Rail derives little value from property development says ex-TfL chief
Rail derives little or no value from property development schemes as the industry is barred from owning non operational land for non rail purposes, says former TfL deputy chairman Daniel Moylan.
“There is insufficient revenue from new rail infrastructure to pay its way, and there are limited techniques for capturing value from new development facilitated by new rail infrastructure. Techniques for capturing uplift from existing stock are even more restricted,” he told Landor’s 2017 Rail Stations & Property Conference.
The chief beneficiaries were the property developers, but the railways derived little value from the enhanced land values their enterprise had stimulated.
“Crossrail has had a profound effect on property values in its core sections and in the suburbs but much of this benefit has accrued to landlords. A business rate supplement (of 2%) has recaptured only a small part of this adventitious uplift. The mayoral community infrastructure levy and s106 agreements have fallen only on new development, not on refurbishments and upgrades of existing commercial property.”
This was not a modern problem but an old one:
“The Metropolitan Railway bought land at agricultural values and built houses on it adjacent to stations, and a similar pattern prevails today in Hong Kong and elsewhere.” But the old Metropolitan Railway was unique; in the UK railway companies can only acquire land for operational reasons. They are cannot benefit from rising land values.
“TfL has legal powers to acquire land only for transport purposes (not for development) and, more crucially, landowners would demand a premium to share the benefit of the proposed arrival of a new station. Where compulsory purchase powers are available (for example, for station construction), there is a tendency to proceed by agreement and allow the landowner to participate in the subsequent over-site development.”
The current planning system penalised the transport system and rewarded property developers. It also meant public bodies had to fund costly transport schemes.
Moylan – also a former Crossrail 2 chairman -cautioned against government over reliance on business rate supplement, stamp duty and other property related revenue streams to fund this project, since these expected income sources might not materialise.
“Crossrail 2, unlike Crossrail 1, is intended to release land for residential development. An estimated 200,000 homes can be achieved. But if they are not built there would be no government stamp duty and the estimated PV revenue shortfall could be around £20bn-£25bn.”
A similar black hole in funding could also beset the Northern Line Battersea extension; the GLA will raise £1bn debt to build it, but the expected business rate levies likewise might not be realised.