Land value capture is an idea whose time has come

by on February 1, 2018 at 1:53 pm in Current Affairs, Economics, Law, Political Science | Permalink

That is the topic of my latest Bloomberg column, here is one excerpt:

Using land value capture for New York City subway improvements makes sense because other funding methods have failed politically. Earmarking some of the state income tax to the subway might be better, but people who don’t use the subway — the majority in New York State — just don’t want to pay. So the state must look elsewhere.

In the meantime, new subway lines are rare, even though the population and economic output of the city have grown substantially. The new Second Avenue line opened only last year, though construction started in 1972 and had to overcome numerous fiscal and political obstacles. On the older lines, delays are frequent and the system lacks modern technology. It is not unusual for signal switches to date from the 1930s. By one estimate, a much-needed revamp of the New York City subway system would cost more than $100 billion.

It is also good practice to consider when one’s argument doesn’t hold:

My own locality, Fairfax County in northern Virginia, treats landowners and real estate developers pretty favorably. They have been a dominant special interest group with many state and local politicians. That might not sound ideal, but those individuals have strongly supported the building out of the community, creating jobs and keeping down home prices. If landowners had been asked to foot more of the bill, the local political pressures for pro-growth policies probably would have been less strong and a NIMBY mentality would have prevailed. Unlike with the New York City subway, here the local interests have much greater sway, and thus land value capture could clog up politics rather than inducing new construction.

Recently I spent a day at a conference discussing Henry George’s “Progress and Poverty,” a late 19th century work that is perhaps the best-selling economics book in U.S. history. George spent much of his life campaigning for a relatively high tax on land and thus landlords, developing the fairness and efficiency arguments I mentioned above. By the end of the conference, I concluded that George had some good economic arguments, but also that he was politically naive. At the margin we should move in George’s direction, but ultimately landowners have to be part of the building coalitions rather than pure victims.

Do read the whole thing.

1 Ricardo February 1, 2018 at 1:58 pm

“but people who don’t use the subway — the majority in New York State — just don’t want to pay”

Wow… if only! Can we have more of that, please? Why do I have to pay for hurricane relief when I don’t live in an area that gets hit by hurricanes? Why do I have to pay for earthquakes when I choose to live in a (relatively) earthquake-free place? That’s the kind of land value capture (or land lack-of-value capture) I want to see…..

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2 John February 1, 2018 at 2:18 pm

The contra argument is that a good Subway system benefits New York City. A wealthy New York City benefits New York State. So even if someone in Buffalo doesn’t have a MetroCard, they’re benefiting from the enormous state revenue generated by New York City.

The attempt to itemize the beneficiaries of state outlays will simply boil down to the fact that rich people and places are getting screwed, and that poor people and places need to start ponying up for all the benefits they’re getting. Ultimately, that’s not a particularly helpful observation.

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3 Jeff B February 1, 2018 at 6:45 pm

+1

Additionally, while not a majority, nearly 6m people (~30% of New York State residents) ride the MTA each weekday. Limit this calculation to 18-65 year old population (data I could not find) and I would bet you end up >40% of working age adults in NY use the MTA multiple times a week. I imagine only the highways in NY would have higher utilization rates in NY as far as public utilities scored by % of population that use weekly.

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4 Careless February 1, 2018 at 8:51 pm

You don’t think that more people use water than the subway?

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5 amartya sen February 1, 2018 at 10:43 pm
6 msgkings February 2, 2018 at 2:21 am

This bot kind of scares the sh** out of me. It’s weird.

7 GoneWithTheWind February 2, 2018 at 9:45 am

Your argument then, seems to reinforce the idea that subway users could pay for subway improvements. Thus those who do not use the subway should not pay for improvements.

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8 Jeff C February 1, 2018 at 2:18 pm

It’s probably due to the fact that most (all?) public transit agencies in this country are corrupt, inefficient, mismanaged… or a combination of all three. In Boston, the MBTA is a dumpster fire that really should be bailed out by the state, but nobody trusts them to be able to fix it.

