Highway-Induced Development

Research Results for Metropolitan Areas

Reid Ewing

In contrast to the literature on highway-induced traffic, the literature on population and employment were 9% and 23% lower, respectively,
highway-induced development has not been reviewed comprehensively. than the levels forecasted in Prince George’s County, Maryland, and
This review finds that in the post-Interstate era, major highway invest- 29% and 3% lower, respectively, than the levels forecasted in the
ments have small net effects on the growth and development of metro- District of Columbia. These shifts in development are illustrated in
politan areas, instead mostly moving development around the region to Figures 1 and 2.
take advantage of improved accessibility. Highway-induced development For the region as a whole, population growth was 5% lower than
is close to a zero-sum game. Highway investment patterns tend to favor that which had been forecasted in 1984, whereas employment growth
suburbs over central cities and thereby contribute to decentralization and was 9% higher. To MWCOG, the two facts together suggested small
low-density development. Corridors receiving major highway investments (if any) net impacts of the widening of I-270 on regional growth.
experience land appreciation and therefore are likely to be developed at The experience with the I-270 widening mirrors the experiences
higher densities than developable lands outside the corridor. Highways described in the literature on induced development. Induced devel-
may be necessary, but they are not sufficient, to induce development. opment may cause major shifts in the locations of development within
To the extent that current planning and zoning caps hold, the impacts a region, but it probably does not have much impact on regional totals.
within the corridor will be moderated. In contrast to the literature on highway-induced traffic (induced traf-
fic), which has been reviewed extensively (2–5), the literature on
induced development has not been reviewed comprehensively. This
Interstate 270, which angles to the northwest from the Washington, review seeks to fill the gap in the literature.
D.C., beltway, was widened in the late 1980s and early 1990s. In 1999,
the Washington Post ran a story comparing the actual traffic volumes
on I-270 with the projections made before construction (1). The arti- INDUCED DEVELOPMENT IN RELATION
cle declared that the widening was a failure, on the basis of the amount TO INDUCED TRAFFIC
of travel induced, which effectively used up the added capacity. By the
year 2000, the traffic volumes for certain sections of I-270 already Induced traffic and induced development are related. One can think
exceeded the forecasts for the year 2010. of induced development as a cause of induced traffic that is not imme-
This was a time of growing interest in the phenomena of high- diate but that is longer term. To better understand induced traffic and
way-induced travel and highway-induced development (induced its connection to induced development, it is necessary to explore the
development). The Maryland–National Capital Park and Planning behavioral consequences of additions to the roadway infrastructure
Commission and the Metropolitan Washington Council of Govern- capacity.
ments (MWCOG) responded with a 2001 study that suggested that In the short run, a variety of behavioral changes can contribute to
induced development was mainly responsible for the high and pre- increased traffic without any induced development. These include
mature levels of congestion on I-270. Also blamed was the failure route switches, mode switches, and changes in destination. In addi-
to build all transportation facilities in the regional transportation plan tion, there is the possibility of new trips that would not have occurred
that had been adopted at the time. Some projects had been delayed without the addition of infrastructure capacity.
and others had been dropped. In the longer run, increases in highway capacity may lower travel
On the subject of induced development, MWCOG concluded that times so that residences and businesses are drawn to locate in the area
“higher observed traffic volumes relative to the 1984 forecast appear near the expanded highway capacity. The question is always whether
to be due in large part to shifts in population, employment, and travel the new development that occurs in proximity to a highway was
to the I-270 corridor from other areas in the region, rather than to induced to locate there as a consequence of the expansion or whether
entirely new travel.” Population and employment in the I-270 corridor it would have occurred anyway, regardless of the highway. Indeed,
were 23% and 45% higher, respectively, than the levels forecasted the highway investment may be a response to new or anticipated
development rather than vice versa. If the development itself would
in 1984. For all of Montgomery County, Maryland, they were 7% and
not have occurred otherwise, the traffic that it generates and the
21% higher, respectively, than the levels forecasted. Meanwhile,
development can be considered induced.
By definition, a gray area exists if the development that occurs
National Center for Smart Growth, 1112K Preinkert, University of Maryland, near a highway would have occurred somewhere else in the region
College Park, MD 20742. rewing1@[Link]. in the absence of the investment. Some would call this induced devel-
opment and others would simply call it redistributed development.
Transportation Research Record: Journal of the Transportation Research Board,
No. 2067, Transportation Research Board of the National Academies, Washington, The term “induced development” is used here liberally to mean any
D.C., 2008, pp. 101–109. development that would not have occurred at a given location without
DOI: 10.3141/2067-12 a highway investment.

