When the city builds a train line or a bus route, adjacent property values skyrocket. Why shouldn’t the public benefit more from that phenomenon?
Generally speaking, there are few (if any) public investments that can do more to help connect people to job opportunities, support businesses, and improve affordability than transit expansions. The problem is, in North American cities, the cost of transit projects (especially rail projects) has grown so high that few major expansions ever get done. The result is that most U.S. transit systems haven’t kept up with population growth, making it harder for residents to access good jobs without the high cost — to both pocketbook and planet — of owning a car.
To help pay for big transit expansions, many cities around the world turn to an innovative financing approach called value capture. The name sounds wonky, but the idea is simple: As commute times and job access improve with a new transit station, the value of nearby real estate rises. A value capture program aims to capture that future windfall to fund construction today.
The idea of public investment benefiting private real estate raises concerns, particularly amid an urban affordability crisis. That may be one reason why value capture hasn’t caught on in the U.S. But if designed well (more on that later), value capture can ensure that private development supports public objectives — creating a vast source of funding for transit expansions that wouldn’t otherwise exist, and that benefit the broader city.