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9 Hazel Meade February 1, 2018 at 2:39 pm

I can’t tell if you’re being satirical or not. Personally I don’t see why people who make rational choices not to live in disaster-prone locations should subsidize those choices by others. One can also argue that if people in disaster-prone areas had to pay the full cost of those choices, they would design their buildings differently, and disasters would be less costly. What social benefit do I derive from other people living in shoddy structures on seacoasts or fault lines?

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10 John February 1, 2018 at 2:51 pm

@ Hazel
I’m not arguing against the disaster zone case. There are clearly examples where the majority subsidizing the minority leads to all sorts of massively inefficient choices. Of course, lots of people would make the same (perhaps reasonable) arguments about all manner of welfare.

@Jeff C
As I New Yorker, I’m also miffed about all the subway funding proposals, including the “soak the rich” provisions when the waste involved in the current system is staggering. There’s so much low hanging fruit to pick that various “creative” financing measures seem a slap in the face to taxpayers.
https://www.nytimes.com/2017/12/28/nyregion/new-york-subway-construction-costs.html

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11 Borjigid February 1, 2018 at 5:41 pm

One of the virtues of living in a big country is diversification of risk. You’d throw that away.

I am 100% on board with paying for hurricane relief. I am totally opposed to subsidizing flood insurance, as we do now. Let the market work, and then have the government there to provide a soft landing

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12 Anon7 February 1, 2018 at 9:23 pm

NYC has a GDP of around $1 trillion, which is bigger than all but a handful of the 50 states, so why can’t the city afford to finance its own infrastructure?

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13 John Mansfield February 1, 2018 at 2:07 pm

This makes it sound like “build more” is always the right answer, against which our systems can be judged by how well they arrive at that answer.

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14 clockwork_prior February 1, 2018 at 2:25 pm

‘My own locality, Fairfax County in northern Virginia, treats landowners and real estate developers pretty favorably.’ – Til Hazel would not want it any other way, of course.

‘They have been a dominant special interest group with many state and local politicians.’ – The ‘they’ might be a bit too generous, though.

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15 Albert February 1, 2018 at 4:24 pm

I think it’s cute that Tyler thinks this idea is awesome so long as it doesn’t apply to his community.

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16 albatross February 1, 2018 at 11:39 pm

Warning: Strausian reading may apply.

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17 art deco February 2, 2018 at 12:08 am

varejão, aitken e ferreira pinto

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18 Alan February 1, 2018 at 2:29 pm

Taxing people extra for living next to the subway is backwards. Firstly, the added value of transit proximity is already priced into the property, and therefore the property tax. Secondly, it puts a disincentive on renting/buying/constructing housing near transit.

A friend of mine in the city puts it thusly: “You know how we’re always talking about how the city should implement congestion pricing? Well, what if they did the exact opposite instead? Wouldn’t that be even better?”

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19 Bob February 1, 2018 at 2:39 pm

The average effective property tax rate in New York City is 0.72%.

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20 Scott February 1, 2018 at 2:41 pm

“Firstly, the added value of transit proximity is already priced into the property, and therefore the property tax”, is exactly what I was thinking. The argument that the property tax is a good source of revenue for things which improve the values of nearby properties is strong. (Assuming that we’ve already decided it will paid for by some sort of taxation.) But the argument that it should be done by some change to the tax formula in some special zones is not.

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21 Bob February 1, 2018 at 2:46 pm

The proposed change in the tax formula simply involves raising the property tax, which as a percentage is generally much lower than all the other taxes people in the area pay.

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22 Alan February 1, 2018 at 2:52 pm

“Average” property tax in NYC isn’t a very meaningful concept because of how complicated the tax code is (σ is pretty darn wide on that distribution). The effective rate I paid was a little over 1%.