101
102 Transportation Research Record 2067

Change in Households:
I-270 Corridor Area Round 6.2 Versus Round 2
< -5,000
-5,000 to -2,500
-2,500 to -1,500
-1,250 to 0
0 to 1,250
1,250 to 2,500
2,500 to 5,000
> 5,000

0 5 10
Miles

*Round 2 Forecasts Adopted in 1979 and

Round 6.2 Forecasts Adopted in 2000

FIGURE 1 Difference between actual and forecasted households by subarea (2000).

Change in Employment:
Round 6.2 Versus Round 2
I-270 Corridor Area
< -10,000
-10,000 to -5,000
-5,000 to -2,500
-2,500 to 0
0 to 2,500
2,500 to 5,000
5,000 to 10,000
> 10,000

0 5 10

Miles

*Round 2 Forecasts Adopted in 1979 and

Round 6.2 Forecasts Adopted in 2000

FIGURE 2 Difference between actual and forecasted employment by subarea (2000).

Ewing 103

COMPLEXITY OF INDUCED DEVELOPMENT is representative of the literature in the two subject areas: the aggregate
impacts of highways and the localized impacts of highways. Other
Induced development is a complex phenomenon, which helps account relevant studies (not reviewed here) are included in the References.
for the divergent viewpoints regarding its magnitude and even its exis-
tence. One reason for the complexity is that the highway infrastructure
has both spatial and economic properties. On the one hand, highways AGGREGATE (NET) IMPACTS OF HIGHWAYS
allow movement, communication, and market exchange. Highway
investments may affect household location decisions by lowering Numerous studies have analyzed the net impact of transportation infra-
travel costs. Household location decisions may, in turn, influence the structure investment and economic growth (11, 12). Such studies typ-
location decisions of firms and industries and vice versa. ically estimate production functions, with economic output explained
On the other hand, highways are an input into the production of in terms of labor, capital, and other factors of production. Capital
private goods and services. Lower transportation costs may generally inputs include public capital, public capital includes the transporta-
boost private-sector productivity and output across the region. If so, tion infrastructure, and the transportation infrastructure includes
highways will affect the economic landscape in ways that no simple highways. The aggregate impacts of highways on economic growth
location model can capture. have been estimated for the nation, states, metropolitan areas, and
Because of these two distinct properties, the interjurisdictional even counties.
effects of highway investments may be either positive or negative. The estimated effects of infrastructure investment on economic
Development and other economic activities may flow from jurisdic- growth have varied widely among studies. Early studies at the national
tions without highway investments to jurisdictions with highway level showed large effects. Early studies at the state level showed
investments. Alternatively, positive spillovers from jurisdictions with smaller but still significant effects. The effects at the metropolitan or
highway investments may cause economic growth in neighboring county level were smaller still, presumably because some of the eco-
jurisdictions without highway investments. Metaphorically, high- nomic advantage of infrastructure investment is lost to smaller areas
way investments may create a rising tide that lifts all boats, or it may through positive spillovers to their neighbors.
lift some as it capsizes others. Which effect dominates is an empirical Later, more rigorous studies (with fully specified production func-
question, hence the need to review the empirical literature. tions and lagged input variables) suggested that the public infrastruc-
ture plays a more limited role in economic growth or perhaps no role
at all. Boarnet stated,
HISTORICAL CHANGES IN
INDUCED DEVELOPMENT Once the appropriate econometric techniques are used, even the time
series evidence usually shows no statistically significant productivity
