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.
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One of the reasons I moved where I did was because I am within walking distance of a train station and the line had been duplicated. My wife and I both like the fact we don’t have to sit in traffic if we don’t want to.
With electrification and increasing petrol prices land prices near train stations will likely only keep on increasing. Add in the CBD tunnel and the impact on land prices would be huge, while the West will benefit the most from shorter travel times, other areas would also benefit from the greater frequency and accessibility these projects offer so across the region there could be really significant increases in land values.
I know of a couple of people, one of whom is (ironically) pretty involved with the National party who moved and only looked at houses close to the railway lines such that they could easily commute into town. So even if National’s Transport Minister and uppe echelon don’t see the benefit, I’m sure the majority of those coming through the bottom do. I know there was a similar debate on CBT where several people claimed that they know no one that would want to live next to a railway station, maybe it’s really that we reside in completely different Auckland universes (which I doubt), but I honestly don’t think I know very many people at all who if moving don’t take into account the ease of walking to a nearby train station.
I guess the improved value from the project is captured through increased rates somewhat, it does make me wonder if the council shouldn’t be letting development rights to land such as that next to the Grafton Station, and Avondale stations (rather than a park and ride at the latter) for a TOD, and somehow taking a cut of the profits. The land at Avondale would certainly be perfect for apartments and Avondale is a suburb that should be encouraging walk up traffic rather than people driving to the station.
rtc, the question to people that don’t think they want to live near a train station is would they prefer to be near a motorway interchange? Or worse like the poor sods getting the forth south-bound lane in their back garden, along with a lovely x metre barrier on SH1. Rail lines being so much narrower cause much less severance of community, in fact, it is clear that the proposed Southwestern line would do a great to repair the fractured Mangere social geography by reforging links both along and across the dividing motorway through the heart of that burb.
So much that’s in that report is intuitive. And what rail project both instantly capture the most walk-up as well as radically improve travel times: the CBDRL. Travel times on the western will be slashed especially for destination in the city south of Britomart, and the city stations walk-up catchments are as dense as possible in Auckland. We all know that it will far exceed the forecasts in the soon-to-be filleted study.
I’m happy to be corrected but I’m not sure if this can be counted. See the price has gone up because the travel time in trips originating in that area has gone down and people want that. So that already has been captured by the analysis in the persons x time saved x value of time equation I would think.
That’s an interesting point Bris. While I think time savings benefits are definitely flawed, they are a reasonably proxy for other – more real benefits – that come with improving mobility and accessibility. This might just be a better way of measuring and quantifying those benefits.
I will just reference my statement.
From the Australian Government Department of infrastructure and Transport
Bureau of Infrastructure, Transport and Regional Economics
http://www.btre.gov.au/info.aspx?NodeId=22&ResourceId=24
“Report 100: Facts and Furphies in Benefit-Cost Analysis: Transport”
p154, emphasis added by me
Bris, while you may be effectively measuring the same thing and therefore need to be careful not to double count, if impact on land value change is a better and more accurate way of analysing a project’s benefits then perhaps we should use that instead of time savings benefits. That’s the question I’m posing.
Well I guess it comes down to what is easier to measure. Travel time and value of time are easier to measure. Land values are affected by many different factors, not just PT, but also the different market forces in operation too so it might be harder to prise apart and attribute the right portion to the PT project.
“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.”
Existing property owners would love to see the value of their properties increased. Anyone wanting to purchase residential CBD property would prefer to see values kept low, and I’m sure commercial and residential tenants wouldn’t want to see their rents increase. You could argue that people living in a CBD have access to a better transport system if they want to travel out to the suburbs, retailers will have more customers, and businesses will reap all sorts of agglomeration benefits. But if property values double then rents might also double and so you’d need to see a doubling of your salary to maintain the same rent to salary ratio. And businesses would have to use the agglomeration benefits to double their productivity and sales and that is hard.
A better strategy might be to run rail lines and new roads out to semi-rural areas, then tax people to rezone rural land and subdivide it for development. If you built commuter rail out to, say, Warkworth then you might be able to build 200,000 new homes between Albany and Warkworth. Say $10bn to build a harbour tunnel and the rail line, and you’d only need to find $50k per home even if that was your only method of financing the line.
