A software tool has been developed for estimating the impact road and public transport investments have on property values.
The Government’s National Infrastructure Commission commissioned the Institute for Fiscal Studies to develop the Property Value Uplift (PVU) tool.
The IFS says the tool’s results “can be considered the best short-run estimates available given existing data and the timescale of the project, and an excellent starting point for future analysis of public investment and planning decisions”.
“The tool is very flexible, allowing the user to be very specific about the type and location of investment they’d like to evaluate,” it adds. “It is also very detailed, predicting the impact on the full distribution of house prices in the area (not just what happens to average house prices) and the full distribution of commercial rents. The results highlight how localised the benefits of transport infrastructure can be.”
Commenting on the policy implications of the work, NIC economist Tom Bousfield said: “At the local level, property valuation decisions are incredibly nuanced, driven by numerous factors such as green space, transport, and access to national parks. It is important, therefore, that local authorities should have flexibility in raising revenue through land value capture tools such as developer contributions.
“The Government’s elimination of pooling restrictions [on Section 106 contributions] and the forthcoming introduction of Strategic Infrastructure Tariffs, as recommended by the Commission, are important and welcome steps in this direction.”
The IFS has summarised the results of testing the PVU tool on several illustrative transport projects in three locations: the Cambridge-Milton Keynes-Oxford arc (CAMKOX), the East Midlands, and Yorkshire.
“Regional-level road investments that reduce travel times by 10 per cent can increase average residential property values by about £3,186 per property in the Cambridge-Milton Keynes-Oxford region, £2,138 per property in the East Midlands, and £874 per property in Yorkshire,” it says.
Average commercial property values were predicted to increase by £14,078 per property in CAMKOX, £5,766 in the East Midlands, and £8,996 in Yorkshire.
“City level [road] projects, as one would expect, have more local impacts and increase values by smaller amounts,” says the IFS.
It says the conclusions about public transport investments are “similar but the impacts on property values are smaller”. “This arises naturally because roughly 90 per cent of journeys are by car. As a result, the short-run impact of public transport projects on property values is small.
“The model does account for the fact that improved public transport times do increase the share of consumers who use public transport. However, in the short-run, the increase is not large.”
The IFS says the tool cannot provide insights for very large transport interventions. “The tool will not accurately predict the impact of new, very large rail schemes since these tend to prompt medium- to long-term shifts in commercial location decisions, residents’ location decisions and travel behaviour.”
To develop the tool, the IFS compiled two property-level databases covering residential and commercial properties.
The residential property database contains information on the price and type of almost every property sold in England between 2008 and 2017, linked to property size, precise coordinates, local land use from the Generalised Land Use Database, data on exposure to flood risk and noise from the Environment Agency, and travel times by car or public transport estimated from Google Maps Distance Matrix API. The weighted average of travel time by car and public transport was used.
The commercial property database contains the same information but measures rateable value and only at a single point in time, April 2015.
The data was used to study how house prices and commercial property rents vary with the characteristics of a property and its location.
By combining the databases and results from the econometric analysis, the IFS created the “property value uplift” (PVU) tool in the form of a web application (the ‘CeMMAP PVU’ tool). As well as evaluating how the prices and rents of existing properties might change in response to small-scale investments in roads or public transport, it can predict the value of and rent for properties in new settlements.
Users of the tool first choose a region and then choose an investment type (a settlement, road investment, or public transport investment). Next they input details of the investment, including a map of its location. The web application provides instructions on how to use Google Maps to create the map. The server predicts travel times, property values and creates a pdf report of the predictions.
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