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DEVELOPING A METHODOLOGY TO CAPTURE LAND VALUE UPLIFT AROUND TRANSPORT FACILITIES

2. THE EVIDENCE FROM EMPIRICAL STUDIES

2.1 Introduction

Transport investment results in changed levels of accessibility, and these improvements are reflected in the cost benefit analysis that is carried out prior to any investment being made. The principal component of benefits is travel time savings to the users of the system. This in turn has secondary benefits for employers as their labour market areas can be extended and for employees who now have a wider range of jobs available within a given time constraint. There are also increased catchment areas for all types of services and facilities (e.g. schools, shops and leisure facilities). These transport benefits are well known, but where there is much less knowledge is in the other potential impacts of transport investments, principally on land values and property values (Banister and Berechman, 2000; ARW and UCL, 2002). The focus of this review is on the local impacts in terms of land value uplift, rather than the wider economic effects on employment, regional investment and patterns of consumption.

There are several well-known problems related to approach, data and the attribution of cause and effect. These additional effects (such as the increases in property and land values) must be seen as value added, and not double counting of the transport-induced benefits ⁷. Current conventional thinking is that there may well be additional benefits, but these are dependent on other factors being present in the local economy. Principal among these is supportive local economic conditions relating to the labour and the property markets, a supportive political environment that is conducive to inward investment, and the availability of both private and public funds for investment. If these necessary supporting conditions are present, then the transport investment might well lead to an enhancement in property and land values. This section first reviews Impacts, then provides some Interpretations.

2.2 Overall Impacts in UK and North America

There is now a rapidly growing body of empirical evidence relating to changes in commercial and residential property market values and transport investment. Table 1 presents the information from the UK, whilst Table 2 does the same for North America.

Table 1: Summary of results from the UK literature

Table 2: Summary of results from the North American literature

As can be seen from the tables, the evidence is broadly positive with most difference being found between the residential and commercial markets, the time over which impacts take place, and how close areas were to the stations. Parsons Brinkerhoff (2001) conclude that "it is clear that in most cases access to rail systems is valued by property owners and there is little support for the suggestion that proximity to rail actually decreases property values". The North American data has a much clearer view than that in the UK as values have been assigned to the changes in property and land values.

From this summary of the empirical evidence, certain issues seem to emerge that merit further discussion. Much of the UK and European research (Table 1) has focused on the residential market, but the reverse is true for the US research (Table 2) where the commercial market has been targeted. Almost uniformly, the impacts are seen as positive, with some very large percentage increases in commercial property values. The enormous variability in (positive) impact points towards either the importance of other factors, or the specificity of results, or the limitations of the methods used - or a combination of all these factors.

2.3 Distance Decay Effects

In the following sequence of tables, these differences are highlighted through distance and time. Here there are three aspects found in the literature, namely (a) the importance of distance thresholds from the station (Table 3a), (b) where a single threshold is implied (Table 3b), (c) where a decay rate is assumed (Table 3c), and (d) the importance of time savings (Table 3d).

Table 3a: The importance of distance thresholds from metro station or LRT stop

Note: The prices in the table show the average increase in values of properties within set threshold distances on BART or JLE stations.

Table 3b: The importance of a single distance threshold

Table 3c: The importance of a distance decay rate

Table 3d: The importance of time savings

In these tables, all the information from the studies in the UK (and Europe) and North America have been summarised according to the variables specified. It is felt that this is the best means to present a large quantity of information in a digestible format. It should be noted that much of the information is not directly comparable as definitions vary, the quality of the data is variable, and the time span over which change is measured is also variable or not specified. Within the literature review, it was only possible to look at the available published material. Often this did not present all the assumptions, the data used, and a consistent level of detail on the empirical results. So comparison between studies is not really appropriate. The main conclusions are that generally land value uplift has been positive, but that the level of that uplift has been very variable. It is impossible to attribute a clear reasoning to the differences. All the factors listed in the Tables (in particular Table 3a-3d) are relevant.

2.4 Overall Spatial Impacts

The overall spatial impacts of public transport investment will reflect the overall interplay of individual lines and stations, their overlapping or competing catchments and the layout of the city as a whole.

Ingram (1998) reports results of experience with new subways in Montreal, San Francisco, Toronto and Washington, D.C.:

• Very modest effects on metropolitan development patterns;
• Some evidence of development around stations (Toronto and Washington);
• Some evidence of CBD development in Montreal and San Francisco.

