Insights
Earlier this week we published a rapid evidence review on the impact of rail investments on local economies. We found 29 studies that met our requirements for inclusion in an evidence review – essentially, using some type of comparison, rather than a simple before and after analysis. The studies covered different scales and types of rail investments, including both heavy rail between places and light rail within cities.
By focussing only on impacts which are both local and economic, we miss a lot of the larger reasons why rail investment is a good idea. Providing an alternative to cars, for example, and helping people access employment and leisure more easily and cheaply.
What can offset the benefits of rail investment?
The question we normally ask is whether an investment led to more employment, wages, or productivity for people and businesses who live in the city or town where the investment is made. Typically, the evidence suggests a positive impact, but it is not as strong as is often assumed. We also often find that two issues can offset the benefits of investment: displacement, and rising property values. These are both issues that have emerged in the rail investment review.
Displacement
Not all of the studies look at this, but several suggest that a substantial portion of the gains in employment and new business starts close to a new station may be due to movers from neighbourhoods further away. So they are not new activity, just new to the area. In some cases that may be all right, for example, when densification is desirable. But policymakers should take the effect of displacement into account when considering the overall benefits of a scheme.
Rising property values
Increasing property values is another frequent ‘thing to consider’ in our policy guidance. In some circumstances rising property values is a beneficial outcome, for example, in countries where local governments levy property taxes. In the UK, however, local authorities do not increase their spending power when property values go up. Instead, these benefits will go to owners and landlords. Local people and businesses may find themselves priced out of their neighbourhood when a new station arrives and makes an area more desirable and this was the case in some of the studies we examined.
Even taking these factors into account, a new rail investment is a major opportunity for any community, opening up access to jobs, businesses and customers.
