For decades, highway expansion was believed to be tied to economic growth. Vehicle Miles Traveled (VMT) and Gross Domestic Product (GDP) grew along the same trajectory from 1960-1998. However, for the last 20+ years, that apparent bond has broken. GDP growth remained positive while VMT became mostly flat; both experienced a small decline during the COVID pandemic. One explanation for the divergence is that as the highway system has been completed, new capacity no longer increases connectivity as it once had. Whatever the reason, new highway expansion is failing to yield anticipated economic returns. Transit, on the other hand, is a reliable investment, generating greater economic value than highway expansion.
Transit is a good investment. In many circumstances, transit investments represent high-return economic development strategies. In the Tri-State Area, a dollar invested in transit yields $2.20 of economic value. On the other hand, the same dollar invested in the highway and street system returns only $1.78. Highway construction jobs tend to be short-term and often involve out of area firms (the profits “leak” to other regions even if the work is done by local labor), investments in public transit create long-term operational jobs (drivers, mechanics, maintenance staff) locally. Moreover, while transit wages tend to circulate locally, additional spending on automobiles and fuel feeds non-local, and oftentimes international economies. Economic modeling for transit investments finds robust returns for the local economy:
2.5 times greater total employment impacts than spending on streets and highways
Generates 17.9 jobs per $1 million invested nationally
31% more direct jobs per dollar than new highway construction
Highway expansions are typically justified based on the estimated value of travel time savings for users. But the evidence shows that added capacity typically induces new traffic. Within 5 years congestion is often worse than before the expansion took place. The most effective way to reduce congestion and save travel time is with demand management strategies. Furthermore, projects may never even recover the additional delays caused during highway construction.
There is clear evidence that that time savings, if it is realized at all will be short-lived. A 2020 study of five separate highway expansion projects in California from 2008 to 20218–HOV widenings and lane additions on Interstate 405, US Highway 101, State Route 1, State Route 210, and State Route 99–showed that the effects of induced demand are either ignored or greatly underestimated in the environmental review process, in two cases by an order of magnitude. For example, the $1.6 billion Interstate 405 Sepulveda Pass Improvement Project, opened in 2014, led to a 50% increase in travel time during the afternoon rush hour from 2015 to 2019. When induced demand erodes those time savings, the core economic justification disappears. We should not be investing billions of dollars for benefits that quickly erode.
Economic productivity increases when people and businesses cluster together — known as agglomeration economies. Highways tend to promote sprawl, weakening economic advantages, while transit is critical in enhancing economies, especially for metro areas.
Specifically, transit investments increase productivity, create more efficient labor markets, lead to knowledge spillovers and help lower supply chain costs.
Public transit increases urban agglomeration effects by 7%
Road lane expansion reduces agglomeration effects by nearly 48%
From 2001 - 2019 New York State lost 68,000 acres of forest land. 94% of this loss (64,000 acres) is attributed to sprawl development. Highway expansion enables sprawl, but highways themselves compound the problem, consuming valuable land that could otherwise support more housing, commercial development, schools, healthcare facilities, and other tax-generating uses. In fact, the land devoted to roads nationally is valued at $4.1 trillion. A study of just 142 urban areas estimates the value of land used by the freeways could generate $500 billion of development. This land, when accounted for properly, shows that some highway projects’ costs are three times greater than their benefits. Transit, on the other hand, can be 15 times more space-efficient than a car lane, enabling thousands of acres of land available for uses that increase accessibility, support agglomeration economies, and free land for productive uses that grow the tax base.
Transit is far safer than driving. The death rate per passenger mile in private automobiles is 20 times higher than train travel and 30 times higher than bus travel. Bus transit is also safer than car travel for non-passengers, i.e. nearby cyclists and pedestrians, on major urban roads. Research has shown that rates of pedestrian injuries are 4.1 times greater and cyclist injuries 5.3 times greater for cars than for buses.
Vehicle ownership imposes large fixed and variable costs, many of which are not included in benefit-cost analysis. These costs include insurance and registration, financing, purchases, on-going fuel and maintenance, and depreciation. Unexpected repairs or costs associated with crashes also create financial burdens for households.
In addition to the high costs of owning and operating vehicles, the economic cost of motor vehicle crashes can take a significant toll on car owners. Nationwide, this cost is estimated to total almost $340 billion (2019), with individuals paying almost a quarter of these costs out of pocket on top of existing expenses such as automobile insurance. Public transportation, as a safer alternative, can reduce medical and insurance costs directly for individuals and society.
Transit reduces these financial burdens, enabling households to spend more on other priorities and in the local economy. This generates multiplier impacts on the local economy, supporting local businesses and jobs. Public transportation is both an economic development tool and an affordability strategy, reducing the cost-of-living.
The economic competitiveness of a place is becoming increasingly dependent on sustainable mobility. Investments in transit support agglomeration economies, reduce emissions and improve public health. This is particularly attractive for businesses that seek climate-resilient regions to invest in.
A study of the 125 largest U.S. urban areas found that increasing transit investments leads to a reduction in vehicle miles traveled and related pollution including greenhouse gas emissions.
Unfortunately, negative externalities of vehicle usage, such as induced demand and air, water and noise pollution, are not accounted for in most benefit-cost analyses. We need to account for these negative externalities that expanding highways creates along with the land use patterns encouraged and supported by public transportation when measuring the emission-related costs and benefits of investments.
Properly accounting for travel time impacts, financial burdens on individuals and households, and agglomeration benefits in our analyses of the value of transportation investments would lead to a very different set of project priorities.