Cervero (1998) observes that radial rail systems can strengthen downtown cores. Banister and Berechman (2000:280-282) observe that BART has had a very modest impact in a highly localised and rather uneven pattern, with central San Francisco benefiting and maintaining its dominant position. The Tyne and Wear Metro was found to have a localised effect on the housing market "in a few inner urban areas, where the attractiveness of housing increased and some redevelopment took place" (Walmsley and Perrett, 1992:31).

Boarnet and Crane (2001:34) note that the more expensive the land at a given location, "the more likely a given site will be developed densely as builders trade off construction cost against unit land costs." Hence densities are expected to decline with distance from central locations.

Walmsley and Perrett (1992:127) suggest that: "Rapid transit tends to accentuate existing trends. If an area is undergoing an expansion or boom period, rapid transit can accentuate the expansion. If an area is declining, rapid transit may help to stabilise the area but will not reverse the decline. In one or two examples, the symbiotic process has worked in reverse: in Lille the Metro enabled people in the declining areas to go somewhere else to shop or work…" Effectively, in broad terms, the metro in Lille benefited most the central business district.

The issue of transport networks' effects on relative accessibility may also work on a wider scale, such as at a national scale. For example, where the TGV network in France is primarily (though not exclusively) radial in nature, then the relative strength of Paris is boosted. Clearly, in any individual context, the relative advantage will depend on the structure of network adopted: in these cases where the centres are the beneficiaries, the systems are more or less radial, though clearly other patterns would be possible.

The 'network effect' in its most general sense refers to the phenomenon whereby increases in size and connectivity of a network can lead to disproportionately large increases in utility and use. Classic cases include telecommunications networks as well as transport networks. The network effect can clearly be seen to operate in the case of a public transport system, especially an integrated one in which there is an ability to cover a high proportion of all origins and destinations, and especially when enhanced by through ticketing and information provision.

Nevertheless, it is in the nature of public transport systems - particularly high capacity systems such as metros - that corridors of high demand are required to support them, and often this is realised through a radial system in cities with a strong central business district.

Hall and Marshall (2000), commenting on the general impact of transport on land use/development, note that there is some evidence that challenges or confounds the conventional assumption of the 'land use - transport feedback cycle' ⁹ This conventional assumption may only work where accessibility is scarce. This would hold for big congested traditional cities and generally for settlements in the past. For many present day, western (especially American) and peri-urban or ex-urban cases, this would not apply. In such cases, the role of distance and transport cost may be increasingly less important

Wegener (1995) offers the explanation that the Land Use-Transport (LU-T) feedback cycle operates under conditions of scarce accessibility, but less so with ubiquitous accessibility. Banister and Berechman (2000:285) also suggest that "One possible explanation for the small and variable impact of urban rail investment is the condition of ubiquitous accessibility found in many urban areas… Any additional infrastructure, particularly where the network is already well developed, makes very little impact on the overall accessibility."

The general issue of the impact of accessibility - which may generally be assumed to result in a positive (component of) impact on property value - is now addressed in terms of two specific aspects: 'step change' and 'network effect'.

The arguments of Cervero and Landis (1995), Wegener (1995) and Banister and Berechman (2000) all suggest that accessibility may not necessarily have a dominant influence on development and land use. Wegener (1995) points out that "The small differences in accessibility are usually more than compensated by amenities such as clean air, quietude, closeness to nature or social prestige, and whatever differences in attractiveness remain are levelled off by the price elasticity of the real estate market." (1995:159) And: "It is not surprising that, under conditions of ubiquitous accessibility, monumental transport improvements have little effect on location."

Cervero and Wu (1998) conclude: "the results of our research are also consistent with the proposition, that factors other than accessibility increasingly shape metropolitan locational decisions", such as planning policy. Bollinger et al. (1998) claim "Our results provide the first hard evidence that convenience for face-to-face meetings is an important determinant of office rent. In fact, we find that this factor is among the most important predictors of locational differences in office rent."

This suggests that public transport investment can support growth in property value or rent where it boosts locations with good opportunity for face to face meetings and general social interaction. This is typically through the creation of high density urban nodes with a concentration of facilities and services, such as those found in the major rail terminals and at transport accessible locations (e.g. transport development areas).

