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Author Topic: Access for Value: Financing Transportation Through Land Value Capture  (Read 2657 times)

Online ozbob

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http://blog.lib.umn.edu/levin031/transportationist/2011/04/access-for-value-financing-tra.html

Access for Value: Financing Transportation Through Land Value Capture
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Online Stillwater

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This will be a big consideration for assessing the viability for high speed rail in Australia.  A financier of the railway project may seek concessions from the federal and state governments to develop whole new cities and towns enroute.  Buy land at farm prices, sell as prime residential.  We have not seen too many new provincial cities built in this country (or smaller places, such as Warwick subject to an economic makeover) -- merely places like Springfield and Northlakes on the outskirts of major cities.

Offline Golliwog

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I look forward to seeing how the Ferny Grove Precinct plan turns out. Not sure what the deal will be with that, but I assume as the car park is QR owned, they will be collecting the profit from it. At one of the public meetings I attended for the project, I was talking to a TL staff memeber, and we got around to takling about the precint plan and the local area. We both agreed that they should be pushing BCC to change the planing rules for the area to allow at least 3 story buildings close to the station, though I don't think you would be able to value capture that.

Still, providing access to station areas for business use makes sense. These businesses obviously make a profit (anyone else notice the juice bar across from the McDonalds at Central has re-opened after a refurbishment?) so it's not like they wouldn't be in demand.

Another option would be similar to an old BCC policy. I forget the acronym, but the gist was it was about giving older shopping precincts a bit of a makeover and sprucing them up. BCC pays for it in the first case, but charges the businesses in the precinct over time to recoup the costs, and in the whole, the community benefits. How many stations have shops nearby that are poorly connected and just generally look a bit run down?
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Online ozbob

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Re: Access for Value: Financing Transportation Through Land Value Capture
« Reply #3 on: September 20, 2016, 08:59:32 AM »
Sent to all outlets:

20th September 2016

Land Tax: Gold Coast Light Rail value escapes out of QLD Gov't Back Door!

Greetings,

An interesting piece in The Conversation about how Gold Coast Light Rail has escalated land values around LRT stations.

University of Queensland Economist Dr. Cameron Murray estimates that the Gold Coast Light Rail raised land values by around $300 million, or a whopping 25% of the cost to construct the Gold Coast Light Rail system.

This is a very significant amount of money.

Once a property is sold, these windfall gains are set to land in the private bank accounts of landholders along the Light Rail route. As the Light Rail was paid for using tax money, these value increases are really coming courtesy of the taxpayer.

The Gold Coast City Council's budget will also be boosted. Council rates are based on land values, so when land values go up, so does the rates revenue.

We think local government should contribute to public transport infrastructure and operations based on this simple fact alone.

Dr. Murray's article notes the many Queensland Government exemptions that sees revenue slip through the Queensland Government's fingers. The Queensland Government needs to reform its land value taxation regime. Queensland's newly created Productivity Commission would be well equipped to investigate the issue.

Taxing land makes buying a property more affordable, not more expensive.  The phased removal of stamp duties and the introduction of a land tax to residential properties within the ACT has reduced mortgage payments by around $2200 per year.

Land tax reform would also allow economically inefficient stamp duties on properties to be abolished.

How can the Queensland Government credibly claim that it has no money for essential state-building projects such as Cross River Rail or the Sunshine Coast Line upgrade, while at the same time, it lets hundreds of millions of dollars in untaxed land wealth walk out of the proverbial back door?

Reforming land tax, while removing stamp duties and other taxes would boost our economy and generate the revenue that our state needs for major projects like Cross River Rail and the Sunshine Coast Line upgrade.

Best wishes,
Robert

Robert Dow
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References:

Gold Coast light rail study helps put a figure on value capture’s funding potential
https://theconversation.com/gold-coast-light-rail-study-helps-put-a-figure-on-value-captures-funding-potential-65084

ACT land tax policies already cutting mortgage payments, report says
http://www.afr.com/real-estate/residential/act/act-land-tax-policies-already-cutting-mortgage-payments-report-says-20160911-grdrar

The first interval - Evaluating ACT’s Land Value Tax Transition, Prosper Australia
https://www.prosper.org.au/wp-content/uploads/2016/09/The-First-interval-Evaluating-ACTs-Land-Valur-Tax-Transition.pdf
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Online ozbob

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Re: Access for Value: Financing Transportation Through Land Value Capture
« Reply #4 on: September 20, 2016, 09:01:46 AM »

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Online ozbob

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Re: Access for Value: Financing Transportation Through Land Value Capture
« Reply #5 on: September 20, 2016, 09:06:44 AM »
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Online ozbob

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Re: Access for Value: Financing Transportation Through Land Value Capture
« Reply #6 on: September 21, 2016, 07:45:51 AM »
Letter to the Editor Queensland Times 21st September 2016 page 15

Light rail boosts values, who pays?

