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 travel time savings, if realized at all, will be short-lived. A 2020 study of highway expansion projects in California from 2008 to 2018 showed that the effects of induced demand are either ignored or greatly underestimated in the environmental review process, in some cases by an order of magnitude. For example, the stated purpose of the $1.6 billion Interstate 405 Sepulveda Pass Improvement Project was to improve traffic conditions including reducing commute times for all drivers. The environmental review predicted “a reduction of 14,860 vehicle-hours of delay for the year 2015 and 16,060 vehicle-hours of delay for the year 2031” compared to the no build alternative. However, a year after opening in 2014, reductions in delays were only 50% of those promised and drivers saw a one-minute increase in rush hour commute times compared to pre-project conditions. When induced demand erodes those time savings, the core economic justification disappears.
Economic productivity increases when people and businesses cluster together — these are 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 to 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 community infrastructure. 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 to be used in ways that increase accessibility, support agglomeration economies, create open space, or otherwise free up for productive uses that grow the tax base.
NACTO
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. The image below shows the breakdown of fixed and variable costs of car ownership, per car. American householders own 1.7 cars on average, and 60% own more than one car meaning the costs of automobility are nearly double what is shown here.
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, the cost of crashes was estimated to total almost $340 billion in 2019; individuals paid 75% of this cost, only two-thirds of which is covered by their private insurance. The remaining $79 billion is an unexpected out-of-pocket loss. Public transportation, as a safer alternative, can reduce medical and insurance costs directly for individuals and society.
Reducing these financial burdens enables households to spend more on other priorities and in the local economy. This generates multiplier impacts supporting local businesses and jobs. Public transportation is both an economic development tool and an affordability strategy, reducing the cost-of-living for users.
Unfortunately, negative externalities of vehicle usage, such as additional delay, air, water and noise pollution, due to the induced demand are not well accounted for in most benefit-cost analyses. Travel time savings, even though fleeting account for a large amount of modeled benefits in project evaluation, agglomeration benefits, one of the key economic benefits of transit, are excluded, land costs are often undervalued or excluded. To get rational outcomes, we need to account for the negative externalities including induced demand and the additional air, water, and noise pollution of induced traffic, along with any positive and negative impacts of land use patterns encouraged and supported by different 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.
