Take the Q Train: Value Capture of Public Infrastructure Projects
64 Pages Posted: 18 Oct 2019 Last revised: 4 Jun 2021
Date Written: June 4, 2021
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.
Keywords: Public Finance, Land Value Taxation, Urban Development, Value Capture
JEL Classification: R10, R42, R51
Suggested Citation: Suggested Citation