But anyway, you can use whatever effective tax rate you decide is true to work out the intrinsic marginal tax on subway proximity. eg, the Falocchio/Kontokosta study claims that being near a subway adds $3.85/sqft to commercial property value, commercial real estate is taxed at something like 4% (plus the rent tax), so you get $0.15/sqft value tax on subway proximity just from current law.

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23 Bob February 1, 2018 at 2:56 pm

NYC’s most expensive properties have the lowest rates:

http://metrocosm.com/nyc-property-tax-billionaires/

“Last month, I provided the data for a New York Post article, How NYC Does Not Tax the Super Rich, which describes how NYC’s most expensive apartment, a penthouse that recently sold for $100M, has an annual property tax bill of only $17k.

That’s an effective tax rate of just 0.017% (vs a national average rate of 1.29%).

That case is pretty egregious, but it only scratches the surface of the mess that is the New York City property tax system.”

24 Scott February 1, 2018 at 3:02 pm

But only within a certain distance of the subway, correct? It seems like that will _over_ concentrate the burden. I.e. the increase in property values is already localized so you are already collecting proportionally more tax from people near the subway, all other things about their properties being equal. By additionally raising the rates for those people you’re hitting them twice.

If the already existing disparity between the taxes for people near and far from the subway is smaller than we want because of the low property taxes, then I think that’s a reason to re-balance taxes in favor of higher property taxes, _overall_, relative to some other taxes. You could imagine two steps. First is a revenue neutral increase in property taxes coupled with a decrease in, say, sales taxes. This would increase the variance in the overall tax burden that is explained by proximity to the subway. Second would be an additional increase in property taxes to raise additional revenue. (Again, assuming we’ve already decided that revenue is going to be raised somehow.) The first step ensures that the burden from the second step is biased towards people benefiting from the subway.

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25 Bob February 1, 2018 at 3:29 pm

Yes, I agree that higher property taxes overall is the right solution.

26 Bob February 1, 2018 at 10:45 pm

Yes, I agree that higher property taxes overall is the right solution.

The issue isn’t the disparity between the property taxes for people near and far from the subway. It’s the disparity between property taxes and other taxes for a given location. The property tax for a building next to the subway is lower than the income tax of the professional who rents an apartment in the building, or the sales tax and corporate tax for a business that rents office space in the building. The building ends up disproportionately capturing the value of the subway and the professional and the business renting space in the building.

27 Anonymous February 2, 2018 at 1:37 am

The people who own buildings near new subway lines are receiving a windfall which is much greater than the amount they will pay in increased property taxes. There is no reason not to reclaim a large portion of this windfall to pay for the cost of the construction that creates the windfall in the first place- unless, as Tyler says, the owners would otherwise be successful in shutting down the new development.

28 Bob February 1, 2018 at 2:54 pm

There’s a disincentive for absentee owned land and property that’s idle with no building or construction on it. There’s no disincentive for actually building and constructing on the land and using it. There’s value in being near transit; that’s why there are renters who rent property near transit who pay the rental value of the property to someone else.

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29 Borjigid February 1, 2018 at 5:46 pm

I think land value capture makes a lot of sense for *new* subway construction. If prices go up (especially relative to a control group), that can reasonably be attributed to the new subway and the owners can hardly complain when the state reclaims some of the increase. As you say, it doesn’t really make much sense to add a special tax near existing subways.

I’m confused about your friend’s point about congestion pricing. What is he arguing for? Paying a subsidy to people driving into the congestion zone?

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30 Maximilian Roos February 1, 2018 at 2:32 pm

The same-in-reverse – compensating communities for any reduction in home prices (or even utility) – is also compelling. e.g. https://www.cnbc.com/2017/03/16/the-yucca-mountain-nuclear-waste-dump-a-political-hot-potato-is-back.html

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31 OldCurmudgeon February 1, 2018 at 2:36 pm

So, increasing fares to cover costs isn’t viable? It seems like riders would be the group most motivated to pay for updated switches.

