IDEAS home Printed from https://ideas.repec.org/a/eee/transa/v138y2020icp402-421.html
   My bibliography  Save this article

Estimating the housing capitalization effects of new infrastructure: Should we be using rents instead of prices?

Author

Listed:
  • Melser, Daniel

Abstract

A widely used approach to valuing transport infrastructure is to look at its effects on housing prices, in treated vs control regions, before and after it is built. But anticipation effects mean that housing prices may start changing as soon as a project is announced. This creates complications for an analysis of the capitalization effects on prices. A long span of data is potentially required—because the time from a project’s announcement to completion may be many years—and the assumption of common price trends between the treated and control regions must be maintained over this time span. An alternative approach is to use rents. This may be advantageous as rents are more directly related to the infrastructure’s service-flow. Though account needs to be taken of the fact that those homes which are rented are often not representative of the housing stock as a whole. We investigate these issues for a new train line in Sydney and contrast the results from using both prices and rents.

Suggested Citation

  • Melser, Daniel, 2020. "Estimating the housing capitalization effects of new infrastructure: Should we be using rents instead of prices?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 138(C), pages 402-421.
  • Handle: RePEc:eee:transa:v:138:y:2020:i:c:p:402-421
    DOI: 10.1016/j.tra.2020.04.016
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0965856420305711
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.tra.2020.04.016?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Sharma, Rohit & Newman, Peter, 2018. "Does urban rail increase land value in emerging cities? Value uplift from Bangalore Metro," Transportation Research Part A: Policy and Practice, Elsevier, vol. 117(C), pages 70-86.
    2. Kyeongsu Kim & Michael L. Lahr, 2014. "The impact of Hudson-Bergen Light Rail on residential property appreciation," Papers in Regional Science, Wiley Blackwell, vol. 93, pages 79-97, November.
    3. Dubé, Jean & Legros, Diègo & Devaux, Nicolas, 2018. "From bus to tramway: Is there an economic impact of substituting a rapid mass transit system? An empirical investigation accounting for anticipation effect," Transportation Research Part A: Policy and Practice, Elsevier, vol. 110(C), pages 73-87.
    4. Robert J. Hill & Daniel Melser, 2008. "Hedonic Imputation And The Price Index Problem: An Application To Housing," Economic Inquiry, Western Economic Association International, vol. 46(4), pages 593-609, October.
    5. Morito Tsutsumi & Hajime Seya, 2008. "Measuring the impact of large‐scale transportation projects on land price using spatial statistical models," Papers in Regional Science, Wiley Blackwell, vol. 87(3), pages 385-401, August.
    6. Bardaka, Eleni & Delgado, Michael S. & Florax, Raymond J.G.M., 2019. "A spatial multiple treatment/multiple outcome difference-in-differences model with an application to urban rail infrastructure and gentrification," Transportation Research Part A: Policy and Practice, Elsevier, vol. 121(C), pages 325-345.
    7. ., 2018. "Taxing land and property," Chapters, in: Fiscal Decentralization and Local Finance in Developing Countries, chapter 6, pages 227-278, Edward Elgar Publishing.
    8. Gibbons, Stephen & Machin, Stephen, 2005. "Valuing rail access using transport innovations," Journal of Urban Economics, Elsevier, vol. 57(1), pages 148-169, January.
    9. Daniels, Rhonda & Mulley, Corinne, 2013. "Explaining walking distance to public transport: The dominance of public transport supply," The Journal of Transport and Land Use, Center for Transportation Studies, University of Minnesota, vol. 6(2), pages 5-20.
    10. Melser, Daniel, 2017. "Disaggregated property price appreciation: The mixed repeat sales model," Regional Science and Urban Economics, Elsevier, vol. 66(C), pages 108-118.
    11. Pilgram, Clemens A. & West, Sarah E., 2018. "Fading premiums: The effect of light rail on residential property values in Minneapolis, Minnesota," Regional Science and Urban Economics, Elsevier, vol. 69(C), pages 1-10.
    12. Diao, Mi & Leonard, Delon & Sing, Tien Foo, 2017. "Spatial-difference-in-differences models for impact of new mass rapid transit line on private housing values," Regional Science and Urban Economics, Elsevier, vol. 67(C), pages 64-77.
