The critical role of transport infrastructure in supporting economic growth is widely recognised by politicians and policymakers alike. Yet we still face significant challenges in both funding new projects and in persuading decision makers that the full benefits of transport investment will indeed materialise. A new report from property consultancy GVA is therefore welcome as it provides us with valuable new evidence on the emerging benefits from one key scheme - Crossrail.
The Crossrail Property Impact & Regeneration Study shows that the wider impacts of Crossrail will be significantly greater than previously thought:
• 90,000 new homes along the route are predicted by 2021 and 180,000 by 2026, far greater than the 57,000 new homes (by 2021) predicted before.
• Over 4.4 million square feet of commercial office and retail space is expected along the route by 2021 – up from the 3.25 million predicted in 2012.
• Based on permitted schemes alone, Crossrail could create up to £20bn in additional residential property value by 2026, and average value increases along the route of 29% above baseline forecasts.
Significantly these benefits are not just concentrated in existing successful areas in central London, but right along the route. Housing starts along the line are more than 10% higher than borough averages, with significant additional development in both east and west London. Between 2013 and 2016 over 80% of residential applications used Crossrail as part of their justification.
All of this represents good news for strengthening the evidence base and potential business case of new transport schemes with significant regeneration and housing benefits, as well as transport ones. This includes vitally needed new schemes such as Crossrail 2 and Northern Powerhouse Rail.
The study's findings will also catch the eye of those interested in exploring how value uplifts associated with new transport schemes might be captured to help pay for new transport infrastructure. This has long been a holy grail for policy makers and has emerged as an area of growing interest for both government and opposition alike.
The reasons for such a resurrection of interest are understandable. New transport schemes generate windfall gains for land and property owners along the route who benefit from value increases as a result of improved transport links. Recent analysis for TfL identified a sample of eight prospective projects costing around £36bn which could produce land value uplifts of about £87bn.
The challenge is of course in capturing these uplifts, something which has generally defeated previous initiatives in this area. TfL's study concentrated on two potential mechanisms for capturing land value uplifts. The first, a transport premium charge, would capture a proportion of the premium paid to landowners by new purchasers or tenants of residential property for access to new transport links. The second, the development rights auction model (DRAM), would be aimed at areas with high potential for housing development. The key feature of this proposal is the integrated planning and consenting of land use and density in a defined zone around a new station, in parallel with the planning of the new scheme. Development rights would then be auctioned to developers, with gains shared between landowners and the planning authority.
While both mechanisms could in theory release significant resources for transport investment, both would face significant political and technical obstacles before they could be implemented in practice. This is particularly the case for projects where specific routes and stations have been identified, as speculative activity has already occurred.
So while further analysis on value capture will doubtless take place, it would be imprudent to rest all our hopes on finding this holy grail. Further exploration should in parallel take place into options for better capturing and recycling value uplifts through existing mechanisms, such as Stamp Duty, over-station development and development taxes such as the Community Infrastructure Levy. These last two contributed towards Crossrail and seem set to make a bigger contribution towards Crossrail 2.
Either way, GVA and Crossrail are to be thanked for this new study which will surely strengthen the hands of transport promoters across the country in persuading the government to lend support and funding to the next generation of essential new schemes.