Measuring the benefits of transport projects is usually done through a process of comparing how long it took someone to get from A to B without a particular project, how long it is expected to take from A to B with that project, compare the difference, apply some value to the time, multiply it up by how many people will benefit and get a big round number. This methodology has its own flaws (what if people just travel further, rather than taking quicker trips), but it also potentially ignores many of the benefits that enhanced transport access can provide. What if a particular project encourages employment to concentrate in a city centre and thereby generates agglomeration benefits? What if people owning property in a particular place see their land values skyrocket through enhanced accessibility? These are all benefits, but not necessarily benefits that are frequently captured.
An interesting study by Motu Research attempts to capture and quantify some of the benefits from transport projects that tend to be ignored – looking at the example of the upgrades to Auckland’s Western Railway Line. Further to that issue, the paper also analyses the ‘anticipatory’ nature of these impacts: the extent to which house prices started increasing even in advance of completion of the upgrade – because people knew it was coming. It’s important to note that the benefits analysed were only those in the former Waitakere City.
A summary of what is analysed is outlined in the introduction: A bit more on the findings is outlined below:
So there seems to be a statistically significant impact. I suppose the real question is what the level of that impact was – and potentially how we might ‘tap’ that effect to help fund future projects.
But first, it’s worth having a read through the theory behind the idea that rail improvements will boost property values. This is broadly summarised below – although the study itself goes into quite a bit more detail: Interestingly, the house price benefit seems to largely occur within the pedestrian catchment of the train station – and most particularly when the station wasn’t constructed with “park and ride” users being prioritised:
There’s a lot of complicated maths in the way the effects are all worked out, and the study splits the railway stations in the west into three groups: those around New Lynn, those around Henderson and then Ranui & Swanson as a third group. The result show a definite uplift in house values in the areas around the stations compared to similar areas during the post-announcement period: after around 2005 when it was known that the rail upgrade would go ahead. The graph below averages out the two time periods to make the “jump” clearer:
Interestingly the biggest increases were for the stations closest to the city. It makes one wonder what effect the CBD Rail Tunnel might have on property values in the Grafton to New Lynn corridor along the Western Line: as that project will shave a huge chunk of trip times to the city centre.
When the value uplift is aggregated, you can some pretty big results in terms of the impact the project has had:
Now remember that this type of ‘benefit’ is not even included in the typical cost-benefit analysis. It’s also worth thinking about what the value uplift of the CBD Rail Tunnel might be – as typically rail projects have a greater effect on commercial land values in city centre than they do on residential values. We could be looking at some pretty massive numbers that haven’t even been given consideration in the business case for that project.
I suppose my final point of interest is in how this value uplift could potentially be used as a funding mechanism for rail infrastructure projects like the CBD Tunnel. Perhaps if a proportion of the value uplift was taxed (by way of a targeted rate or some sort of capital gains tax) then the revenue raised from that tax could help repay loans that were taken out to fund the project.
In any case, the article is certainly an interesting read – both in terms of identifying a benefit from rail projects that seems to have been previously overlooked, while at the same time also potentially highlighting a possible source of revenue. After all, if you owned property in the CBD you’d probably prefer it increased in value by 100% as result of the CBD Rail Tunnel, even if you saw a third of that taxed, than if it didn’t increase at all because the project could not go ahead.