The impacts of highway investments are less today than they once effect from public capital. Later cross-state studies verify this result.
When controlling for unique state and year effects, which in general is the
were. Construction of the Interstate highway system, in particular,
preferred approach, recent studies find no statistically significant effect
has tied virtually every place in the country to everywhere else. Most from public infrastructure. . . . results are the same when only highway
studies finding sizeable highway impacts (6–8) date back to the first capital is used as an independent variable. (11)
round of Interstate highway construction, which created huge positive
externalities for areas gaining access to the network. By the early As an example, Garcia-Mila et al. modeled the gross state product
1970s, the Interstate highway system was largely complete. Incre- in terms of total employment, total private capital stock, and total pub-
mental additions or improvements to the network have since produced lic capital stock broken down into three categories: highways, water
comparatively small improvements in interregional accessibility. and sewer systems, and other (13). Without controlling for unique state
So, in the post-Interstate era, how great are highway impacts on eco- effects, highway capital stock had a large, positive, and significant
nomic and land development? This is a subject of great debate. In a effect on the gross state product. After state effects were accounted for,
well-known point–counterpoint, Giuliano minimized the importance the effect of the highway capital stock was small (but still significant).
of highway investments for three reasons: To date, no compelling studies have been conducted at the
metropolitan-area level. Most importantly, no studies have controlled
The transportation system in most U.S. metropolitan areas is highly for unique metropolitan-area effects. However, because effect sizes
developed, and therefore the relative impact of even major investments vary directly with the size of the area, it is safe to assume that highway
will be minor. The built environment has a very long life. . . . Even in
rapidly growing metropolitan areas, the vast proportion of buildings that
investments in metropolitan areas have only marginal effects on the
will exist 10 to 20 years from now are already built. . . . Transport costs gross regional output. This is not to say that highway investments have
make up a relatively small proportion of household expenditures. (9) no role in the private economy, but rather, this is to say that in the post-
Interstate era, ample infrastructure is already in place and the marginal
Cervero and Landis countered that “although new transportation effects of highway investments on output are likely to be small.
investments no longer shape urban form by themselves, they still
play an important role in channeling growth and determining the
spatial extent of metropolitan regions by acting in combination with LOCALIZED IMPACTS OF HIGHWAYS
policies such as supportive zoning and government-assisted land
assembly” (10). They then challenged Giuliano’s empirical evidence Even if the net economic impacts of highway investments are small,
and presented evidence of their own. highways may have important impacts on the geographic pattern of
Who is right? Giuliano is probably right about aggregate impacts, development within a region: “it is quite possible that infrastructure
whereas Cervero and Landis are probably right about localized investments made by states are indeed productive assets, but that their
impacts. The following sections provide a sampling of research on value is reflected in the fact that economic actors will change locations
the impacts of highways. The sample is by no means exhaustive but within, but not across, states to utilize new public works” (14).
104 Transportation Research Record 2067

