Seppo Laakso Kaupunkitutkimus TA Oy Rail projects, land value and value capture in the Helsinki Region (and the case of Eastern metroline)

Land use before metro (car & bus connections) The impact of the metro on land use Metro tends to increase the density of land use and to make the surroundings of metro stations potential local centres Interplay on planning and markets - accessibility increases market demand - planning principles support development in station locations Land use after metro Construction close to the stations demand for density around the stations: services, offices, blocks of flats lower density in outer zones manufacturing and storage move away Source: Raideliikenteen hyödyt. Benefits of rail transport) HSL 2010/30

Improved accessibility raise the land value in the area of influene After metro Before metro Distance from city centre Metro stations

Dependence of the housing price on distance to city centre in the Metropolitan Area of Helsinki Estimations based on housing price data from 1990s Index, transport distance 50 min. = 100 (all directions) 1 min. shortening in centre distance 1 – 1,5 % increase in housing price Lähde: Laakso 1997

Index, station distance 1250 m. = 100 The micro location in the vicinity of metro station affects the demand and willingness to pay for location Estimations based on housing price data from 1990s Index, station distance 1250 m. = 100 Lähde: Laakso 1997

Impact of the Helsinki metro (Eastern metro lines – taken into use in 1983 (Vuosaari line in 1998) Estimated increase of total land value caused by the metro lines in Eastern Helsinki: ~ 1500 Mill.Eur (year 2009 price level) Realised land value compared with land value without metro (old buss based transport system) Value increase division between the land owned by the city and private land owners (~50% - 50%) No benefit fees or land rent increases Construction costs of Helsinki Metro (Eastern metro lines) ~ 1200 Mill.Eur (year 2009 price level) Financed by tax income of the city of Helsinki No direct value capture Non-residential land (business, industrial etc.) Increase of property values aroud stations Enabled strong local service centres (shopping & public serv.) Itäkeskus Herttoniemi Vuosaari Myllypuro motion centres Not realised without metro Created preconditions for the change of Vallila-Sörnäinen-Kalasatama area from port and industrial zone to business concentration Residential land Made possible the relatively dense urban structure in the metro zone – not possible without metro Without metro, respective housing construction would have realised elsewhere in less accessible locations Makes it possible to enhance the urban structure further towards East (Östersundom etc.) Lähde: Raideliikenteen hyödyt. HSY 2010/30

Value capture Land use and building legislation provides alternative means for value capture Development of land owned by the municipality Purchase of raw land (or old ownership) Planning and infrastructure Transport investments Sale (auctions) or renting (usually subsidised) of lots to private developers Own development by municipal organisations (eg. Social rental housing) The value incease caused by planning, improved accessibility (transport) and infrastructure ends to the municipality Land use contract Contract between private land owner (developer) and the municipality Land owner gets right to develope the land Detailed plan: developer – municipality Developer pays compensation to the municipality Or builds infrastructure or services (eg. Local park, kindergarten given to the municipality Development area procedure Complicated procedure Not used in practice Property tax On land and buildings New land use in good locations add property tax income Development of own land is the dominating policy in Helsinki Large ”old” land assets Active land purchase in potential future development areas Also in many other major cities (eg. Tampere, Oulu) and in towns in Helsinki region (Hyvinkää, Järvenpää, Kerava) Land use contracts is the principal policy in Espoo and in some rural municipalities of Helsinki region (Kirkkonummi, Sipoo,..) Mixture policy: Vantaa The role of land use contracts or development area procedure (if modernized) is becoming more important when completary construction of build areas and lots is increasing Note: The income to municipality from the development ins normally not earmarked for a certain investment.

Income from land in the Metropolitan Area of Helsinki Helsinki, Espoo, Kauniainen, Vantaa, year 2011 Property tax (land and buildings) 310 M€ 300 €/capita Rent income (land and business premises) 240 M€ 220 €/c. Net income* from land sales and land use contracts** ~50 M€ 45 €/c. Total 600 M€ 570 €/c. Investment and maintanance costs of infrastructure (share of municipalities) ~700 M€ * Net income = sales – purchases & land improvement costs ** Srong variation between years; conflicting data sources