Far too many Americans struggle to find affordable housing in places that give them access to the opportunities of daily life — getting to work, to appointments, and to friends or family. Housing physically close to opportunities is increasingly unaffordable even as America finds it increasingly difficult to build cost-effective infrastructure to close the distance to more neighborhoods. Congress can close these gaps by taking steps to ensure that housing can be built where it is needed and lower the cost of new transportation infrastructure.
Strengthening the Surface Transportation Reauthorization bill pending in the House is a critical first step. Ideally, the process should more intentionally focus on expanding access to daily opportunities by rewarding jurisdictions that allow property owners to build housing, requiring transportation agencies to prioritize projects based on how much they improve access to opportunity, and lowering the cost of providing transportation infrastructure.
The BUILD America 250 Act (H.R. 8870), the reauthorization bill reported out of the House Transportation and Infrastructure Committee (T&I) last month and awaiting a floor vote, is a good start. In particular, several of its provisions recognize that housing and transportation policy can’t be addressed separately; others deal with the high cost of infrastructure. But more can be done, beginning with two notable omissions in the bill: 1) tying the distribution of the majority of transportation funding (formula funding) to population or housing growth; and 2) incentivizing data-driven project prioritization which is critical to ensure that chosen projects improve access.
Still, the bill includes several provisions that could meaningfully improve how the federal government supports access to jobs, errands, and friends or family. Three provisions in particular directly address the need to build housing near federally funded transportation infrastructure; a fourth would begin to tackle the high costs of transportation infrastructure.
Lowering the cost of public buses
Transportation-infrastructure costs in the United States are abnormally high compared with other developed countries with similar labor and environmental regulations. Buses for public transit, for example, can cost twice as much here as in peer countries such as France and Germany.
The transit systems of most American cities — 373 out of 412 urbanized areas that operate transit — rely entirely on buses. Currently, the federal government pays for 85 percent of the cost of nearly every bus purchased using federal funds, no matter how expensive the bus. The reauthorization bill would cap the federal government’s per-bus payment to a percentage of a benchmark price. These benchmark prices would be based on the average cost of a bus according to categories of length and propulsion technology — for example, 40-feet or 60-feet long, and diesel, hybrid or electric.
This proposal targets a well-documented source of inflated bus costs: insufficient manufacturing scale. “Buy America” requirements shrink the pool of available bus manufacturers to the much smaller U.S. bus industry. Transit agencies’ excessive customization further fragments demand and discourages manufacturers from competing for business. A recent AEI-Brookings report found that in 2024, 70 percent of bus procurements were customized in at least one feature — windows or transmissions, for instance.
Past efforts have failed to address these procurement challenges in part because they targeted the symptoms rather than the cause. While there are some technical tweaks that could improve the efficacy of previous reforms, the primary culprit is the poor incentive design of federal funding for buses: Transit agencies are only responsible for 15 percent of the cost of a bus; the federal government pays the other 85 percent. Because they bear so little of the cost, agencies have little incentive to coordinate their purchases. Simply put, if they were on the hook for a greater share of the cost, they would be more likely to join forces and provide larger, more efficient orders.
While the Transportation and Infrastructure Committee’s proposal on bus-procurement costs is a positive step, Congress needs to tighten the technical implementation. Rather than setting the benchmark for each bus category at the average cost of buses procured in that category over the last five years nationally, a more sound approach would be to target some lower-percentile cost. For example, the benchmark could be set so that 75 percent of bus purchases in a category exceed it (the 25th percentile). As customization tends to add to a bus’s price, these lower-cost procurements are a better proxy for the “uncustomized cost” of purchasing a bus.
The experience of the Metropolitan Transportation Commission in the San Francisco Bay Area shows the need for setting better benchmarks and tightening their implementation. The commission has set benchmark prices in this way for a decade to improve how it distributes federal funds among the nearly 30 transit agencies in the region. Its 40-foot diesel benchmark now sits at $736,000 — more than double European costs. This average was substantially influenced by the costs of heavily customized procurements from the larger agencies. A new federal benchmark must improve upon this design.
The current draft of the reauthorization bill attempts to further control costs over the flawed benchmark design by decreasing the federal per-bus share from 85 percent to 70 percent over the course of three years. But this is a blunt lever that would needlessly penalize agencies that have managed to control their procurement costs. Disciplining the benchmark, rather than the federal share of that benchmark, would provide a better incentive structure while still saving federal money.
The benchmark prices themselves, rather than the federal share of the benchmark, could also be directly targeted for productivity increases. Instead of updating the benchmark every year relative to the most recent five years of procurement data, the benchmark could be set once using that method. The benchmark could then be set to follow an inflation index minus some productivity factor.