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Offline #Metro

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Re: Access for Value: Financing Transportation Through Land Value Capture
« Reply #7 on: September 21, 2016, 08:20:34 AM »
Wonderful to read that article  ;)  :is-
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Offline #Metro

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Re: Access for Value: Financing Transportation Through Land Value Capture
« Reply #8 on: September 21, 2016, 09:22:04 AM »
Some quick and dirty calculations.

30 year lifetime
300 million value
1% land tax on value increase/uplift only
1200 million construction cost

30 years x 300 million x 0.01 = $90 million

Now

90 million / 1200 million construction cost  x 100 = 7.5% return on assets

Seems good, given that return on term deposit is 3.2%

(these calculations have not been time discounted - numbers are for discussion and not for use anywhere)

Haven't done adjustment, so real returns are probably much lower. But still, a respectable way to offset at least a good portion of the costs.
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Offline urbanplanr

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Re: Access for Value: Financing Transportation Through Land Value Capture
« Reply #9 on: September 21, 2016, 09:45:29 AM »
In an ideal world the solution would be along the lines of this:

Light rail for existing CityGlider routes. One between West End and Fortitude Valley/Teneriffe similar to what the ALP local gov proposed for the elections, and another alignment that crosses that light rail route similar to the Maroon CityGlider. With the amount of residential and commercial mix-use development in this corridor, the value capture would alone pay for the entirety of this project not to mention the amount of money it would save in the long term to not need to run buses along the corridor for the increased population growth that will occur. Light rail will be able to provide more capacity to these routes. I would even dare say a driverless system in the long term future.

Running the 111, 555, 222 etc. like line-haul system on the busways with very low headways/high frequency, and have local bus routes like the 170, 180, 140, 150 etc. on 5-10 minute peak hour frequency to the nearest busway/heavy rail station rather than making the long trip into the CBD.

The Victoria Bridge can remain as is if a new light-rail crossing is created otherwise take away the vehicles on Victoria Bridge and have both the busway and light rail crossing.
« Last Edit: September 21, 2016, 10:05:53 AM by urbanplanr »
I love transit but I have a specific interest in line haul transit systems, particularly LRT and BRT.

Offline #Metro

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Re: Access for Value: Financing Transportation Through Land Value Capture
« Reply #10 on: September 21, 2016, 01:52:26 PM »
The zoning needs to be in place to permit these increases, in fact I think this is exactly the logic behind what GCCC has done.
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Offline aldonius

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Re: Access for Value: Financing Transportation Through Land Value Capture
« Reply #11 on: September 21, 2016, 02:12:15 PM »
Trouble is Paddington etc can't be up-zoned anywhere near enough to make it worthwhile, it's all character residential (and hilly to boot)... like you think West End is bad for NIMBYism, but the urban renewal there is almost all ex-industrial sites.

Online ozbob

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Re: Access for Value: Financing Transportation Through Land Value Capture
« Reply #12 on: September 22, 2016, 11:50:10 AM »
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Online ozbob

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Re: Access for Value: Financing Transportation Through Land Value Capture
« Reply #13 on: September 24, 2016, 02:47:14 AM »
Couriermail --> Opinion: ‘Beneficiary pays’ principle could help move forward with new infrastructure projects

Quote
... In no case though have these models captured any of the often windfall value that is delivered when a shiny new piece of infrastructure – be it a rail link to Redcliffe or a football stadium in Townsville – is in place and operating.

And the gains, as measured by increased land values, associated with new public infrastructure can be quite substantial.

On the Gold Coast, for example, recent analysis by University of Queensland economist Cameron Murray concludes the increased value of land surrounding the city’s new light rail system is 7 per cent above that of land further out. In dollar terms that equates to $300 million, or a quarter of the project’s $1.2 billion cost.

“This is,” Murray says, “the once-off gain to the owners of 1324 plots of land within 400m of the light rail stations as a result of this transport investment.”