Overall, then, we may say that an improvement in accessibility is the logical foundation for, and necessary prerequisite of, increases in property value, but is not on its own sufficient. Its impacts depend on both the scale of the investment (Section 2.7) and on the contribution of the new link to the network.

2.5 Impacts by Mode

Although investment in metros and other public transport systems may lead to increased property values and development in their vicinity, this has to be set against the performance of locations served by other modes.

With respect to an analysis of changes in planning applications in main transport corridors in Sheffield, Dabinett (1998:180) infers that the road corridors were more important in stimulating potential development than Supertram. Dabinett also reports that proportionately more change occurred in the road corridor and interviews suggested that the road investment appeared to have had a more positive impact than the introduction of light rail.

Banister and Berechman (2000:280-282) similarly note that although there have been some positive development outcomes as a result of the introduction of Bay Area Rapid Transit (BART), especially in maintaining the position of San Francisco's central business district, they report that outside the city even greater office development took place near road-accessible corridors.

Vickerman et al. open their 1999 paper: "The precise role of transport infrastructure in the process of regional development, even the direction of causality, is still open to much debate". Subsequently, they state (p3): "Provision of both roads and railways varies considerably between richer central regions and poorer peripheral regions. The impact which these variations in the provision of transport infrastructure have on regional development has been difficult to verify empirically". Then: "Attempts to explain changes in economic indicators, ie economic growth and decline, by transport investment or differences in accessibility has been much less successful" [than absolute levels]. They also go on to state "there is even disagreement on the direction of the impact and thus whether transport infrastructure contributes to regional polarization or decentralization."

Banister and Berechman (2000:245) conclude in their review of the economic impact of roads on development that there seems to be a link … "Yet the factors were not investigated within a unifying framework and, as a result, it is quite difficult to assess whether these investments have indeed led to any new economic development and, if so, by how much."

2.6 Timing of impacts

Dabinett (1998:178) reports on a Delphi study of property agents regarding the effects of the Sheffield Supertram. The greatest general influence on property values was found to have occurred just ahead of the rail improvements; impacts were greatest for retail and leisure sectors, and least for industrial. In contrast, the sector expected to be least affected by roads, was the residential sector.

Cervero (1998) suggests that land-use impacts are greatest when transit investments occur just prior to an upswing in regional growth (Section 2.8b). There is more evidence of this issue in Section 6.3 on the Croydon Tramlink, where the issue of time forms one of the main conclusions. In the literature more generally, it is not reported on extensively, as most of the studies have taken change over two points in time.

2.7 Scale of Change

Hall and Marshall (2000) summarise a series of studies that conclude that transport investment is often necessary but not sufficient to generate development (Tolley and Turton, 1995; Walmsley and Perrett, 1992:127; Dabinett 1998:172, 185). Where this 'necessity' would bite would be in the following cases:

(a) Areas lacking transport infrastructure generally.

(b) In 'advanced' transport networks, where there is a significant step change in accessibility, such as a river estuary crossing (or channel tunnel) where previously separate economic systems merge.

(c) Also in 'advanced' transport network contexts, where there are 'bottlenecks'.

In other words, in already advanced transport situations, it would take a major step change (b or c above) to see significant effects. Otherwise, the effects would be marginal.

This echoes comments by Ryan (1999) noting that it is where time savings are made that increases in property values are likely to accrue. In other words, if the change in accessibility is of a sufficiently large change, (e.g. new metro in a public transport-poor metropolitan area) then measurable time savings will be made (by at least some sectors of the population who would use the system). Alternatively, if a public transport investment was made that hardly changed travel times to any significant degree (whether because accessibility was already good in the direction served, etc.), one would not expect to see a large impact.

This is seen in the case of BART, where some transit-oriented developments have prospered, particularly notable are three stations located towards the end of the network, where there was little existing development in 1973 (Banister and Berechman, 2000:280-282). Banister and Berechman (2000:280-282) also report that the Japanese high speed rail system had minimal development impacts at existing stations, but the new stations located at peripheral sites had substantial local impacts. Boarnet and Crane (2001:35) also describe the effect: 'Initial investments in transportation infrastructure, such as the first interstates, almost certainly led to significant local development impacts. The effects of subsequent investments are less clear.'