Ensuring transit grants prioritize growing areas
Many federally funded “fixed guideway” transit projects (particularly subways, light rail, and bus rapid transit) fall short of their ridership and access potential because of local restrictions on new development, including on housing, nearby. The T&I bill makes some changes that are consistent with language in the Build More Housing Near Transit Act (BMHNT), a bipartisan bill introduced in both the House and Senate, which aims to address this problem. In addition, a successful amendment put forward by Burgess Owens (R-Utah) makes a few complementary modifications. We are broadly supportive of these additions, though they would be greatly improved by a few technical tweaks.
First, the reauthorization bill should hew closer to BHMNT’s model. BHMNT would modify the scoring system of the Capital Investment Grant (CIG) program, the primary source of capital funding for fixed guideway transit infrastructure. Current scoring, for the most part stipulated by statute, only indirectly accounts for the importance of future housing development near the infrastructure. At most, housing regulations have an influence on 21 percent of the final scores — assuming that the project sponsor elects to report optional future-year ridership projections. BMHNT’s modification would give projects with “pro-housing policy”— defined and actionable land-use reforms — within walking distance of project stations a full-point boost on the five-point final project score. As written, the reauthorization bill applies the full-point scoring boost incorrectly, targeting the “economic development” project justification criterion rather than to the full score. Each criterion accounts for a mere 8 percent of the final project score. A full-point boost here would not be sufficiently meaningful to the final score. And the “economic development” score is already at least one-third dependent on the existence of “supportive zoning” in the project area. A more generous reading of Federal Transit Administration guidelines would suggest that the entire “economic development” score reflects the supportiveness of zoning in the project area.
BHMNT would also require coordination with the Department of Housing and Urban Development (HUD) for its technical expertise when scoring whether policy near a project is pro-housing. The reauthorization bill does include a similar consultation requirement. However, this requirement would be improved by including BHMNT’s prescriptions on the nature of that consultation. Including these details would ensure that the FTA has the tools to properly assess housing policy.
Second, the Owens amendment would allow project sponsors to report population growth rate projections in the project area instead of reporting current population density. This would, in theory, benefit projects planned in high-growth areas — exactly the sorts of projects that we should prioritize. Two additions could strengthen the amendment: 1) specifying what constitutes a realistic population growth projection, and requiring FTA and HUD to determine whether projections are consistent with the existing zoning, building code, and permitting regime; and 2) requiring that a larger portion of the land-use criterion depend on population density.
Clearing obstacles to financing transit-oriented development
Building more housing near existing transportation facilities that are operating under capacity is a great way to expand access to opportunity — likely at a lower cost to taxpayers than building new transportation infrastructure. The reauthorization bill would take meaningful steps in this direction by proposing to unlock the Transportation Infrastructure Finance and Innovation Act (TIFIA) and Railroad Rehabilitation and Improvement Financing (RRIF), two sister transportation infrastructure financing programs. Congress can strengthen the proposal by addressing a mismatch in creditworthiness standards between the two programs and a missing pathway to leverage HUD’s existing technical expertise.
Over a decade ago, Congress added transit-oriented development (TOD) to the statutory list of project categories eligible for TIFIA and RRIF financing. The purpose was to help finance complex projects that struggle to assemble financing on their own despite significant potential public benefits. Unfortunately, TOD project sponsors have made limited use of TIFIA’s and RRIF’s substantial financial resources, largely because projects have to go through an intensive application process built around credit and environmental reviews designed for larger infrastructure projects.
Existing law for TIFIA requires that projects obtain an “investment grade” rating from at least two ratings agencies, a standard designed for large infrastructure projects with a single, dedicated revenue stream. RRIF is only nominally more flexible. The bipartisan, standalone Build HUBS Act proposed replacing this standard with a structured “investment-creditworthiness assessment” offering three options. The reauthorization bill adopts two of these for RRIF: a joint liability agreement with a sufficiently rated state or local government, and an alternative rating or certification by an “originator servicer.” The definition of “originator servicer” in Build HUBS did not make it to the reauthorization bill. This should be rectified. The definition in Build HUBS provides a path for the FTA to leverage the technical expertise of HUD’s “Multifamily Accelerated Processing” framework already developed to originate and service similar projects.
On the TIFIA side, the reauthorization bill would take a different approach, directing DOT to accept analyses prepared by institutions financing a project as proof of creditworthiness. It’s a promising solution to the TIFIA structure, but the requirements for TIFIA and RRIF should be the same, if only to minimize confusion and complexity for potential enrollees.
