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Take the Q train: Value capture of public infrastructure projects

Arpit Gupta, Stijn Van Nieuwerburgh and Constantine Kontokosta

Journal of Urban Economics, 2022, vol. 129, issue C

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 $5.5 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.

Keywords: Infrastructure finance; Real estate; House prices; Public finance; Urban transit; Value capture; Commuting (search for similar items in EconPapers)
JEL-codes: G10 G50 R32 R41 R42 R51 (search for similar items in EconPapers)
Date: 2022
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Working Paper: Take the Q Train: Value Capture of Public Infrastructure Projects (2020) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:juecon:v:129:y:2022:i:c:s0094119021001042

DOI: 10.1016/j.jue.2021.103422

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