Take the Q Train: Value Capture of Public Infrastructure Projects

Abstract

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 $6 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.

Flattening the Curve: Pandemic-Induced Revaluation of Urban Real Estate

“…Davis, Ghent, and Gregory (2021) likewise studies the effect of working from home on real estate prices. Liu and Su (2020) This research has begun to use high-frequency location data from cell phone pings to study patterns of consumption, commuting, and migration (Miyauchi, Nakajima, and Redding, 2021;Couture, Dingel, Green, Handbury, and Williams, 2021;Gupta, Van Nieuwerburgh, and Kontokosta, 2020). Coven, Gupta, and Yao (2020) shows that the pandemic led to large-scale migration.…”

Causal Inference for Spatial Treatments

“…For the effects of infrastructure projects, such as additional bus or subway stops, on commute times and real estate prices (cf. Gupta et al, 2020), the appropriate assumption may depend on the type of stops that are added. An additive effects specification for bus or subway stops may be a good approximation if each stop gives access to a different transit line.…”

Regional development in Lithuania: A tale of two economies

“…Against this background, improving residential mobility is an important policy challenge for more balanced regional development. The small rental market is an additional barrier to residential mobility, prompting labour market "lock-in" effects (Glocker and Plouin, 2016 [43]) (Andrews and Caldera Sánchez, 2011 [44]). Less than 10% of the Lithuanian population lives in rental housing, compared to 25% in the European Union (Eurostat, 2019[45]).…”