The T&I reauthorization would take a similar approach as Build HUBS to exempt most transit-oriented development projects from stringent NEPA review. First, it would exclude from NEPA review land acquired for TOD projects. Second, it would create statutory categorical exclusions for both office-to-residential conversions and construction of commercial buildings on disturbed land adjacent to a transportation project.
Expanding Amtrak’s flexibility
Useful transportation infrastructure, such as Amtrak’s Northeast Corridor, creates value that is hard to capture with user fees alone. The ability to commute to a job, take advantage of amenities and services, and visit loved ones quickly is worth something, even to infrequent users of the infrastructure. But this “option value,” as it’s known, is not easily captured and calculated for user fees, and as a result goes uncollected. Households and businesses will pay a premium to locate where such options exist, and the resulting value accrues to nearby property owners instead of to the infrastructure operator. Capturing this value is an underused way to fund transportation when user fees are insufficient.
U.S. Reps. Addison McDowell (R–NC) and Seth Moulton (D–MA) introduced an amendment to allow Amtrak to do just that, without requiring additional taxes. It would provide Amtrak flexibility to develop station-area properties and capture the resulting land value appreciation directly.
This approach is not new. Early American railroads were often funded by land redevelopment projects that allowed their funders to internalize the value produced by their investments. Various private Japanese railway companies, including JR East, operator of Shinkansen bullet trains, still follow this model, building homes, shopping centers, and offices around their stations. The Japanese passenger railroad network is arguably the most effective in the world, demonstrating that the model is financially viable even while producing world-class infrastructure.
McDowell’s amendment is a four-legged stool:
- It would allow Amtrak to acquire property for revenue-generating commercial, office, retail, or mixed uses in addition to land needed for traditional rail infrastructure. Amtrak would be permitted to develop TOD on land it owns or leases, through the use of joint developments or other public-private partnerships.
- It would allow Amtrak to pocket increases in value from providing better service or developing TOD projects itself in exchange for Payment In Lieu of Taxes (PILOT), whereby Amtrak would pay to the relevant authorities an amount equivalent to the predevelopment taxes on the property. This would ensure that jurisdictions could not enact punitive taxes to block projects.
- It would update RRIF to address the barriers that have made it functionally unavailable for Amtrak-led TOD projects while not requiring its use.
- It would give Amtrak broad preemption over local zoning and building codes for TOD projects, expanding Amtrak’s existing authority to improve the Northeast Corridor. The preemption would only apply to land that it owns or develops, and wouldn’t mandate broader zoning changes to the surrounding area.
This program is, overall, very well structured and could transform Amtrak’s finances. But one provision should be refined: Rather than freezing the state and local government shares of tax revenue at predevelopment tax levels, the bill should require Amtrak to pay the normal, updating tax amount through the PILOT payment structure. This would fairly compensate public agencies for local improvements to services and to contributions to rising property values. However, local jurisdictions should be prohibited from singling out Amtrak-led developments for different tax treatment than what otherwise similar nearby parcels would receive.
With that single adjustment, the amendment would create a rare program that could give Amtrak and the communities it serves a shared stake in modernizing the nation’s passenger rail infrastructure without imposing a cent of new taxes on the American taxpayer or raising fares on customers.
A good start, but room for improvement
The Transportation and Infrastructure bill contains numerous genuine steps toward improving how the federal government supports Americans’ access to daily opportunities. The McDowell amendment, in particular, is a well-structured mechanism that could materially improve Amtrak’s finances without requiring additional taxpayer dollars, supporting additional infrastructure expansion while making public transportation more available to more Americans.
Three of the other promising provisions — on bus procurement, transit-grant scoring, and TOD financing — would create sound policy but need technical refinement to deliver it fully: a refined benchmark formula; a broadened scoring boost; and harmonized, fully defined creditworthiness standards. These are entirely fixable problems and are worth solving because the underlying policy ideas are sound.
The biggest openings for improvement lie in what T&I has left undone. The reauthorization bill only gestures toward encouraging data-driven project prioritization, particularly the measurement of improvements to access. And while portions of the transit program would begin to reward metro areas producing housing, the bulk of transportation funding distributed by formulas would not. There is a wide-open opportunity for future versions of the bill to correct this.
Surface transportation reauthorization is, at best, a twice-a-decade opportunity. Congress must preserve T&I’s best provisions while sharpening their execution, and extend the agenda to areas T&I leaves open. By considering housing growth jointly with transportation infrastructure, and by reducing the cost of that infrastructure, Congress can ensure that Americans see the increased access to opportunity that both housing and transportation provide.
