A report released by the UNSW City Futures Research Centre has indicated that land value growth could be used to fund a high-speed rail network spanning Australia’s east coast.
The report, titled High-Speed Rail Value Uplift: Preliminary Investigation Report, estimates that the estimated growth in land values due to high speed rail could fund much of the construction of the network. UNSW believes land values and property prices surrounding high speed railway stations could increase by up to $140 billion.
As opposed to dipping into taxpayer funding, the researchers have floated the idea of adopting policies that funnel economic growth from the HSR towards offsetting its costs. Population growth scenarios and estimates within the report calculate that the value of land surrounding the stations will increase between $48 billion and $140 billion.
Professor Christopher Pettit, Director of UNSW City Futures Research Centre, conducted the research alongside postgraduate researchers Will Thackway and Reg Wade through the Value Australia project. The project received funding from the Federal Government’s Cooperative Research Centre Project (CRC-P) program. The project uses the power of data analytics and artificial intelligence to provide insights into Australia’s property market.
“We’ve put together this report for policymakers and decision-makers to explore these growth scenarios and make informed decisions based on big data and analytics,” Pettit says.
“There are a lot of opportunities around the HSR for Australia to build stronger connectivity between cities and inject significant wealth and job opportunities into the regions. The numbers in the report confirm and help quantify that considerable potential.”
Pettit says the report’s estimations of a potential $140 billion in growth could be well below the actual figures.
“We expect the values to be a conservative approach to estimation and that the total value uplift could actually be higher. This is while still factoring in a profit for the developers after all the external costs, including stamp duty, legal fees and building costs.”
Value capture policies have been used in the past to partially fund the construction of the Sydney Harbour Bridge, as well as a number of railway projects across the globe. For the Crossrail project in the UK, the Greater London Authority implemented a Business Rate Supplement, which is expected to generate £4.1 billion ($7.7 billion), contributing substantially to the total cost of the whole project of £14.8 billion ($27.9 billion).
Betterment levies, developer charges or taxes on property transactions are among the various mechanisms available to secure some of the benefits delivered by public investment. For the HSR in Australia, just how much value uplift can be captured comes down to the value capture policy frameworks and structure put in place.
“If you were to capture a substantial proportion of this value uplift, it could pay for a huge amount of the HSR. You would be looking at tens of billions of dollars just from the residential value uplift alone, without even factoring in commercial, industrial and other beneficiaries,” says Pettit.
“Some of that value capture could also be used to invest into housing affordability schemes. It doesn’t necessarily all need to go towards the infrastructure. It’s about ensuring that growth and benefits can be fairly and equitably distributed with maximum value.”
The implementation of a high speed rail network has received a number of endorsements from business leaders, due to it having an outsized economic and social impact on regional cities.
“A nation building infrastructure project like this will go a long way to alleviating supply issues while supporting regional economic development and improved connectivity,” says James Abbott, Managing Director of Abbott Advisory, an advisor to leading Australian property and infrastructure groups.
Andrew McNaughton, the Chairman at Network Rail (High Speed) Limited describes the creation of the network as a no brainer.
“High-Speed Rail can breathe new life into East Coast Australian cities and regions, driving prosperity and social equity for decades to come. It would be a gift from us to our future generations. And this study indicates the potential for achieving it. It’s time to get on with High-Speed Rail.”
The UNSW report also recommends that further research be conducted into the use of value uplift financial instruments, the formulation of a national settlement plan, and creating a national cities institute to ensure the maximum benefits realisation of an HSR network across Australia.
Such initiatives would assist the nation in significantly reducing emissions in the long term and go a long way to ensuring liveable, sustainable, productive, and resilient cities are planned along the HSR, Pettit says.
“Australia is in an excellent position to capitalise on this infrastructure that would be transformational for the nation. If the Government were to make a significant investment into the HSR, it would show strong leadership and vision and set up future generations of Australia into 2060 and beyond.”
To read the report in full, click here.