This section reviews the evidence on the impacts of highways at Rephann and Isserman
the relatively fine geographic scale of the county or smaller units. The
studies reviewed looked either at the direct effects on development, Rephann and Isserman isolated the impacts of Interstate highways by
growth, or output or at the indirect effects through property values. comparing counties that were affected by highways with counties in
a control group that were not (19). They compared output and income
series before and after highway construction. Their data covered
Lichter and Fuguitt 334 U.S. counties from 1959 through 1984. Counties were classified
as competitive (areas that were home to small cities that got Interstate
Lichter and Fuguitt analyzed patterns of growth for nonmetropolitan mileage during the period), urban spillover (areas near large cities
counties between 1960 and 1970 (15). Some counties were exurban with Interstates but without their own Interstate mileage), uncompet-
and were just outside metropolitan boundaries, whereas others were itive (predominantly rural areas with Interstate mileage), and adjacent
more remote. Being on an Interstate had both direct and indirect effects (areas close to counties affected by highways but off the Interstate).
on population growth, with the indirect effects occurring through the The results showed the strongest impacts on urban spillover counties,
growth of employment in export services and tourism industries. From followed by competitive counties. Significant negative impacts were
50% to 80% of the total effect was indirect and was through employ- found in adjacent counties, possibly reflecting a flow of resources out
ment. An Interstate highway’s effect was the greatest for nonmetropol- of the adjacent county toward the new highway investment.
itan counties near metropolitan areas. Overall, although an Interstate’s
effect was small, the “consistency of evidence provided on the rela-
tionship between date of completion of the interstate highway and Boarnet
various demographic measures was striking” (15).
Boarnet estimated a production function using panel data for Califor-
nia counties from 1969 through 1988 (20). The gross county product
was modeled in terms of the labor inputs, private capital inputs, and
Payne-Maxie Consultants
highway capital stock of the county itself and its neighbors. The
Payne-Maxie Consultants examined the influence of suburban belt- study used lagged variables to test the premise that causality runs
ways on the growth of suburbs and central cities in 54 U.S. metro- from changes in the highway stock to changes in output and not vice
politan areas (16). They concluded that beltways have little impact versa. The results showed that the output of a county was larger when
on the overall growth of metropolitan areas, but they also concluded a county’s own highway stock was larger than its neighbors’ but that
that beltways may shift growth from one place to another within a county output was smaller when the highway stock in neighboring
metropolitan area. The magnitude of land use impacts was deemed counties was larger. This suggested not only that the highway stock
to be dependent on (a) overall local economic conditions, (b) proxim- increased the output at the county level but also that the output gains
ity to medium- or high-income residential areas, (c) the availability of were at the expense of the outputs of neighboring counties.
land for development, and (d) favorable local zoning policies.
Hansen and Colleagues
Stephanedes and Eagle Hansen and colleagues used econometric techniques to study the land
use impacts of highway expansion in several corridors in California’s
Stephanedes and Eagle studied the interaction between highways and
four largest urban areas (21). Land development was measured in
employment for 30 counties in Minnesota over a 25-year period (17).
terms of construction permits. Highway expansion had the effect of
They found that highway expenditures had positive impacts on local increasing the number of single-family housing permits in the cor-
employment (beyond the regional trend) only in the Minneapolis– ridor relative to the number in the region. The results for multifamily
St. Paul metropolitan area. This was attributed to the greater capacity housing permits were similar. Highway expansion was found to have
of the metropolitan area to absorb growth compared with the capac- an immediate positive impact on commercial development but not on
ities of other areas within the state. The positive impacts of highway industrial development. The effect on commercial development dimin-
expenditures in certain counties were offset by the negative impacts ished over time. The authors concluded that “highway capacity
in adjacent counties. expansion stimulates development activity, both residential and
non-residential, in the corridors served by the expanded facilities” (21).

