FINANCING MASS RAPID TRANSIT WITH LAND VALUE CAPTURE: EVIDENCE FROM THE OPENING OF NORTH EAST AND CIRCLE LINE

Abstract

In 2013, the Singapore government published a multi-billion-dollar Mass Rapid Transportation (MRT) expansion plan, which stated that 182 kilometres of additional lines were being planned for 2030. To finance these expansions, the capturing of land value enhancement provides an alternative sustainable financing model for Singapore’s rail transit expansion effort. This paper used a difference-in-differences (DID) estimator in the hedonic price modelling framework to capture land value enhancement, taking into consideration issues that are often overlooked in the cross-sectional hedonic price analysis. The modelling framework was applied to the opening of the Circle Line (CCL) and North East Line (NEL), for which data for public and private non-landed residential transactions are combined with network distance data to the nearest MRT stations, derived from Geographical Information System tools. Based on local polynomial regressions and hedonic price models, the opening of the NEL increased the value of public housings within 800 meters of the nearest NEL station by between 11.1% and 13%. The opening of the CCL increased the value of private housings within 1200 meters of the nearest CCL station by between 3.04% and 3.16%. Falsification tests further confirmed the validity of the statistical models. By providing more reliable estimates of the property value enhancement of the nearby residential properties attributable to the increased transit accessibility resulting from MRT expansions, this paper provides support for the implementation of equitable and effective land value capture programs.