Urban Rail Investments and Property Value Gains in Athens: a Case for Alternative Funding Sources

Urban Rail Investments and Property Value Gains in Athens: a Case for Alternative Funding Sources




The aim of the paper is to investigate the magnitude of property value gains in the case of an urban rail system in Athens as well as their conversion into additional revenue generating opportunities through surplus value recapture taxes


Several European cities are considering the introduction of new light rail transit (LRT) systems. Others have implemented such schemes with considerable success. The introduction of such systems is however a costly investment which also needs in most cases an operating subsidy; cities, due to their budget constraints, face many difficulties in implementing and operating such systems.

In many local contexts exists evidence that urban rail investments induce around stations distinct property value gains. The main aim of the paper is to investigate the existence and magnitude of such premiums in the case of the new Athens LRT system, operating since the 2004 Summer Olympics and covering the southern suburbs of the agglomeration. The focus is on the city line section connecting the coast with the city centre. The market segmentation refers to residential as well as commercial properties. The comparison pertains to the 1,5-year periods before and after the LRT opening. The pooled data comprise 719 real asked prices for sale of properties close to LRT stops. Note that for tax evasion reasons, the nominal contractual prices seriously underestimate the market prices achieved by successful transactions. Offers are adjusted to consider the mean 2003-to-2005 property price changes in the southern suburbs due to factors other than rail accessibility. Note that in Athens, owners dominate the occupation of residential properties to 79% and of commercial ones to 53%. Several specifications of a price gradient have been tested as functions of the proximity to the nearest LRT stop. The chosen decay function predicts for residential properties an 8% premium within 250m from a LRT stop and a 2% premium within the range of 250 to 500m. Commercial properties display a 13% premium and a 1% discount respectively. Aggregated property value gains have been compared with model-estimated travel time savings from/to the 250m zone, the latter capitalised with the Value-of-Time figures of the multi-modal Metro Development Study conducted by ATTIKO METRO. The resulting positive difference may be ascribed to wider benefits beyond the direct accessibility savings.

The paper examines further new ways of funding an LRT extension to Piraeus and the western suburbs through the conversion of property value gains into additional revenue generating opportunities. Revenue mechanisms based on land value gains are investigated in depth. Value recapture taxes applied on beneficiaries of public investments in urban rail infrastructure internalize some of the external benefits to private parties. A fair surplus portion corresponding to the unique contribution of the rail investment on the property value is suggested, given a mix of tax instruments. The allocation problem of an efficient taxation of relevant stakeholders is introduced. The instruments considered refer to (a) location benefit taxes paid on a recurring basis by property owners within 250m of LRT stops. It is calculated as a %-increase on property ownership tax and is justifiable in terms of improved accessibility to i.a. employment or shopping opportunities, (b) business taxes paid on a recurring basis by larger commercial occupiers of properties within 250 m of LRT stops. It is calculated as an increment on business income tax and is defendable in view of an improved accessibility for employees, customers and visitors, (c) planning gains as one-off charge paid by property owners or developers in case of a hand-over or of granting planning permissions around LRT stops. A scaled fee is set in relation to the value of the transaction or of the project to be developed.

The methodology and the results are considered to be of wider interest for planning agencies, transit authorities and policy makers.


Association for European Transport