Thursday, 30 August 2012

High priced London

According to the Economist, London is (once again) the most expensive city in the world for renting office space.

Business cycle fluctuations aside, no surprises here. As my colleagues Cheshire and Hilber (2008) carefully document, planning restrictions in England impose a 'tax' on office developments that varies from around 250% (of development costs) in Birmingham, to 400-800% in London. In contrast, New York imposes a 'tax' of around 0-50%, Amsterdam around 200% and central Paris around 300%.

Tuesday, 28 August 2012

Greenbelt 'under threat'

CPRE seem to have received plenty of coverage for their report highlighting a 'renewed threat' to the Greenbelt.

The report identifies projects "amounting to the development of a new town greater than the size of Slough over the next twenty years".

That's not a unit of measurement I find very intuitive. However, the BBC translates this as about 1,000 hectares. The Greenbelt is currently 1,619,835 hectares. So in a twenty year period the plan is to use a little more than half of one percent of Greenbelt land to help manage growth in UK cities. In terms of undeveloped land that's an even smaller percentage (because Greenbelt itself only accounts for around 12% of England).

It does make you wonder how government (local and national) can be expected to plan sensibly for the development of our towns and cities if using such a small area of land leads to accusations that they are betraying promises on the Greenbelt?

Wednesday, 22 August 2012

Mixed communities

Policy Exchange's proposals for selling off high value social housing to fund new building hasn't proved popular with supporters of mixed communities (similar arguments were made wrt to changes to housing benefits).

Perhaps a useful moment then to remind ourselves that the evidence for the benefits of mixed communities is, shall we say, mixed. In addition, these policies are certainly not costless (even for poorer residents who are supposed to benefit). If you want to read more on the evidence, take a look at our SERC policy paper on the effects of mixed communities.

Friday, 17 August 2012

Urban rail investment: lessons from Beijing

Posted by Wenjie Wu, LSE 

While British politicians argue about infrastructure, Chinese policymakers have been laying it out. Decades of heavy investment in urban transport systems have reshaped the face of most Chinese cities. Between 2000 and 2008 alone, for example, the Beijing city government invested about 52 billion CNY (c. £5.2bn) on new rail transit construction, with a subsequent investment of 105 billion CNY (c. £10bn) in the four years to 2012. 
Even in a mega-city like Beijing, this massive investment ought to have a substantial positive effect on local land values, as well as reducing urban congestion. By improving a city’s 'effectivedensity', new transport links help people become more productive or access amenities, benefits which should cash out in higher land proces, and thus property prices. In the case of London’s Jubilee line, for example, LSE research by Steve Gibbons and Steve Machin found positive effects from building the line to nearby house prices. SERC’s Gabriel Ahlfeldt has similar results for the Docklands Light Railway.

Has Beijing’s transport programme had this positive land market kick? In a new SERCDiscussion Paper, I attempt to find out – the first analysis of this kind I’m aware of for cities in BRICS countries.    

I use a ‘difference-in-difference’ methodology, making use of changes in land parcels’ distance to the network when new stations open, but also anticipatory land price changes that happen when investment plans are published. Also, I’m able to use vacant land parcel data during 1999 and 2009 in the entire urbanised area of Beijing, rather than pre-designed sample areas. I use GIS to construct precise proximity measures, and run a host of other cross-checks.

As expected, I find that new transport systems in Beijing have a big average effect on local land prices. For example, in 2008 a new rail station added 3.75-4.2% on residential land prices, for areas 1-2km from the station. Further away, these proximity effects decay in a possible non-linear trend over space. Importantly, shifts in local land values also vary widely according to local socio-demographic characteristics. For example, the value of proximity to new stations falls as crime rates increases, and rises substantially with employment accessibility and local residents’ median education level.  

Given the huge public investment in the city, the question of who gains is important. Certainly, developers and land-owners benefit from appreciating land values in targeted residential and commercial markets. My results also suggest complementary effects between public investment and private sector investment, as higher levels of economic activity should translate into higher future tax receipts. More speculatively, it suggests that improving local people’s human capital and life chances, alongside physical development, may raise the economic gains to developers.