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Transit Value Capture

New Town Co-Development Models and Land Market Updates in Tokyo and Hong Kong

Jin Murakami

May 2012, English

Transit value capture is another common project-based approach for capturing land value increases generated by public investment. Jin Murakami examines this technique, which is used by major railway companies in Tokyo and Hong Kong to finance new town development. In these cities, transit agencies packaged railway investment and housing development together, so as to capture land value increments resulting from the rapid economic and population growth along the railway corridors and around major stations in suburban areas.

Murakami argues that three factors determine the success of this strategy. First, timing is crucial. The mixed-development approach may work only during rapid urbanization and in a booming economy. During a period of rapid growth, private entities in Tokyo and Hong Kong embarked on railway extension projects and were able to finance part of their undertakings with profits generated by their real estate investments. When the Japanese economy experienced a prolonged stagnation, public transportation companies were unable to self-finance similar projects. Second, land value capture takes time; thus transit-oriented development requires long-term property stewardship. Private railway companies in Tokyo and Hong Kong are committed to long-term property investment. They continue to improve the net profits on their commercial and retail real estate businesses along the transit lines, so as to use the captured land value to cross subsidize their railway operations. Third, the spatial strategy of transit-oriented development needs to be flexible in order to take changing economic and social conditions into consideration. For cities that are experiencing deindustrialization and an aging population, transit-oriented projects should focus on transportation connections to central business districts, satellite university campuses, and international airport terminals.

This paper was presented at the Lincoln Institute’s annual Land Policy Conference in 2011 and is Chapter 12 of the book Value Capture and Land Policies.