Substantial benefit of fixed infrastructure for transport arises from how it enhances the value of land close to the tramways


Thanks for the update.

It is worth noting that a. Homes near good transport links are more attractive places to live. Offices with good transport links are able to employ people from wider areas, and that enhances the value of the land they occupy. Shops with good access to larger populations do better, and so become more valuable.

Much of this benefit is captured by the people who own the land, so landowners, rather than residents. Indeed tenants paying rent may well become worse of as land values (and so rent) increases. Current owner occupiers do well, but prospective ones, seeking to buy, have to pay more.

In London, the capital cost of the Jubilee line was significantly less that the increase in land (and so property) values in the areas that benefited. So a public investment benefitted local landowners. So part of the cost of Crossrail has been raised by a levy on ratepayers (ie businesses) in areas that gained – indeed, politicians involved say that without this “land value tax” the scheme would never have been approved.

It is notoriously hard for the investors in the fixed infrastructure to capture the value created in this way. The easiest way to do it is for the tramway (or railway) owner to also own the land, and this has been done for Tokyo’s railways. When privatised, the railways were endowed with enough land to enable a profit to be achieved, and it is feasible there to work in a railway owned property, travel to and from work on the railway, and live in a railway owned home.

The MTR in HK was endowed with enough land to ensure they could make a living with reasonable fares. Indeed, MTR expects land to be a part of any investment deal for railways.

This was probably well understood by some elements of those who bought in to network rail, but they were so focused on property deals they forgot they had to run a railway properly, and blew it pretty spectacularly (and tragically).

But land ownership is not essential and there are other, usually more complex, ways in which this created value can be used to help run the railway, and deliver other public goods, and not just line the pockets of landowners. They all need some involvement by local or national authorities who have some sort of revenue raising powers.

Britain’s railways (and particularly London’s) are still suffering the effects of landowner involvement (usually reactionary), in, for example, stopping railways coming to the centre of London, or not being able to pass through the centre. But many of the wiggles on routes that limit speed are from landowner participation.

So when you seek Directors, you need to bear in mind that the tramways will have big (and perhaps not obvious) effects on local land values, and those most willing to participate as directors and make investments (or represent investors) are those who will gain (or perhaps lose) from consequential changes in land values.

This is OK, but only if it is transparent. That is, land value changes are actively considered and reported in company decisions, and the gainers and losers are apparent.

I think high speed rail can be a good thing, but HS2 route decisions have been made without this being in the open, and, although many of the players may well be public bodies, it is hard to trust the validity of the decisions and whether the investments are optimal. Who knows. Try and make sure Bath does.

This will be hard. So good luck.


David Hirst