable communities task force plans to spend some of its initial $150 million allocation on encouraging the issuance of "location-efficient" mortgages that take lower transportation costs into account, rewarding borrowers who move to more walkable or transit-rich areas.

But where Fannie and Freddie is concerned, Congress has shown little appetite to make the difficult choices necessary to phase in a new framework for what's known as the "secondary mortgage market." Read more...

Homeowners in car-dependent areas without access to alternative transportation are at greater risk of foreclosure, according to a report released yesterday by the Natural Resources Defense Council (NRDC) that calls for mortgage underwriting standards to begin taking so-called "location-efficiency" into account.

The NRDC examined data for 40,000 mortgages in Chicago, Jacksonville, and San Francisco, seeking to test the contention -- emphasized most often by the nonprofit Center for Neighborhood Technology -- that affordable housing should include transportation costs as well as mortgage bills.

And what did the report's authors find?

In all three cities ... statistically sound results [indicated] that the probability of mortgage foreclosure increases as neighborhood vehicle ownership levels rise, after controlling for income. These results suggest that mortgage lenders should include measures of location efficiency in their underwriting to more accurately predict the risk of default.

In addition to including transit access and walkability in mortgage underwriters' measurement of borrowing terms, the NRDC recommended that location-efficiency be formally adopted as a goal for community planners. Particularly in Sun Belt and West Coast areas where waves of foreclosures have prompted new fears of suburban blight, the report suggests that rebuilding neighborhoods with location-efficiency in mind could stave off negative effects from any future downturn in home prices.

NRDC's conclusions are already being heeded by federal officials. Several House Democrats banded together this summer to add language to their chamber's climate bill asking the Federal Housing Administration (FHA) to insure 50,000 location-efficient mortgages.

That climate legislation is stalled for the time being, but the Obama adminstration's deputy housing and urban development secretary said last week that the White House would spend $10 million on research aimed at boosting the issuance of location-efficient home loans.

Back in the days of "cash for clunkers," which saw the Obama administration send nearly $3 billion in taxpayer-funded rebates to boost the sagging auto industry, our Ryan Avent and several other economics wonks pointed out an inconvenient fact: Many participants in the program would have bought cars anyway, and the rebates only pulled their purchases forward in time.

Now it seems that the tax credit for new home buyers, opened up to even existing homeowners as part of an $11 billion expansion passed in November, is having a similar effect on the homebuilding industry.

As MarketWatch reports from the Las Vegas International Building Show, homebuilders are still mourning the housing bubble that popped so perilously as subprime mortgages imploded, but they are cautiously optimistic about this year as compared with 2009. Still, mitigating factors persist -- and here's one:

Payback from the expiration of the home-buyer tax credit. "The tax credit is pulling people forward who were in the market anyway. So the sales pace isn't quite as vibrant as suggested by the raw data. There could be a payback that materializes (in July) when the current version expires," Sullivan said.

Unless, to the chagrin of environmental groups and many, many voters who rent, Congress decides to extend the sprawl-enticing tax credit one more time in the summer. Lawmakers are often reluctant to let temporary tax credits fade away when industries are lobbying in favor of their extension -- even if the underlying economic logic is demonstrably shoddy.

And if Transportation Secretary Ray LaHood's comments at the Detroit Auto Show this month are any guide ("You see no criticism of 'cash for clunkers' in America"), even the auto rebates could make a return.

The potential for a cap-and-trade climate bill to set aside significant amounts of money for reforming local land use and transportation planning is often touted by Democrats, environmental groups, and this particular Streetsblogger.

But what does Mary Nichols, chair of the California Air Resources Board and administrator of the state's landmark effort to cut emissions by changing development patterns, think of the idea of tackling sprawl via climate legislation?

"I don't necessarily think SB 375 [the California land-use bill] should be in a cap-and-trade bill," Nichols said today during a session of today's Transportation Research Board (TRB) conference devoted to climate change.

The provocative question of how important a congressional climate bill would be to transportation was first raised by EMBARQ program director Nancy Kete, a veteran sustainability advocate.

Asking the TRB audience to consider that "whatever happens on climate change really is not going to have much impact on transportation," Kete praised the climate bill's grants for transit and land-use planning but described them as unsuitable for achieving "significant, short-term" pollution reduction.

Nichols' uncertain perspective on the path to addressing transportation -- which produces 40 percent of California's emissions and 30 percent of total U.S. CO2 -- through climate legislation may surprise some, but it tracks with what she described as an "unsettled" political climate surrounding the issue of pollution limits.

Indeed, Nichols' remarks today emphasized the importance of a federal climate plan that did not attempt to preempt the regulations of individual states, and California is one of several seeking a go-slow approach to greenhouse gas restrictions from the Environmental Protection Agency (EPA).

So if climate change legislation, which faces considerable resistance from Senate Democrats, isn't the vehicle to begin remodeling the nation's transportation planning system, what is? Kete proposed a shift in focus to the six-year federal transport bill -- though its political future is as murky as the climate measure's.

Yet Kete's suggestion brought a telling remark from John Stoody, an aide to conservative GOP senator Kit Bond (MO).

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