High-speed rail can generate economic growth to self-finance
Growth in land values could be used to fund Australia’s east coast high-speed rail network project, according to UNSW research.
Land values and real estate prices around the high-speed rail (HSR) stations would potentially increase by up to $140 billion, a significant portion of which could be spent on financing its construction.
Rise in the value of high-speed rail: preliminary investigation report, released today by research center UNSW City Futures, calculates the estimated growth – or “value increase” – in land value due to HSR. He suggests that adopting policies that direct the economic growth of HSR towards offsetting its costs would allow taxpayers to share in the benefits of increased land values while reducing the pressure on governments to fund it.
The report estimates that the land surrounding a number of stations along the proposed East Coast HSR line would see a significant increase in value – between $48 billion and $140 billion, in the population growth scenarios used. in the report. Projections of increased infrastructure-related value for existing residential properties through improved accessibility and increased planning-related value of land rezoned to residential use around stations .
Professor Christopher Pettit, Director of the UNSW City Futures Research Center, conducted the research alongside postgraduate researchers Will Thackway and Reg Wade as part of the Value Australia project, which received financial support from the Cooperative Research Center Project ( CRC-P) of the federal government. The project uses the power of data analytics and artificial intelligence to provide insights into the Australian property market.
“We have compiled this report for policymakers and decision makers to explore these growth scenarios and make informed decisions based on big data and analysis,” says Professor Pettit. “There are many opportunities around the HSR for Australia to boost connectivity between cities and inject significant wealth and employment opportunities into the regions. The figures in the report confirm and help to quantify this considerable potential.
The researchers calculated the value improvement from the accessibility improvement by applying a value increase coefficient, based on international case studies, to the total value of existing residential dwellings in the area. catchment area of the proposed regional stops of the HSR. The increase in value resulting from planning control changes was calculated by subtracting development costs from the expected values of new dwellings in each area to obtain the residual land value (RLV) per new dwelling. The projected RLV for each area was then multiplied by a series of population growth scenarios to arrive at the final figures.
“We expect the values to be a conservative approach to estimation and the increase in total value may actually be higher,” says Professor Pettit. “This while taking into account a profit for the developers after all external costs, including stamp duties, legal fees and construction costs.”
The report indicates that the increase in value, resulting directly from HSR and population growth in surrounding areas, can be captured by various policies called “value capture”. Although the concept is not new – it partially funded the construction of the Sydney Harbor Bridge – it has been used to fund many major rail projects overseas. Recently, the Crossrail project in the UK, the Greater London Authority introduced a Business Rate Supplement, which is expected to generate £4.1 billion ($7.7 billion), contributing substantially to the total cost of the £14.8 billion ($27.9 billion) project package.
Improvement levies, developer fees or property transaction taxes are among the various mechanisms available to secure some of the benefits of public investment. For HSR in Australia, the incremental value that can be captured depends on the policy frameworks and value capture structure put in place.
“If you were to capture a substantial proportion of that upside in value, it could pay off a huge chunk of the HSR,” says Professor Pettit. “You would have to look at tens of billions of dollars just from the increase in residential value alone, without even considering the commercial, industrial and other beneficiaries.”
“Some of this value capture could also be used to invest in housing affordability programs. Not everything has to necessarily go to infrastructure,” says Professor Pettit. “It’s about ensuring that growth and benefits can be distributed fairly and equitably with maximum value.”
Business leaders committed to advancing infrastructure have also endorsed the creation of high-speed rail to have an outsized economic and social impact on regional cities.
“A nation-building infrastructure project like this will go a long way to easing supply challenges while supporting regional economic development and improving connectivity,” said James Abbott, managing director of Abbott Advisory, advising major Australian property and infrastructure groups.
“High-speed rail can breathe new life into cities and regions on Australia’s east coast, driving prosperity and social equity for decades to come. It would be a gift from us to our future generations. And this study indicates the potential for doing just that. It’s time to move on to high speed rail,’ said Professor Andrew McNaughton, Chairman of Network Rail (High Speed) Limited.
The report also recommends that further research be conducted on the use of capitalization financial instruments, the formulation of a national settlement plan and the creation of a national institute of cities to ensure maximum realization of the benefits of a HSR network across Australia.
Such initiatives would help the nation significantly reduce long-term emissions and go a long way to ensuring livable, sustainable, productive and resilient cities are planned along the HSR, Prof Pettit said.
“Australia is in an excellent position to capitalize on this infrastructure which would be transformational for the nation,” Prof Pettit said. “If the government were to make a significant investment in the HSR, it would show strong leadership and vision and set up Australia’s future generations to 2060 and beyond.”
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