    13. Claudio A. Agostini & Gastón A. Palmucci, 2008. "The Anticipated Capitalisation Effect of a New Metro Line on Housing Prices," Fiscal Studies, Institute for Fiscal Studies, vol. 29(2), pages 233-256, June.
    14. Yen, Barbara T.H. & Mulley, Corinne & Shearer, Heather & Burke, Matthew, 2018. "Announcement, construction or delivery: When does value uplift occur for residential properties? Evidence from the Gold Coast Light Rail system in Australia," Land Use Policy, Elsevier, vol. 73(C), pages 412-422.
    15. McDonald, John F. & Osuji, Clifford I., 1995. "The effect of anticipated transportation improvement on residential land values," Regional Science and Urban Economics, Elsevier, vol. 25(3), pages 261-278, June.
    16. Daniel P. McMillen & John McDonald, 2004. "Reaction of House Prices to a New Rapid Transit Line: Chicago's Midway Line, 1983–1999," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 32(3), pages 463-486, September.
    17. Stephen Gibbons & Stephen Machin, 2008. "Valuing school quality, better transport, and lower crime: evidence from house prices," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 24(1), pages 99-119, spring.
    18. McIntosh, James & Trubka, Roman & Newman, Peter, 2014. "Can value capture work in a car dependent city? Willingness to pay for transit access in Perth, Western Australia," Transportation Research Part A: Policy and Practice, Elsevier, vol. 67(C), pages 320-339.
    19. Efthymiou, D. & Antoniou, C., 2013. "How do transport infrastructure and policies affect house prices and rents? Evidence from Athens, Greece," Transportation Research Part A: Policy and Practice, Elsevier, vol. 52(C), pages 1-22.
    20. Mi Diao, 2015. "Selectivity, spatial autocorrelation and the valuation of transit accessibility," Urban Studies, Urban Studies Journal Limited, vol. 52(1), pages 159-177, January.
    21. Devaux, Nicolas & Dubé, Jean & Apparicio, Philippe, 2017. "Anticipation and post-construction impact of a metro extension on residential values: The case of Laval (Canada), 1995–2013," Journal of Transport Geography, Elsevier, vol. 62(C), pages 8-19.
    22. Cohen, Jeffrey P. & Brown, Mike, 2017. "Does a new rail rapid transit line announcement affect various commercial property prices differently?," Regional Science and Urban Economics, Elsevier, vol. 66(C), pages 74-90.
    23. Alemi, Farzad & Rodier, Caroline & Drake, Christiana, 2018. "Cruising and on-street parking pricing: A difference-in-difference analysis of measured parking search time and distance in San Francisco," Transportation Research Part A: Policy and Practice, Elsevier, vol. 111(C), pages 187-198.
    24. Billings, Stephen B., 2011. "Estimating the value of a new transit option," Regional Science and Urban Economics, Elsevier, vol. 41(6), pages 525-536.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chinmoy Ghosh & Venkatesh Panchapagesan & Madalasa Venkataraman, 2024. "On the Impact of Infrastructure Improvement on Real Estate Property Values: Evidence from a Quasi-natural Experiment in an Emerging Market," The Journal of Real Estate Finance and Economics, Springer, vol. 68(1), pages 103-137, January.
    2. Dongsheng He & Guibo Sun & Ling Li & Chris Webster, 2024. "New metro and housing price and rent premiums: A natural experiment in China," Urban Studies, Urban Studies Journal Limited, vol. 61(7), pages 1371-1392, May.
    3. Fragoso Januário, João & Costa, Álvaro & Oliveira Cruz, Carlos & Miranda Sarmento, Joaquim & Faria e Sousa, Vítor, 2021. "Transport infrastructure, accessibility, and spillover effects: An empirical analysis of the Portuguese real estate market from 2000 to 2018," Research in Transportation Economics, Elsevier, vol. 90(C).
    4. Federica Daniele & Elena Romito, 2022. "The impact of "Metro C" in Rome on the housing market," Temi di discussione (Economic working papers) 1394, Bank of Italy, Economic Research and International Relations Area.
    5. Daniel Melser, 2023. "The housing market reaction to the combustible cladding crisis: Safety or financial concerns?," Urban Studies, Urban Studies Journal Limited, vol. 60(4), pages 620-637, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Schmidt, Adam & Bardaka, Eleni & Thill, Jean-Claude, 2022. "Causal, spatiotemporal impacts of transit investments: Exploring spatial heterogeneity from announcement through long-run operation," Transportation Research Part A: Policy and Practice, Elsevier, vol. 161(C), pages 151-169.
    2. Dubé, Jean & Le Gallo, Julie & Des Rosiers, François & Legros, Diègo & Champagne, Marie-Pier, 2024. "An integrated causal framework to evaluate uplift value with an example on change in public transport supply," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 185(C).
