Evaluating the Effects of Transportation—Land-Use Policies on Housing Values and Household Welfare

Abstract

In a previous article published in this journal (Anas, 1979a), a simulation model developed by the author was used to examine the impact of transit investment on property values in an urban transportation corridor that had a completely centralized employment distribution. The present paper examines the effect of rail-transit investment in the context of various scenarios which deal with urban employment decentralization, housing distribution, transportation pricing, and income composition. From these simulations it appears that under a variety of assumptions regarding urban change the taxation of short-run differential changes in property values caused by transit investment can raise only a small portion of the cost of typical transit investments. The distinctive feature of the simulation model is that it is consistent with the discrete-choice theory of travel demand currently used in transportation planning and travel-demand prediction. But whereas the state of the art in transportation planning ignores the simultaneity of transportation changes and price changes in the housing market, the model developed here is a first attempt to deal with these effects by incorporating discrete-choice theory into a Walrasian market-equilibration procedure. In addition to being a theoretical alternative to the classical bid-rent model, still made use of by urban economists, the new approach is computationally efficient and suitable for large-scale simulation.