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32 Hazel Meade February 1, 2018 at 2:43 pm

Same question I asked in the previous thread. Without getting a real answer.

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33 ChrisA February 1, 2018 at 11:20 pm

Increase subway prices and people move to the alternative – driving. So total revenues could actually go down.

The problem with increasing the tax base to fund growth in “public infrastructure” is that these public infrastructure projects are incredibly poorly managed, and very costly because of various interest groups (Unions only part of it). Fixed public infrastructure is incredibly vulnerable to these kind of issues.

If you are interested in improving public transport, what I would do is introduce high rates real time road pricing for urban areas and ban parking on streets for more than 5 minutes. This would force most cars off the roads. Then I would allow private buses to operate and stop anywhere they like. I can guarantee that the free market will find ways to optimally deliver transportation at a fraction of the cost of the public system and be much more flexible in anticipating demand. Imagine a bus system run using today’s Uber technology – you tell it where you want to go and it efficiently re-routes a bus to your position, optimising the whole network. I would also privatize any subways, let them compete with the overground buses.

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34 Jaunty Rockefeller February 1, 2018 at 3:44 pm

Depends on the demand elasticity, no? Maybe the fare increase necessary to cover infrastructure upgrades would crater ridership, where as land value capture would not effect demand for high-end Manhattan real estate.

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35 OldCurmudgeon February 1, 2018 at 3:55 pm

If that’s true, then the correct decision is to leave the old switches + operate the trains at intervals where they are safe.

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36 y81 February 1, 2018 at 4:29 pm

The argument would be that when fixed costs are very high, variable costs are very low (it costs a lot to run a train, but it costs the same whether it has 1 rider or 1000), and demand is reasonably elastic, there is no market clearing price, but the total government subsidy may be less than the consumer surplus. So the subsidy increases total welfare. Then the question is how the government can capture the consumer surplus, and at least some of that surplus is reflected in the property values of those who own property near the subway station, who either use the train or have customers (or tenants) who do.

Alternatively, subway riders vote, and want to tax other people to pay for their subway rides.

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37 Hazel Meade February 1, 2018 at 4:44 pm

Yeah, but the people being taxed are … themselves, in a round about way with land value capture. You take the windfall away from the landlord, let’s pretend in a lump sum. That’s equivalent to if the landlord paid more for the property in the first place. Now the landlord has to raise rents to cover the increased cost. So the people who live near subways, and benefit from subway improvements, pay more in rent. It’s a very round about way of taxing people who live near subway lines. In an efficient market those people who be people who use the subway the most.

Of course, NYC has rent control so maybe the landlords can’t actually raise the rent. We could speculate on the effect that would have on the housing market as well. If the property value goes up, does it matter if he can’t actually benefit from it because of rent control? How is he going to pay the tax?

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38 y81 February 1, 2018 at 8:11 pm

I will leave economic theory to those who know more. (I was an econ major, but that was 40 years ago.) As to New York rent regulation and property taxes (I have been a real estate lawyer for 35 of those 40 years), property taxes on rental properties are based on income, giving effect to rent regulation, so if rent regulation impedes the landlord’s ability to collect rents, his taxes will not go up. However, there are plenty of properties that are not regulated, de facto or de jure, for various reasons, and presumably both the value and the property taxes payable by those properties would go up if a subway line were built nearby.

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39 OldCurmudgeon February 2, 2018 at 10:05 am

I suppose one difference is the degree of taxation. Higher fares hit that subset of local residents who use the subway most heavily. IMHO, that’s more fair, but I suppose reasonable people may differ there.

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40 Hazel Meade February 2, 2018 at 4:19 pm

I think I talked myself out of this one. The land values are going up anyway, and the people renting there are going to pay higher rents regardless. The tax just reverses the positive externality that grants to landowners near the stops.
But they should only apply it to NEW subway lines. Properties on older subway lines should already have that priced into the purchase price that the landowner paid for it.

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41 OldCurmudgeon February 2, 2018 at 10:09 am

>Alternatively, subway riders vote, and want to tax other people to pay for their subway rides.