    3. Lee, Jae Kwang, 2022. "New rail transit projects and land values: The difference in the impact of rail transit investment on different land types, values and locations," Land Use Policy, Elsevier, vol. 112(C).
    4. John Murray & Eleni Bardaka, 2022. "Evaluating the spatial and temporal distribution of beltway effects on housing prices using difference-in-differences methods," Transportation, Springer, vol. 49(6), pages 1963-1998, December.
    5. Chun-Chang Lee & Chi-Ming Liang & Hui-Chuan Hong, 2020. "The Impact of a Mass Rapid Transit System on Neighborhood Housing Prices: An Application of Difference-In-Difference and Spatial Econometrics," Real Estate Management and Valuation, Sciendo, vol. 28(1), pages 28-40, March.
    6. Diao, Mi & Leonard, Delon & Sing, Tien Foo, 2017. "Spatial-difference-in-differences models for impact of new mass rapid transit line on private housing values," Regional Science and Urban Economics, Elsevier, vol. 67(C), pages 64-77.
    7. Seungwoo Chin & Matthew E. Kahn & Hyungsik Roger Moon, 2020. "Estimating the Gains from New Rail Transit Investment: A Machine Learning Tree Approach," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 48(3), pages 886-914, September.
    8. Rennert, Lindiwe, 2022. "A meta-analysis of the impact of rail stations on property values: Applying a transit planning lens," Transportation Research Part A: Policy and Practice, Elsevier, vol. 163(C), pages 165-180.
    9. Chinmoy Ghosh & Venkatesh Panchapagesan & Madalasa Venkataraman, 2024. "On the Impact of Infrastructure Improvement on Real Estate Property Values: Evidence from a Quasi-natural Experiment in an Emerging Market," The Journal of Real Estate Finance and Economics, Springer, vol. 68(1), pages 103-137, January.
    10. Ahlfeldt, Gabriel M. & Nitsch, Volker & Wendland, Nicolai, 2019. "Ease vs. noise: Long-run changes in the value of transport (dis)amenities," Journal of Environmental Economics and Management, Elsevier, vol. 98(C).
    11. Dubé, Jean & Andrianary, Eugénie & Assad-Déry, François & Poupart, Janie & Simard, Justine, 2018. "Exploring difference in value uplift resulting from new bus rapid transit routes within a medium size metropolitan area," Journal of Transport Geography, Elsevier, vol. 72(C), pages 258-269.
    12. Devaux, Nicolas & Dubé, Jean & Apparicio, Philippe, 2017. "Anticipation and post-construction impact of a metro extension on residential values: The case of Laval (Canada), 1995–2013," Journal of Transport Geography, Elsevier, vol. 62(C), pages 8-19.
    13. Sun, Weizeng & Zheng, Siqi & Wang, Rui, 2015. "The capitalization of subway access in home value: A repeat-rentals model with supply constraints in Beijing," Transportation Research Part A: Policy and Practice, Elsevier, vol. 80(C), pages 104-115.
    14. Tideman, Nicolaus & Plassmann, Florenz, 2018. "The effects of changes in land value on the value of buildings," Regional Science and Urban Economics, Elsevier, vol. 69(C), pages 69-76.
    15. Wenjie Wu & Guanpeng Dong & Bing Wang, 2015. "Does Planning Matter? Effects on Land Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 50(2), pages 242-269, February.
    16. Gabriel M. Ahlfeldt & Volker Nitsch & Nicolai Wendland, 2019. "Ease versus noise: long-run changes in the value of transport (dis)amenities," CEP Discussion Papers dp1631, Centre for Economic Performance, LSE.
    17. Zhengyi Zhou & Hong Chen & Lu Han & Anming Zhang, 2021. "The Effect of a Subway on House Prices: Evidence from Shanghai," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(S1), pages 199-234, March.
    18. Comber, Sam & Arribas-Bel, Dani, 2017. "“Waiting on the train”: The anticipatory (causal) effects of Crossrail in Ealing," Journal of Transport Geography, Elsevier, vol. 64(C), pages 13-22.
    19. Tian, Chuanhao & Peng, Ying & Wen, Haizhen & Yue, Wenze & Fang, Li, 2021. "Subway boosts housing values, for whom: A quasi-experimental analysis," Research in Transportation Economics, Elsevier, vol. 90(C).
    20. Basso, Leonardo J. & Navarro, Matias & Silva, Hugo E., 2021. "Public transport and urban structure," Economics of Transportation, Elsevier, vol. 28(C).

    More about this item

    Keywords

    Transport economics; Value of infrastructure; Difference-in-differences; Housing economics; Repeat sales model;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:transa:v:138:y:2020:i:c:p:402-421. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/547/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.