The problem is that in Queensland our land tax regime does not capture the added value efficiently, and Murray argues there is considerable opportunity to help fund new infrastructure by establishing a regime that reflects more of a “beneficiary pays” principle. ...
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Online ozbob

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Re: Access for Value: Financing Transportation Through Land Value Capture
« Reply #14 on: September 24, 2016, 03:20:19 AM »
Sent to all outlets:

24th September 2016

Re: Land Tax: Gold Coast Light Rail value escapes out of QLD Gov't Back Door!

Good Morning,

Piece in the Courier Mail this morning along similar themes as our previous comment below.

Couriermail --> Opinion: ‘Beneficiary pays’ principle could help move forward with new infrastructure projects

Is Queensland past the point of rescue? 

Linking essential SEQ transport reforms and improvements to an Olympics Games bid is also flawed thinking.

These things need to happen regardless and sooner.

Best wishes,
Robert

Robert Dow
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[ Attached: http://railbotforum.org/mbs/index.php?topic=5883.msg180186#msg180186 ]
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Online ozbob

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Re: Access for Value: Financing Transportation Through Land Value Capture
« Reply #15 on: September 24, 2016, 03:26:29 AM »
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Online ozbob

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Re: Access for Value: Financing Transportation Through Land Value Capture
« Reply #16 on: September 24, 2016, 03:29:37 AM »
Past the point of rescue .. 

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Offline #Metro

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Re: Access for Value: Financing Transportation Through Land Value Capture
« Reply #17 on: September 24, 2016, 05:04:12 AM »
I am very pleased to see this out in the open now. Things can start to move. It may be a way forward out of the whole privatisation/borrowing thing, or at least some relief.

It will also give some independence back to Queensland as a state that raises its own money doesn't have to do what the Feds tell it to do.

It is very good that the Courier Mail, of all newspapers, comes around to this.

Currently, any value uplift is being caught by both land owners and local councils. Objections by the property industry are not based on good economics. In any case, they could be exempt for 18 months as they build a property, for example.

The beauty of a land tax is:

1. Economically efficient. Land is fixed in supply, unlike work or goods coming out of a factory that can move or be changed to avoid the tax (think Apple Inc etc).

2. Don't need to draw lines on a map. Valuations simply updated and collect.

3. Devaluation of land is automatically compensated - devalued land gets lower tax bills

4. Impossible to avoid - unlike putting your $$ in Panama or other tax havens

5. Makes land cheaper - encouraging building

6. You can move to reduce your tax if you want to. People can choose their tax level, for example, by selling a large home and moving into an apartment.
« Last Edit: September 24, 2016, 05:52:00 AM by LD Transit »
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Offline #Metro

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Re: Access for Value: Financing Transportation Through Land Value Capture
« Reply #18 on: September 24, 2016, 07:03:53 AM »
This Dr Cameron Murray is very interesting and a goldmine of advice!  :yikes:

Have a look at his profile on The Conversation: https://theconversation.com/profiles/cameron-murray-172480/articles

Modelling for major road projects is at odds with driver behaviour
https://theconversation.com/modelling-for-major-road-projects-is-at-odds-with-driver-behaviour-63603

This is explosive stuff really:

Quote
Melbourne researchers John Odgers and Nicholas Low found that the forecast time savings for Melbourne’s CityLink project did not eventuate. They suggest that, rather than being based on evidence, transport policy is probably driven by political momentum to build more roads, because that’s what Australia has been doing for a long time.

Linked paper here http://www.wctrs.leeds.ac.uk/wp/wp-content/uploads/abstracts/lisbon/general/01403.pdf


« Last Edit: September 24, 2016, 07:10:37 AM by LD Transit »
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Offline SurfRail

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Re: Access for Value: Financing Transportation Through Land Value Capture
« Reply #19 on: September 24, 2016, 07:52:46 AM »
It's a pity the politics of this issue is so vexed.

We really need to wean ourselves off transaction taxes like duties - they are too volatile.

Online Stillwater

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Re: Access for Value: Financing Transportation Through Land Value Capture
« Reply #20 on: September 24, 2016, 08:39:27 AM »
Build a new road = votes from tens of thousands of motorists
Build a new railway = votes from thousands of commuters and tens of train drivers

Online ozbob

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Re: Access for Value: Financing Transportation Through Land Value Capture
« Reply #21 on: September 24, 2016, 08:44:34 AM »
Build a new road = votes from tens of thousands of motorists
Build a new railway = votes from thousands of commuters and tens of train drivers

However, increasingly it is being realised that building more roads is just making it worse in effect.  By building new railways outcomes become better for all including motorists.  We are seeing subtle shifts towards more balanced thinking within the road lobby - eg. RACQ, RACV etc.

