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Local homeowners and businesses should contribute to infrastructure costs – research

November 15, 2017 Business News No Comments Email Email

Governments are well placed to recover transport infrastructure costs by asking home owners and businesses that benefit financially from infrastructure development to share this benefit, according to a leading researcher at the University of Sydney Business School.

Professor Corinne Mulley, says this practice of taking contributions in line with an increase, or uplift, in property values and profits flowing from new infrastructure already occurs in parts of the United States, has been tried in Queensland and is now under consideration in New South Wales.

“Value uplift refers to the way in which when you put in new infrastructure, typically transport infrastructure, the land around that infrastructure becomes more accessible, it allows you to get to more destinations more quickly, and so the price of that land goes up,” Professor Mulley explained.

Professor Mulley’s research has examined the degree of ‘uplift’ related to infrastructure development in the United Kingdom and Australia. This has included ferries in Brisbane, buses and light rail in Sydney and metro services in the UK.  Most recently she has looked at bus rapid transit and heavy rail in Brisbane.

“On the Gold Coast which has a new light rail system, residences have paid a small amount of extra tax in order to help fund it and I don’t see that that’s unreasonable,” said Professor Mulley, who holds the Chair in Transport at the Business Schools internationally respected Institute of Transport and Logistics Studies.

“The New South Wales Government is referring to the concept as value sharing and I understand that it is going to put a limited process in place to help cover the cost of the Parramatta light rail system,” Professor Mulley said.

The 12 kilometre Parramatta Light Rail will link the suburb of Westmead to Parramatta and Carlingford via Camellia, at an estimated cost of a billion dollars.

“When the State pays for new transport infrastructure, whether its public transport or roads, individuals who live in housing close to that infrastructure personally benefit,” said Professor Mulley.

Pointing to the example of London’s Jubilee Underground line, which pushed up nearby property values by more than a million dollars when it opened, she said that, “it has always seemed to be quite wrong that individuals should benefit when the thing which produced that benefit is payed for by the public purse.”

Ideally, Professor Mulley says that governments should levy home owners and businesses as the infrastructure is being built. “Transport infrastructure is really expensive, and governments are finding it difficult to provide the sort of infrastructure we need to produce the sustainable cities that we want for the future” Professor Mulley said.

However, she also acknowledges the political difficulties associated with such a contribution system and says that it may be better to levy a charge when a house is eventually sold. “Businesses are less of a problem, because new businesses and the entrepreneurs who build them, will take account of land value uplift when making investment decision.”

“People pay income tax, council rates and a variety of other government charges,” Professor Mulley concluded. “Why shouldn’t we pay a contribution when property values increases as a result of infrastructure development?”

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