TY - JOUR
T1 - Take the Q train
T2 - Value capture of public infrastructure projects
AU - Gupta, Arpit
AU - Van Nieuwerburgh, Stijn
AU - Kontokosta, Constantine
N1 - Funding Information:
We gratefully acknowledge financial support from the Lincoln Institute and the NYU Stern Infrastructure Initiative, as well as comments from conference participants at the CREFR Spring Conference, the PREA Institute Conference in NYC, the AREUEA National Conference 2020, the Stanford Hoover Institute infrastructure conference, the 2019 Urban Economics Association conference, the Virtual Real Estate Seminar, CUNY Baruch, and NBER Summer Institute (Real Estate/Urban). We thank Yuan Lai, Michael Leahy, and Joshua Coven for superb research assistance.
Funding Information:
We gratefully acknowledge financial support from the Lincoln Institute and the NYU Stern Infrastructure Initiative, as well as comments from conference participants at the CREFR Spring Conference, the PREA Institute Conference in NYC, the AREUEA National Conference 2020, the Stanford Hoover Institute infrastructure conference, the 2019 Urban Economics Association conference, the Virtual Real Estate Seminar, CUNY Baruch, and NBER Summer Institute (Real Estate/Urban). We thank Yuan Lai, Michael Leahy, and Joshua Coven for superb research assistance.
Funding Information:
Even in New York City itself, the 7 train extension to Hudson Yards used an innovative financing formula. The train extension was financed by a $3 billion bond issuance by a special purpose vehicle, the Hudson Yards Infrastructure Corporation (HYIC). To ensure bond repayment by the HYIC, it received property tax payments from private developers as well as revenues from the sale of additional construction rights enabling developers to exceed zoning limits ( Petretta, 2020 ). These examples illustrate the viability and growing acceptance of value-capture methods to fund transit projects around the world, including in New York City.
Publisher Copyright:
© 2021 Elsevier Inc.
PY - 2022/5
Y1 - 2022/5
N2 - Transit infrastructure is a critical asset for economic activity yet costly to build in dense urban environments. We measure the benefit of the Second Avenue Subway extension in New York City, the most expensive urban transit infrastructure project in recent memory, by analyzing local real estate prices which capitalize the benefits of transit spillovers. We find 8% price increases, creating $5.5 billion in new property value. Using cell phone ping data, we document substantial reductions in commuting time especially among subway users, offering a plausible mechanism for the price gains. The increase in prices reflects both higher rents and lower risk. Infrastructure improvements lower the riskiness of real estate investments. Only 30% of the private value created by the subway is captured through higher property tax revenue, and is insufficient to cover the cost of the subway. Targeted property tax increases may help governments capture more of the value created, and serve as a useful funding tool.
AB - Transit infrastructure is a critical asset for economic activity yet costly to build in dense urban environments. We measure the benefit of the Second Avenue Subway extension in New York City, the most expensive urban transit infrastructure project in recent memory, by analyzing local real estate prices which capitalize the benefits of transit spillovers. We find 8% price increases, creating $5.5 billion in new property value. Using cell phone ping data, we document substantial reductions in commuting time especially among subway users, offering a plausible mechanism for the price gains. The increase in prices reflects both higher rents and lower risk. Infrastructure improvements lower the riskiness of real estate investments. Only 30% of the private value created by the subway is captured through higher property tax revenue, and is insufficient to cover the cost of the subway. Targeted property tax increases may help governments capture more of the value created, and serve as a useful funding tool.
KW - Commuting
KW - House prices
KW - Infrastructure finance
KW - Public finance
KW - Real estate
KW - Urban transit
KW - Value capture
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U2 - 10.1016/j.jue.2021.103422
DO - 10.1016/j.jue.2021.103422
M3 - Article
AN - SCOPUS:85122629493
VL - 129
JO - Journal of Urban Economics
JF - Journal of Urban Economics
SN - 0094-1190
M1 - 103422
ER -