LAND RENT AND NEW TRANSPORT INFRASTRUCTURE: HOW TO MANAGE THIS RELATIONSHIP?

This paper discusses the relationship between land rent and new transport infrastructure, and analyses the problems of social structure and distribution of income that can arise. The building of a new transport infrastructure, increasing the accessibility of the area and the level of mobility, can result in the increase in the value of land in that area. This is also tightly linked to building constraints on the area, because they raise the scarcity of land that is an element of land rent. So, if accessibility increases and if there are building constraints, also land rent will rise. This land rent can be transferred into the prices of houses and buildings, and in turn of goods and services, which are in the ownership of individuals and firms. This raises the issue of social distribution: while the transport infrastructure is paid for by all taxpayers, one important benefit, land rent, is captured only by a limited number of owners (it can be also the total of owners). Is it possible to avoid this and how? There are, at least, two ways. First, the capture of land rent by general financing options. This practice, common in USA, takes part of the benefits arising from the building of infrastructure to finance it. Second, the removal or reduction of building constraints on the land involved. Rent, among other factors, is a function of the scarcity of land and building constraints help establish scarcity of land. If new building land becomes available, total rent decreases. In this paper we examine the connection between the building of a transport infrastructure and the land rent that it creates, and we try to explore two solutions to manage the issues of social distribution that may arise.