It’s a complicated issue, so here’s a little background (I have a Masters in Urban Planning so I’ve read a lot). Streetcar lines (and subways in some places) were profitable businesses, just like railroad lines. But there were a few features that we don’t have today.
First, it was a new mobility technology so it opened up land that was too far away to be developed. There is no such land now in metro areas because highways and have cars make all areas equally accessible.
Second, they were a real estate play as much as a transportation play. Because they opened up new land, the lines tended to go to greenfields where the streetcar companies and their allies owned or could buy land. Take a look at the Brown line in Chicago and watch how it winds – that was a land acquisition issue. This wouldn’t work now because a rail line doesn’t increase the value of land enough since so much is accessible by car.
Third, people rode trains a lot more then than people ride them even now. These trains were extensions off of a very dense, centralized city. Technology and social changes reduced the number of daily rides. For instance, refrigerators meant that women didn’t have to ride into the market every day. Worker benefits (like the 6 or 5 day work week) meant that workers didn’t ride as often. As shopping and employment decentralized, people didn’t have to ride to the city as often. And when people got cars, they had an alternative to the train.
So what can we learn from history and contemporary transit to make transit more valuable today?
First, there must be attractions at both end so the fixed costs in tracks and cars can make money both ways. Early streetcar lines often has amusement parks at the terminus to promote two-way travel. The Las Vegas monorail is a decent modern version of this – there’s something at every stop. Transit lines that end in the suburbs at a big parking lot will be underutilized by definition.
Second, land use matters. All of the streetcars and subways were built before zoning and so the market built what the market could bear by transit, and buildings could be razed and built bigger if demand grew. Housing in transit-rich cities and near light rail in cities with new transit systems is more expensive because zoning restricts how much can be built. In addition to maximum height, massing, and lot utilization, there are also minimum parking limits that mean every house/condo is much more expensive and not affordable to people that would use transit the most. Take a look at the area around the transit stops in Arlington, VA for an example of transit zoning done right – extremely dense development within 1/2 mile of transit stops. It has the lowest car ownership and usage in Northern VA and generates 50% of the county’s property tax in 5% of its land area.
Third is that quality of service matters. Buses in the US suck and are slow because fare collection takes place one at a time while the bus is stopped. Curitiba, Brazil (look it up, it’s the world leader in bus transit) has bus stops where you pay to enter and everyone boards at once. The city has one of the highest rates of car ownership in Brazil and the highest transit utilization in Brazil. On their main bus routes they have 1-3 minute headways so there’s no such thing as looking at a schedule. Other things like priority lanes for buses at stoplights, tech to let the bus hold a green light to make it through, etc help. Bogota, Columbia is the other leading bus tech center and both cities do something like 50x the miles of service per dollar as a subway would have cost to build and operate.
Fourth, if there’s lots of free parking at the destination it’s almost always easier to drive. Point to point means the trip is faster and free parking means it costs less. Places in the states that have the highest transit usage (Boston, New York, Chicago Loop, SF) are places where parking sucks or is expensive. Even LA traffic doesn’t keep people from driving because a) the buses are stuck in it too, and b) it’s free to park when you get there.
Basically, any city that’s building a light rail or subway line and not dramatically increasing the zoning around it is throwing money away. Without the proper land use, there’s not enough population to drive demand, without demand there’s not enough incentive to provide good levels of service, and without good levels of service people will find it faster to drive.