And tourists don’t vote. So, the politically optimal solution is to raise fares and then offer big discounts on ‘100 ride’ passes.

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42 Anonymous February 1, 2018 at 2:38 pm

Tyler, does the flamethrower increase or decrease your confidence in The Boring Company?

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43 Scoop February 1, 2018 at 2:41 pm

Land value capture does work well in a number of places, and it might improve things in NYC.

But it wouldn’t address the real problem, which is construction costs. Those are 5 to 10 times higher in NYC than in Spain or France or Japan. (To see this assertion very thoroughly documented, see the blog Pedestrian Observations.)

If construction costs fell 80 to 90 percent, it would be easy to get funding for new subway lines under current funding mechanisms (though land value capture might still be a good idea).

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44 rayward February 1, 2018 at 2:49 pm

America’s love affair with the automobile is irrational: the enormous cost, including for ownership, maintenance, and repair, for storage, for highways, not to mention the environmental cost, all for what is an inefficient means of moving people around in vehicles that sit idle most of the day. But it’s a love affair not likely to end soon. So the answer to more efficient transportation is . . . . the automobile. No, not just any automobile, the autonomous vehicle. For those not paying attention, autonomous vehicle is a euphemism for . . . transit. Elon Musk wants to build underground roads for autonomous vehicles. We used to call those “subways”. Does it really matter what we call the vehicle that uses the underground road? Call it a hippopotamus if you wish. It’s still transit. Irrational people get to keep their cars (well, somebody’s cars), and we get transit. What likely appeals to Cowen is that, except for the underground road, it’s “private” rather than “public”, surely something he would prefer. Henry George has been dead for 120 years. Let’s move on to the 21st century, and build underground roads for autonomous vehicles. Sure, it’s a subway, but a subway people can love. Just like the automobile. Cowen’s moon shot, to educate people to be rational, may work at the margin, but it won’t work well enough for enough people to act rationally and build and maintain “transit”, so fool them into believing they got their irrational way by building an underground road instead.

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45 JWatts February 1, 2018 at 3:18 pm

You’re babbling again. And confusion Tesla cars with the tentative idea for a hyperloop. The hyperloop is a fast subway system. Not a car.

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46 rayward February 1, 2018 at 3:33 pm
47 JWatts February 1, 2018 at 3:43 pm

Ok, I wasn’t aware of that concept. I will admit it looks cool. Of course, it’s a complete pie in the sky plan. It’s just an Elon Musk brain storm.

” Elon Musk wants to build underground roads for autonomous vehicles”

The video showed tracked sleds that people parked their cars on. This is not a new idea. Most people are familiar with ferries. I still don’t understand your objection to the concept. It’s probably unworkable, but you just seem to be upset that it might be a private enterprise instead of a public utility.

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48 OldCurmudgeon February 1, 2018 at 4:01 pm

>autonomous vehicle is a euphemism for . . . transit.

“Transit” minus the “mass” modifier. The flexibility changes everything

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49 anon February 2, 2018 at 3:56 pm

Public transportation is enormously costly and inefficient, and a lot less environmentally friendly than transit advocates suggest. Think about it… a massive bus that often is mostly empty, or a freaking train is of course going to use enormous amounts of energy.

Automobiles are a lot cheaper. Roads need to exist whether people have cars or not so they might as well be used for cars. An automobile that a person can use to go exactly where they want when they want is by definition efficient. The economic benefits of job access alone are huge. There are well argued pieces online that even suggest that it would be more effective in some US cities to simply give poor people money for cars/taxi service than using the money on their public transit system.

And I say all this as a left winger who misses the NYC subway system.

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50 Effem February 1, 2018 at 3:49 pm

How about Manhattan simply fixes its property tax system which allows massively valuable properties to pay taxes on a much lower calculated value off some theoretical “rental value?”

