Transportation drives development. At times the discussions revolve around how land use affects transportation, but the transportation decisions were made first. This is why private land developers once created their own streetcar lines, to entice people to visit and buy homes in their subdivisions which now make up the inner ring neighborhoods of many cities. The best examples are close-in, compact and convenient, usually very walkable to enable easy access to the streetcar, with a tight street grid of small blocks. Many of the great Chicago neighborhoods were streetcar suburbs, with the streetcar lines and ensuing development radiating away from the lakefront downtown core. Hyde Park in Austin shows the classic short-block form, is very popular and walkable, and has one of the lowest crime rates in the city to boot, disproving the "defensible space" theory of cul-de-sacs (for more quantifiable evidence see this 10mb thesis). Seattle has many great, compact and walkable neighborhoods which were once connected to downtown by streetcars.
The short block street grid of Hyde Park, a streetcar suburb in Austin
Some cities never gave up their streetcars, Toronto, for instance. The TTC Red Rockets are a familiar fact of life, as is the necessity of vehicles stopping to let passengers board and deboard the center aligned streetcars. That sort of civility can be relearned even when the city habit has been long broken, even in an auto-centric, big-oil loving city like Dallas. When they brought back the McKinney Avenue trolley, people had to learn how to stop for the trolley car, how to watch for it as it moves on tracks from center to side alignment, and to accept a few inconvenient stops and slow-downs. They seem to manage fine, although it helps that the enthusiastic volunteer motormen get out to make sure the traffic stops and will let drivers know if they have transgressed.
The previously private relationship between transportation and land development changed with the creation of the interstate highway system, when road building became the responsibility of the taxpayers via the government, and we all unwillingly or unwittingly subsidized auto-centric sprawling development. Now there is renewed interest in reestablishing streetcars in city streets, under a different sort of transportation funding and development model. Streetcars often represent shared public and private costs, a sort of mix of the purely private early streetcars and the typical public mass transit project. The capital financing for the initial outlay of street infrastructure, railstock, and operating agency often relies on a public or local improvement district, essentially a local tax district. Businesses, residents and property owners along the route, who are presumed to benefit from it, pay into the district fund. The PID along McKinney Avenue in Dallas provided a very good return in investment to the businesses and property owners along the route, which generated immense redevelopment and rise of property values, and therefore tax rates.
Streetcars on fixed rails are the type of investment that spurs development, and routes are planned accordingly through areas where the greatest redevelopment is desired, such as the South Lake Union streetcar (no, I won't use the original acronym here, you already know it). Seattle is planning other streetcar routes which are not fully decided yet. One is planned through my neighborhood on 1st Avenue, although the Belltown business owners have been vehemently against it. I don't know how to argue against the costs they bear, as I don't think I could run a business myself, but I think their greater fear has been loss of street parking. The good news for those of us who want a streetcar is that property owners along the whole route, from Seattle Center to Pioneer Square, get to vote on whether or not to approve the taxing district, which improves chances of it passing. The streetcar will have six minute headways, on a center alignment, with two or three stops in Belltown, fewer than the bus stops but encouraging more walking - along businesses frontages, of course. The buses will move to 2nd Avenue.
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