Economic Stupidity, Or Corruption?
Government Accidentally Gives Huge Subsidy to Landowners
Creating a rail station means creating huge increases in site value surrounding that station. Should the creator receive any of the value created, or should it all go as windfalls into the hands of landowners? If landowners get all the benefit, won't they automatically promote even stupid, destructive projects so long as they get windfalls? Here is an early set of findings on a specific project in the UK.
Jubilee line raises land value by estimated £2.8 billion at Canary Wharf and Southwark Tube stations aloneA new report published by Transport for London (TfL) suggests that the uplift in land values attributed to the Jubilee Line Extension is in the region of £2.8billion in the proximity of Canary Wharf and Southwark Underground stations.
The pilot study, conducted by globally integrated real estate services and money management firm Jones Lang LaSalle, found that there has been a positive impact on local property market values.
The conclusions of the report, 'Land & Property Value Study - Assessing the Change in Land & Property Values Attributable to the Jubilee Line Extension' are that the estimated uplift in land values is in a wide range, but in the order of:
Jones Lang LaSalle were commissioned by TfL to undertake a pilot study and assess the impact of the Jubilee Line Extension (JLE) on land values at two stations, Southwark and Canary Wharf.
- £2billion around Canary Wharf Underground station;
- £800million around Southwark Underground station.
The methodology agreed at the outset with TfL involved using property market evidence to assess value, applying this value appropriately to the property stock in the defined study areas, and then estimating the effect of the JLE by comparison with controls not materially affected by it.
The full report is available on the TfL website at www.tfl.gov.uk/tfl/about/report-library/jle/extension.shtml.
In deciding the extent of the study areas, it was assumed for the purposes of this study that the majority of any value uplift would occur within a 500 meter radius of each station for commercial uses and 750 meters for residential uses. The areas used are loosely based on these dimensions.
The pilot study examined value uplift from 1992 to 2002. It should be noted that the results of the pilot study are sensitive to the start and end dates chosen, and any different period adopted would give differing results.
The estimated land value uplift is sensitive to assumptions made in Jones Lang LaSalle's analysis. These assumptions relate to both property stock and value, because of the nature of the data available, and the need for interpretation in the application of this data. For these reasons the exercise is one of estimate and judgement, not calculation, hence the wide range of figures reported.
ATIS REAL Weatheralls were also commissioned to estimate the uplift in land value as a result of the JLE using a different methodology and data sets to those used by Jones Lang LaSalle. The consultants are expected to finalise their work in summer 2004.
For a fuller explanation of how to pay for the costs of public transportation, see this:
Transportation, Economic Rent, and Land Use
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When government declares the site of a new rail station, it causes land values to rise by billions overnight. Should the taxpayers get any of that value? Or should they pay higher rents and also pay for the new transit infrastructure, while absentee landlords get windfalls for free? What's your opinion? Tell your views to The Progress Report:
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