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51 Zach February 1, 2018 at 3:54 pm

It costs New York three or four times as much per mile of subway than anywhere else — even other very expensive places. Is New York’s problem a funding problem, or the capture of existing funding by entrenched interests?

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52 Borjigid February 1, 2018 at 5:50 pm

Both, and ideally they’d try to solve both. But if they’ve decided that the cost problem is too hard, that’s no reason to give up on the funding problem.

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53 edgar February 1, 2018 at 3:55 pm

Possibly related, homeless population in Fairfax County, VA drops below 1,000 for the first time:
http://www.connectionnewspapers.com/news/2017/apr/11/report-fairfax-county-homeless-population-down-47-/
New York homeless population at highest level since great depression: https://ny.curbed.com/2017/9/16/16319102/nyc-affordable-housing-crisis-bill-de-blasio-report Probably hard to tell what the effect of one localized tax increase would be in one particular area given all of the other moving parts such as local construction costs, existing property tax rates, development fees, affordable housing set aside requirements, density regulations, etc. but somehow I suspect NYC would get more subway lines, if that is really the goal, and get overall better related outcomes, by finding ways to decrease the local cost of constructing subway lines rather than trying out new taxes. Reminds me of the good old days when Tyler was opposed to expanding the federal tax base and wanted a plan to control spending instead.

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54 Dagon February 1, 2018 at 4:06 pm

I find it odd that we’re so willing to talk about “who should pay”, totally disconnected from “is it worth the price”? In my mind, they’re completely linked, and the obvious answer is “it’s worth the cost if people are willing to pay”. If you charge riders enough to pay for the construction and operation of the service (with the capital portion presumably smoothed out by 30-year bond issues), this question goes away (or rather, it becomes “is the subway feasible without tax-paid subsidies”, which is a better question).

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55 Homeros February 1, 2018 at 4:12 pm

Take a look at the variety of ways the MTA is fiananced: http://interactive.nydailynews.com/project/mta-funding/
It is financed by sales tax, taxes on petroleum and cars, taxes on real estate transactions, and on payrolls. It seems obvious that everytime the subway system is on the verge of collapse, some new tax that won’t be too noticeable gets tacked on.

The MTA does not need more money. It needs reform so that all of its billions do not get captured by insiders.

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56 jorod February 1, 2018 at 4:25 pm

Politicians choose to line their own pockets and those of the public unions rather than invest in infrastructure. Most money goes to NY City because that’s where the votes are. And the unions are campaign workers. Also, the pensions have become unaffordable and there is no money for anything. It’s business as usual for democrats. We needed a constitutional amendment in Illinois to keep politicians from raiding the road funds.

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57 jorod February 1, 2018 at 8:40 pm

Maybe train riders should pay for it.

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58 Devin Lavelle February 1, 2018 at 5:13 pm

Sounds a lot like California’s former redevelopment regime, which was tossed out a few years ago after decades of failing to show efficient benefits …

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59 Steven Kopits February 1, 2018 at 6:12 pm

I hardly know what to say about this post. Let’s let others do the talking:

https://nypost.com/2015/07/16/heres-why-your-subway-fare-keeps-going-up/

The estimated cost of the Long Island Rail Road project, known as “East Side Access,” has ballooned to $12 billion, or nearly $3.5 billion for each new mile of track — seven times the average elsewhere in the world. The recently completed Second Avenue subway on Manhattan’s Upper East Side and the 2015 extension of the No. 7 line to Hudson Yards also cost far above average, at $2.5 billion and $1.5 billion per mile, respectively.

https://www.nytimes.com/2017/12/28/nyregion/new-york-subway-construction-costs.html

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60 jack February 2, 2018 at 8:05 am

Yes. Unbelievable that after the NYT article none seems to have started an investigation into billions of dollars that disappeared, hundreds of no show jobs, featherbedding and so on. Instead chatter about Henry George and other nonsense

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61 jack February 2, 2018 at 8:02 am

Dubious that this “solution” has much to do with the problem, which is the inability of New York’s government to execute construction projects at reasonable costs — see the excellent NYT article dated 12/28/17 showing billions of dollars disappearing in recent subway projects from corruption and incompetence. No reason to think that this taxation theory will do much to address the problem. It is of course much more interesting to debate esoteric economic concepts than address the dull problems of dysfunctional government.