Carlino and Mills

Voith
Carlino and Mills analyzed development densities in circa 1980 for
3,000 U.S. counties using economic, demographic, and policy vari- Voith examined the geographic distribution of transportation invest-
ables and regional dummy variables to capture climatic effects (18). ments in the Philadelphia, Pennsylvania, metropolitan area, focusing
They modeled population and employment densities jointly using on differences between the city and the surrounding suburbs (22). He
structural equations to reflect the interaction between them. The den- presented county-level estimates of total, per capita, and per user high-
sity of Interstate highway mileage within a county was among the way investments over the 10 years from 1986 to 1995, as well as the
significant variables in both models. Elasticities suggested that a dou- fees generated by highway users. The central finding was that highway
bling of Interstate highway mileage would result in approximately capital expenditures were about 2.5 times higher on a per capita basis
2.8% and 6.1% increases in population and employment densities, in the suburbs than in the city. Even when transit investments were
respectively. Interstate highway access was not a dominant influence, included in the analysis, per capita transportation investments ben-
nor was it inconsequential. efiting suburban residents exceeded those benefiting city residents
Ewing 105

by 47%. Voith’s conclusion was that highway investments have pro- 150.00

Price Indices
vided an economically significant, although not overwhelming, incen- 140.00 1125 ft.
tive for suburban population and employment growth at the expense 130.00 to 1 mi.
of the city. His “reasonable guess” as to the impact of differential 120.00 2 to 3 mi.
110.00
highway investments was a net loss of 40,000 jobs for the city. 100.00
90.00
88 90 92 94 96 98 00
Haughwout 19 19 19 19 19 19 20
Year
Haughwout related county employment growth to state highway
investments, other state infrastructure investments, county employ- FIGURE 3 House price indices for the Foothill Transportation
Corridor (as function of distance from highway beyond 1,125 ft).
ment density, and other economic variables for the period from 1974
to 1992 (14). The results suggested that state infrastructure investments
redistributed growth from dense to less dense metropolitan counties.
His explanation was that by reducing the cost of travel, state highway Kockelman and Colleagues
investments undermined the spatial advantage of dense urban coun-
ties. The redistributive effect was limited to metropolitan areas; state First, Kockelman and associates analyzed 9 years of building permit
highway investments did not appear to spur employment growth in data for planning areas in Austin, Texas (24). The results suggested
nonmetropolitan counties. Because dense areas tend to be more pro- that highway expansions had no impact on development activity. How-
ductive, the net effect of state investments in the infrastructure could ever, the authors acknowledged that more spatially disaggregate or
be to reduce overall employment growth. larger data sets might have led to different results. Then, they studied
17 years of tax assessment records for parcels along an improved
highway. They found significant inflation in land values in response to
Boarnet and Chalermpong right-of-way acquisition, subsequent declines from their speculative
levels, and then gradual rises as development occurred (Figures 4
Boarnet and Chalermpong conducted a before-and-after study of the and 5). The subsequent statistical analysis confirmed that the year of
impact of new toll roads on single-family detached house prices in land acquisition had a significant effect on land value adjustments
Orange County, California (23). The study used hedonic price analy- and that the value of land on corners and land with frontage on major
sis and multiple sales price analysis to examine how the opening of facilities was much higher than the value of land elsewhere.
the toll roads altered house prices in nearby areas between 1988 and
2000. Highway access was measured by distance to the nearest toll Bollinger and Ihlanfeldt
road on-ramp. The evidence suggested rather strongly that changes
in accessibility were reflected in home sales prices. The evidence was Bollinger and Ihlanfeldt used data from the Atlanta, Georgia, region
particularly strong for the Foothill Transportation Corridor (Figure 3). from between 1985 and 1997 to estimate the change in a census tract’s
Thus, it was “reasonable to conclude that new highways will also cre- share of regional employment as a function of tax incentive programs,
ate changes in development patterns,” as higher prices lead to higher highway and transit infrastructure investments, and crime (25). The
densities of development (23). results showed that tracts containing rail station areas lost employment

500,000
ROW Acquired
450,000
Average Land Value per Acre

400,000

350,000

300,000

250,000

200,000

150,000

100,000

50,000

0
1982 1984 1986 1988 1990 1992 1994 1996 1998
Year

FIGURE 4 Average assessed values before and after right-of-way (ROW) acquisition by
average land value per acre.
106 Transportation Research Record 2067

45
ROW Acquired
40

Average Improvement Value per SF

35

30

25

20

15

10

0
1982 1984 1986 1988 1990 1992 1994 1996 1998
Year

FIGURE 5 Average assessed values before and after right-of-way acquisition by average
improvement value per square foot (SF).

share, but this effect was never statistically significant. In contrast, longer-term path analysis. The share of countywide building square
highway improvements within the tract caused employment shares footage and valuations along a corridor increased with the share of
to grow by about 0.00006 in the year following the completion of countywide freeway lane mileage added 3 years earlier. Building
the improvements, which translated into a gain of about 70 jobs. activities were also highly responsive to the average operating speeds
These effects were stronger than those commonly reported in the lit- 2 years earlier. Evidently, lane mile additions in previous years, con-
erature, perhaps because this was the first study to use panel data at firmed by increased travel speeds, spurred developers to build hous-
the neighborhood level. “As the geographical area over which the ing, offices, and retail stores near improved freeways. Consistent
firm chooses its location gets smaller, alternative locations become with theories of the highest and the best use, the developers of offices
closer substitutes. Hence, policies [or highway investments] may and public buildings appeared to value the accessibility benefits con-
have stronger effect within a metropolitan area than they have ferred by freeway expansions more than the developers of land for
within a state or broader region” (25). industrial uses. The gains in travel speeds made in earlier years, but
not lane mile additions, spurred retail development.