Depoliticalisation of transport policy and implementation is a dream, but it should be pushed for constantly.
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Offline techblitz

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Re: Access for Value: Financing Transportation Through Land Value Capture
« Reply #22 on: September 24, 2016, 08:56:26 AM »
re land taxes & demand...
land is currently a greed driven commodity...just like coal was back in the boom when prices were sky high & everyone wanted to build mines.(greed factor)
Population growth is the fuel for land demand. Melbourne for example is projected to add 100-120k per annum till at least 2030.This will ensure property demand remains high.
The gold coast is very very attractive to overseas investors and retiring cashed up boomers/genX...courtesy of the best beaches in Australia. So there is a greed driven coastal market there as well..
In greed driven markets you can tax extensively but retirees/rent seekers will still come......especially if they are loaded with moolah....

Online ozbob

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Re: Access for Value: Financing Transportation Through Land Value Capture
« Reply #23 on: September 26, 2016, 09:22:53 AM »
Gold Coast Bulletin --> Gold Coast light rail has raised the city’s total land value by $300 million

Quote
PROPERTY industry and city leaders have declared the Gold Coast light rail a success, with new research showing land values along the tram route have spiked by around $300 million.

The city’s $1.2 billion tram system, from Broadbeach to Griffith University, has been operational for more than two years and a stage two extension is under way.

University of Queensland economist Dr. Cameron Murray said the system was a success.

Writing for independent online website The Conversation, Dr Murray said his research had focused on changes in land values on the Gold Coast since July, 2014.

“My research on the Gold Coast light rail provides the figures to demonstrate the size of the gains to nearby land values, which were around 25 per cent of the $1.2 billion capital cost in stage one of the project,” he said.

“I found that land within 400m of the stations increased in value by seven per cent more than land between 400m and 2km from the stations, in the year after the light rail began operation.

dr Murray said he has then used the price deviation to the total land value in those areas – a little over $4.2 billion in 2015 – to estimate the absolute change in land value was $300 million. ...
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Online ozbob

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Gold Coast Bulletin --> State and Federal Governments should have taxed Gold Coast land owners on light rail route: Report

Quote
LAND owners who benefit from property value windfalls brought by new public transport projects should pay more tax to ensure new systems can be built, researchers have found.

The study, to be released today, suggests a “value capture” model is fairer than simply relying on shrinking government budgets.

It says the State and Federal Governments missed the opportunity to recoup public funds used to build the first two stages of the Gold Coast light rail from landholders who made millions of dollars from the project.

Researchers from Griffith University, the University of Sydney Business School and the University of Queensland analysed two decades of sales for Gold Coast residential property within easy walking distance of a station.


While values rose sharply across the board, they found a “sweet spot” within 100-400m of stations where values increased 30 per cent more than they rose at 400-800m.

Gold Coast council already charges ratepayers a $123 annual transport improvement levy, reaping more than $29 million a year.

Project leader Associate Professor Matthew Burke said a system that recognised the benefits of each project were not shared equally between locals should be considered.

“For example you might ask people within a certain distance of a new station to pay a higher levy – but only where there’s been research that demonstrates there will be a property value increase,” he said.

Dr Burke said even a value capture yield worth 10 per cent of a proposed project’s price could be enough to get it over the line, especially when it came to the often-contentious State-Federal funding split.

Value capture has been successfully used in cities including Melbourne, where commercial property owners were levied so the City Loop project could go ahead.

Heavy and light rail stations in Sydney have also been funded by targeted levies, while London, Hong Kong and the United States use various other methods to capitalise on the increased value of surrounding land.

The researchers unexpectedly found the biggest price spikes around the light rail occurred in the early planning stages – not once a project was funded, built or running.

“We expect that the building of the second stage to Helensvale is already having effects in that northern corridor through Parkwood,” Dr Burke said.

“Land values at Nobby’s and Miami are also likely rising now due to the planning studies under way to take light rail through to Burleigh Heads then on to the airport, given that now looks pretty certain to happen.”

LIGHT RAIL FIGURES

* 12 per cent between 1996 and 2002 when planning began and priority corridor was identified;

* another 26 per cent 2002-2006 when the main planning study was completed;

* two per cent from 2006-2011 when funding was confirmed and construction began; and

* another 5.4 per cent from 2011-2016, when the light rail was launched.

