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

Daniel Melser

Transportation Research Part A: Policy and Practice, 2020, vol. 138, issue C, 402-421

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.

Keywords: Transport economics; Value of infrastructure; Difference-in-differences; Housing economics; Repeat sales model (search for similar items in EconPapers)
JEL-codes: C22 R21 R42 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (5)

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DOI: 10.1016/j.tra.2020.04.016

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