Cervero
Hartgen
Using data for 24 California freeway projects across 15 years,
Cervero explained traffic increases in terms of both faster travel Hartgen studied the growth of North Carolina’s 1,551 census tracts
speeds and land use shifts that occurred in response to the addition of during the 1990s in relation to the location of 312 major road
freeway lanes (26). Figure 6 shows the elasticity values from his projects (27 ). “Major road projects” were defined broadly, even

BENEFIT:
Roadway + .64
+ .39 Speed

SUPPLY: + 1.05 DEMAND:

+ .49 VMT
Lane Mile
Growth Growth
Share Share

DEVELOPMENT + .17
+ .44 ACTIVITY:
Building Growth
Share

FIGURE 6 Longer-term path model summary (VMT  vehicle miles traveled).

Ewing 107

FIGURE 7 Population change and major road projects 1990 to 2000, Charlotte, North Carolina, region.

including widening of two-lane arterials and the creation of one- Ryan

way pairs. Growth went where there was room for it, with the growth
filling in urban tracts and lower-density edge tracts. Road improve- Ryan examined the effect of access to highways and light rail lines on
ments increased the decade-long growth of tracts by 50 to 550 peo- office and industrial property rents in the San Diego, California, met-
ple per decade per mile of investment, about 2 to 14 percentage ropolitan area between 1986 and 1995 (29). Three variables measured
points above the baseline decade growth rate. The effect of road access: the straight-line distance of each property to the closest free-
improvements on growth was the greatest in Charlotte, North Car- way on- or off-ramp, the straight-line distance of each property to the
olina’s largest city (Figure 7). However, the relationships were gen- closest light rail transit station, and the straight-line distance of each
erally weak and explained only about 15% to 25% of the variation property to the central business district. The results indicated that
in growth and suggesting that other, uncontrolled factors were at access to highways had a significant effect on office rents, whereas
work (e.g., schools, taxes, sewer and water, taxes, and community access to light rail did not. Neither type of access produced a premium
receptiveness). in industrial rents. The preliminary conclusion was that although free-

Sanchez 35%

Sanchez studied whether highway projects in 15 Oregon cities induced 30%

Highway Projects
the conversion of land to urban uses between 1970 and 1990 (28).
25%
Probability of

Aerial photography was used to delineate the extent of urban devel-

Change

opment during the 20-year period. A logit regression model related 20%
the likelihood of land conversion to the distance to the nearest high- 15% All Highways
way, the distance to the nearest state highway project, the numbers
10%
of years since the highway project was completed, the distance to the
city center, the zoning classification, the city size, and the population 5%
growth rate. The results suggested that for the 15 cities, the likelihood
0%
of urban development declined with increasing distance to the near-
0.0 0.5 1.0 1.5 2.0 2.5 3.0
est highway, declined with the distance to a state highway project, and Distance (km)
increased with the number of years since the state highway project was
completed (Figure 8). FIGURE 8 Likelihood of development, 1970 to 1990.
108 Transportation Research Record 2067

ways provided clear access benefits for office firms, access to light rail • Highways may be necessary, but are not sufficient, to induce
transit and to the central business district was valued only when it development. To the extent that current planning and zoning caps
coincided with significant, preexisting centers of like activity. hold, the impacts within the corridor will be moderated.
• Counties receiving major highway investments attract popula-
tion and employment growth to a greater degree than they would
Berechman and Colleagues otherwise.
• Nearby counties may experience more or less growth than they
Berechman and colleagues estimated econometric models for coun- would otherwise, depending on the strength of the spillover effects.
ties and municipalities in the New York–New Jersey metropolitan • Nonresidential development is more strongly attracted to major
area using longitudinal data for 1990 to 2000 (30). State-level mod- highways than residential development, particularly in the immediate
els were also estimated but are not relevant here. The models esti- vicinity of facilities.
mated production functions, with output as the dependent variable • The induced development impacts are wider and deeper for
and labor, private capital, highway capital, and unemployment as Interstate-quality highways than lesser highways and streets.
the independent variables. Highway investments were found to have • It takes many years after construction for development to adjust
positive and statistically significant impacts on output at the county to a new land use–transportation equilibrium.
level but not the municipal level. As the geographical scale got smaller, • The induced development impacts of major highways extend
the spillover effects of highway investments into neighboring areas out at least 1 mi and probably extend farther.
became larger. When time lags were applied to highway capital, the
coefficients associated with that variable became smaller, suggest-
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