That is effectively what was done in many places overseas, the rail operator would up lots of land in the countryside, build a rail line through the middle of it and the city would expand around it due to the easy transport connections the line afforded. I think that the best place for us to consider that would be the North West corridor between Westgate and Huapai, we should build a NW busway all the way to Huapai with it designed so that can upgraded to heavy rail in the future. Then build stations about 2km apart which would give you 3 between Westgate and Huapai with a 4th pretty much right in the middle of the town. Land can then be opened up around those stations for both residential and commercial properties but focusing on TOD developments right next to the stations and use developer contributions to pay for the whole thing.
Auckland gets another RTN route which will also benefit existing areas of the city and more land is opened up for development (appeasing the sprawl types) while still keeping the development contained to a set area.
This is a good piece of research. Your final comment is not quite right, however, where you say “remember that this type of ‘benefit’ is not even included in the typical cost-benefit analysis.”
The fact is that effects of transport infrastructure on land values reflects their net impacts on access (i.e. transport costs savings) as well as amenity. Obviously in this case the value of the transport cost savings has been capitalised in advance, but that’s simply because people are anticipating what the transport benefits will be.
The key point is that you can’t just “add” these benefits on top of standard transport user benefits, because that would be double-counting. Instead I’d just see it as an alternative (arguably more holistic and robust) way to value transportation improvements.
It would be interesting to see these trends go once the upgrade is complete, because I suspect the “anticipated benefits” include some sort of discount for the fact that the upgrade was no yet complete, so there was some risks of the plug being pulled.
Also supports the notion of funding PT through targeted public transport rates, as the ARC used to do, because the benefits are more or less localised.
The limited consideration of “benefit” (that which can be measured, is) means that questions about what might be more pleasant or convenient are too frequently ignored. Things which contribute to a ‘nicer’ city often have measurable benefits, but the intangibles frequently can only be described.
The council (or whoever builds CD rail loop in the end) will have to buy quite a bit of land around the link anyway in order to do the construction. Perhaps they can redevelop and sell afterwards in some cases?
Robbie’s Rapid Rail was to pay for the CBD tunnel through downtown land value uplift, it’s all in the 1974 final report of the steering group, gathering dust on Level 2 Auckland Research Centre of the Auckland Public Library: “Auckland Rapid Transit: Report to Government / by ART Directorate,” catalogue ref. 388.4 A8 (2 volumes). Nothing new under the sun, we just keep forgetting what’s already been investigated, because we never do anything (at least with regard to the CBD tunnel).
May I suggest emailing that to Gareth Hughes and Shane Jones? As the Opposition’s spokesmen on transport, that kind of information is invaluable for trying to formulate policy.
Of course, with the current national attitude towards paying for anything out of any form of taxation, good luck with that.
I would like to see the council, possibly in joint ventures, develop land around the train stations. Over time this should become an means of funding and adding value to station upgrades. This should speed up their ability to make these changes because it moves the spending fro the cost side of the balance sheet to investment. Building assets not just subsidising improvement. Two obvious examples are Mt Albert now and eventually Mt Eden, when the CBRL is built.
At least NZ has a local government rail contribution, meaning paying local taxes supports local rail.
Over here, local governments pay nothing towards rail services or upgrades, and therefore when property prices and land values feed into richer local governments, they pay nothing towards improving the rail services that make it possible.
That said, they are bled dry on just about everything they do, so there’s no unspent bucket of money lying around.
I agree with the concept that property value increases duplicate other benefits, but remember it is not just time saving they makes them rise. If you have good transport links then a family can easily forgo a car and save $5,000 or so a year. Do they include this in the normal cost benefits?
In cost benefit analysis, counting travel time savings and property value increases is double counting (proviso below). The increase in property values represents buyers transferring part of the value of future travel time savings to sellers. A transfer payment does not change the position of the community as a whole, so it is not an economic benefit for the purposes of CBA.
See p.37,51 of http://www.atcouncil.gov.au/documents/files/National_Guidelines_Volume_3.pdf
Proviso: a transit project may have benefits other than travel time savings if it allows some spatial rearrangements of economic activity, and that change has benefits other than travel time savings (agglomeration benefits). Agglomeration benefits are a real economic benefit, which may also be reflected in property values, but the same point about double counting applies.
Confusion can arise if you try to use increase of property values as a proxy for agglomeration benefits (because you have no way of estimating them otherwise); but that increase in property values is partly caused by travel time benefits, and you have counted travel time benefits separately.
If you don’t know in what proportions the increase in property values is caused by agglomeration vs travel time benefits, you will be part double counting to an unknown degree.