Small scale investments will only have limited property market effects, and their main impacts will be on transport accessibility. The larger the investment, the more likely it is to have property market effects. But as time passes, the measurement of change becomes more difficult and attribution of any change also becomes more complicated.

2.8 Contextual and Local Economic Factors

There are also several important contextual factors that need to be considered that both relate to the transport investment itself and to the broader local economic environment. Four of these are covered here:

a) The qualities of the transport corridor

The introduction of the transport infrastructure and service should not, in its installation and operation, reduce the amenity of the area through which it passes, and thereby undermine the value of adjoining properties. Rather, ideally, it should enhance the relative attractiveness of the location.

The individual qualities of a public transport corridor can affect the magnitude and even the direction of the property value gradient. This particularly applies where a route is at surface level and influences the amenity of an area, or has had a historic influence on the character of an area. It also applies in the cases of surface sections of metro, 'underground' or other rail lines.

In some cases there is potential that the existence of a rail line could depress property values close to the line. This could occur in different ways, for example:

• In general, properties close to a line might suffer from noise or other disturbance, if close to the line; this might be offset wholly or partly by the benefit of increased accessibility in cases close to access points (stations), but might fail to do so in cases adjoining the line but not near any station;
• Where a service is run along an existing freight line, which may be associated with older industrial areas, there may be less appeal compared with new greenfield sites served (only) by road. As Boarnet and Crane (2002:162) note of the San Diego Trolley (South Line): 'the character of land uses near the stations was predetermined by pre-existing freight rail, and is not conducive to residential development'.

This suggestion is supported by Knaap et al. (1996) who found for the Portland LRT that the value of land parcels located within a half mile of the line increased with distance, but decreased with distance from the actual station.

In a study of the effects of BART in different areas, Landis et al. (1994) found in some cases a negative relationship between property value and proximity to the BART (-$1.97 per metre). This negative effect may be due to the proximity of the BART route to industrial and commercial land uses

In the case of Atlanta, Nelson (1999) found that in low income tracts, house prices were higher the closer they were to a transit station (+$1000 per 100 feet), whereas there was a slight negative effect of proximity in high income tracts (see also 'socio-economic factors').

Landis et al. (1995) found that typical house prices in San Diego fell as distance to the system decreased. This may be in part due to the fact that some sections of line run through an industrial corridor. In the case of San Mateo, Landis et al. (1994) found a negative association between property value and proximity to CalTrain, a commuter service on an existing heavy rail corridor. Landis et al. found that houses within 300m of a CalTrain right of way sold at a $1500 discount.

So far, we have discussed two prerequisites for increases in property value. Firstly, a new metro system must increase accessibility (and may need to do so significantly in order to discernibly be attributable to rises in property value), and secondly, it must enhance the attractiveness of a location, by increasing the amenity (perhaps visibility, identity and prestige of a locality with its new metro station) and/or avoiding reducing local amenity. The combination of these factors suggests a potential for property values to increase and new development to be realised. However, these may be necessary but not sufficient.

b) The economic climate

Hall and Marshall (2000) noted two particularly important contextual items regarding transport investment on development in general as (1) General economic climate and (2) Regulatory context, e.g. planning control. In other words, generally speaking, it has been found that infrastructure investment has led to land use development in buoyant economic contexts, and that public transport-led development in particular has tended to flourish where planning policy favoured public transport-oriented development and/or restricted car use/car-oriented development.

Cervero (1998) drawing lessons from Toronto, San Francisco and elsewhere, suggests that transit redistributes rather than creates growth (see also 'spatial impact'); and that a prerequisite is a healthy regional economy. He also notes that land-use impacts are greatest when transit investments occur just prior to an upswing in regional growth (Section 2.6).

Banister and Berechman (2000:280-282) reviewing the impacts of BART suggest that development impacts are not uniform and only occur where other economic conditions already favour development. They draw similar conclusions regarding a high speed rail scheme which requires the presence of a buoyant local economy that can take advantage of the new accessibility opportunities.