Based on properties within 100-400m of a light rail station
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Online ozbob

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The Conversation --> Why Gold Coast light rail was worth it (it’s about more than patronage)

Quote
Why Gold Coast light rail was worth it (it's about more than patronage)

Gold Coast’s light rail scheme has attracted great interest since the streets of Surfers Paradise were torn up and stations and track were built. Was it worth spending A$1.5 billion on 13km of light rail and more than $40 million a year in subsidies?

Are we right to be spending another $420 million on an extension to Helensvale in time for the Commonwealth Games? Should we be taking it all the way down to Gold Coast Airport?

Another question is whether gains in property values served by the project could be “captured” to fund such infrastructure.

Previous studies of property values in areas serviced by the light rail showed only modest gains after it opened. Our research cast a wider net back to when we first started planning the system in 1996 through to the latest data we could get in 2016.

The results were intriguing. We found that prices in the catchment areas started to increase in the earliest planning phases. The effects of the light rail were to push up property values within 800 metres of the stations by more than 30% in total from 1996 to 2016.

This is well above most previous estimates of a light rail system’s effects. This is mainly because we looked earlier for the property value gains and used a carefully designed control to make the comparison.
Impact after opening seemed modest

These findings cast a different light on the apparently modest impact of the light rail after it opened.

When the first stage from Broadbeach to our university at Parkwood opened it was well received. But the behaviour change we all hoped for was rather modest at first. After opening in 2014, patronage did not surge compared to bus ridership on the route in earlier years.

New passengers got on board, but it was an uphill climb for the new system. Fare increases of almost 50% from 2010 to 2014 pushed passengers off public transport across southeast Queensland, especially on rail.

Not all passengers enjoyed improved service for their particular journeys either. Those who used to travel through the corridor in a bus now had to break their journey at the light rail terminus and transfer, adding travel time and annoyance.

In the second year of operation, however, patronage jumped 16% and our contacts suggest third-year patronage is tracking well. Subsidies per passenger are falling. The decision to add the connection to Helensvale looks a sound one.

But, seemingly, other changes everyone expected weren’t there. The Bureau of Infrastructure, Transport and Regional Economics analysed property values in the corridor from 2000 to 2013 using a coarse geography and didn’t find much evidence of any uplift. This gave many cause for concern.

Reassuringly, Cameron Murray used valuation data for a similar period using a different geographical scale and found a 10% increase for properties within 400 metres of the new stations. But there was still uncertainty.

Our new research backs up and expands on Murray’s findings, suggesting there was substantial positive impact.

What did our research look at?

Our research team in the Funding on the Line Australian Research Council Linkage Project took a different approach.

In a peer-reviewed paper, which will shortly be presented at the World Symposium on Transport and Land Use Research, led by Barbara Yen, we used sales data for residential properties along the corridor. Our study compared areas within 800 metres of the stations with a control area containing locations a little further away but still in the same vicinity.

We used a longitudinal methodology to see when the value uplift occurred from back in 1996, when planning of the system first started, through to the latest 2016 data. Property prices in the catchment areas started to increase very early in the planning phase. The property value uplift was highest in the locations between 100 and 400 metres from the stations.

Values went up 11.9% in these locations compared to our control areas between 1996 and the feasibility study’s announcement in 2002. They increased a further 26.3% from 2002 to 2006 over the control areas when the feasibility study was completed. Prices rose only 2.3% from 2006 to 2011 when the formal funding commitment was made and construction began, and then by another 5.4% after the line opened to the end of the study period in 2016.

The areas less than 100 metres from the stations, and between 400 and 800 metres also recorded strong increases compared to the control areas, though not quite as much.

This is to be expected. Sites closest to the stations received some nuisance from the light rail and road corridor; sites further away obtain fewer advantages in travel time savings for passengers.

What are the funding implications?

The property value gains attributable to the project from 1996 to 2016 of more than 30% are very significant. Yet it’s pretty much only the landowners who benefit.

The City of Gold Coast recoups some of its $120 million investment in the light rail through its rates and its public transport levy on urban residents. The Queensland government may end up getting a little slice via stamp duty as properties are sold. The few pieces of government-owned land likely rose in value.

But the state and federal governments generally have no other mechanisms to take a small sliver of the increased property value their investment generated to help pay for the light rail system or reinvest in public transport elsewhere. We’ve written about this previously in The Conversation and suggested ways we could change the system.

A recent federal parliamentary inquiry and moves to set up “value sharing” units in the Queensland and New South Wales governments suggest we are now getting serious about generating alternative funding for public transport.

Our study’s results only add more support to these initiatives. Get it right and we should be able to deliver more metros, busways and light rail to serve our growing population and its increasingly urban way of life.
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