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62 Carl Danner February 2, 2018 at 10:13 am

I’m a little puzzled by the argument. If landowners “should” pay when the normal operations of government cause values to increase — which is a fairness argument — then shouldn’t government also pay when its ineptitude or corruption causes the opposite? My grandparents worked their whole lives to own and manage two multi-unit brownstones in Brooklyn. When they passed in the ’70s, the buildings were sold for a pittance because that’s all they were worth given problematic tenants paying minimal rent-controlled amounts in a crime-ridden area. Subsequent improvements in New York government and policing presumably have helped make the buildings staggeringly more valuable (along with other factors of course, but better government must have been a substantial contributor). Of course, you can chase your tail with this kind of argument — were we owed compensation? Should the new owners, in turn, pay? Suppose there were several intervening sales of the properties etc. Property taxes based on market values also already reflect what might be called an appropriate amount of any capital gains (or losses).

Does this also argue that governmental corporate location subsidies are appropriate? Did Nevada do the right thing by Tesla, provided that landowners could be hit for the bill? Presumably some real estate values are rising as a result, Amazon will do the same for its selected area. What about sports stadiums?

I think there’s room for some further elaboration or finer distinctions here.

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63 Axa February 2, 2018 at 10:32 am

Well, the users can pay for it. Adjusted for inflation and changes in fare bundling, transport in NY is cheaper today compared to 20 years ago. http://www.businessinsider.fr/us/nyc-transit-fare-hike-cheaper-than-in-1996-2013-10/

Also, look at London. Public transport works with very low subsidies even if users have to pay higher fares. No drama involved.

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64 Floccina February 2, 2018 at 10:51 am

Maybe they could have some expensive first class seating to earn some extra dough.

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65 Vance Koven February 2, 2018 at 11:58 am

While you can say it’s efficient to tap into the presumed increased value of property for local infrastructure improvements, when the landowners don’t have a strong say in what infrastructure projects get built they also don’t have a strong say in what restrictions are imposed on their ability to capitalize on the potential value increase. More concretely, zoning, rent control and set-asides (e.g. for affordable housing and parkland) in urban areas make a mockery of the notion that land owners will be glad to share a larger portion of their value (through rate increases rather than valuation increases) in taxes.

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66 albigensian February 2, 2018 at 12:09 pm

The (private) builders of interurban railroads captured land values by buying land near the lines they were going to build and then profited by selling land near the stations for commercial or mixed development, and land a short distance away for residential development.

Is there a reason why MTA couldn’t do something similar today? Yes, the land it would buy is already developed, but much of it would be worth more with a nearby subway station, or improved subway service.

Of course, for this to work the land would have to be bought before the public knew what was to be built or improved. And (as always with government) it’s difficult to prevent corruption.

And perhaps something like a TIF is more feasible, although all too many have amounted to additional taxation that was not adequately rewarded with increased land values.

Then again, perhaps if we understood and could do something about why NYC could afford to build the original IRT subway in just four years (and practically all with separate local and express tracks, and including the electric generating facility and distribution system to power it) when it’s already taken far longer to build just that short segment of the Second Avenue line then it might be possible to do something about it.

For the root-cause reason for the antiquated state of the NYC subway (and decrepit infrastructure in general) remains our inability to execute large projects with anywhere near the efficiency and productivity (even with our greatly improved construction technologies) that was possible 50, 70, or 100 years ago.

Well, at least we can still build bicycle lanes.

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67 Heinz Roggenkemper February 2, 2018 at 1:43 pm

Having heard you refer to Singapore often, I am astonished that you do not mention their model of land value capture at all.

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