Walmsley and Perrett (1992) found a consensus of opinion on the effects of rapid transit on urban development: that development can only be successfully channelled if there is demand for property (1992:127). Walmsley and Perrett (1992:130) also report various examples where areas in economic decline are not boosted by a new transit system. In Tyne and Wear, demand for industrial property in the early 1980s was low, and the Metro had no significant effect on location decisions. This is echoed in the case of the light tail system in St Louis, where Hack (2002) notes that "the real estate market in areas along the rapid transit line is moribund and the private sector has been reluctant to invest in station area development until the Metrolink proves successful."

c) Supportive public policies

Various studies point to the importance of supportive public policies being in place to encourage development demand at public transport stations. Contextual factors found to be relevant include zoning and taxation policies; also, the availability of land (appropriately assembled) in the first place (see for example Boarnet and Crane, 2001:166).

Dabinett (1998:173) makes reference to studies, which showed that "rail transit can have a strong influence on the location, intensity and timing of new development, especially when it is supported by positive development incentives and coordinated land use/transit planning." The importance of planning context is made by Pill (1988) - citing zoning bonuses for developments around Toronto subway stations - and Greenberg (1988).

Walmsley and Perrett (1992) studied or reviewed the effects of 14 rapid transit systems in France, USA and Canada. They report that the systems with the greatest effect on development occurred were those in which there was a long process of urban planning in conjunction with the rail system (1992:126). They state: "A principal conclusion from this report must be that development is much more likely to follow the British rapid transit systems if some comprehensive plan is followed or development is otherwise encouraged to take place. If it is left to developers to provide the spur without incentives, there is a risk that nothing will happen until the new line has been in place for ten or twenty years" (1992:136).

Nelson (1999) found that commercial properties were influenced positively by access to rail stations and 'policies that encourage more intensive development around those stations."

Finally, in the context of high speed rail, Banister and Berechman (2000:280-282) suggest that " the need for supporting public policies at all levels cannot be over-emphasised".

d) Socio-economic factors

Socio-economic factors may influence the potential impact of metro investment on property values, regarding the correlation (or lack of correlation) between property purchasers (home owners) and public transport users. If there is a strong correlation, then the introduction of a public transport service could be expected to provide a significant boost to accessibility and hence attractiveness and property value. On the other hand, if those sectors of society who purchase their own homes are not inclined to use public transport, and/or if public transport use is restricted to low income people who are not homeowners, then the increased accessibility may have a minimal effect on the perceived value of the location. Indeed, it could conceivably hinder gain in value if the presence of the new service somehow compromised the perceived exclusivity of certain residential locations. In this sense the first two 'prerequisites' (accessibility and quality) are engaging with different housing markets and location preferences.

Ryan (1999) stresses this need to consider who the users are, who would benefit from increased accessibility and hence generate demand for property.

In the case of Atlanta reported earlier, Nelson (1999) found that while house prices closer to transit stations had a premium in low income areas, in high income areas there was a slight negative effect. This negative effect may be due to the fact that in the case of high income people, any possible slight negative effect on amenity due to the presence of the transit system would not be compensated or overturned by the benefits of greater accessibility, if the high income users do not use the transit system.

2.9 Summary of the Empirical Evidence and Comments

The foregoing and following results and discussion draw from both UK and North American cases. In interpreting results from North America with a view to drawing conclusions for the UK, the following broad points should be borne in mind:

• Cities that do not have a strong downtown, and/or having dispersed trip patterns, may not be able to take full advantage of the high capacity potential of metro systems;
• Cities with a lack of a public transport culture (where systems are introduced in cities without a tradition of high public transport use) may lead to less impact on travel and perceived value of accessibility improvements;
• Similarly, socio-economic factors may mitigate against the full possible impact of transit investment on property value, where property owning and transit-riding sections of the population do not coincide;
• The availability of relatively cheap car travel and good road infrastructure may also affect the relative impact of transit investment, compared with more costly/congested cities.

As a final exercise we show tabulated in summary form the impacts of a selection of metro and rail-based systems, relating their impacts to four key contextual factors: accessibility, planning policy regime, market (economic climate) and locale/ design attributes (Table 4). For example, with respect to the JLE, the Chesterton study concluded that the planning environment and accessibility were positive factors, whilst the housing market situation and local factors were more variable along the JLE corridor. Nevertheless, the impacts on both the residential and commercial markets were positive.

Table 4: Summary of empirical evidence

Note: The blank cells indicate that no comment was made on these factors in the study cited. The interpretation of the positive or negative effects of planning policies is a subjective one, and relates to whether planning (and other contextual factors) policies are supportive of change.

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