The first in a series on transport policy, James Nix calls for a more equitable way to fund local transport links such as roads and bus corridors
London's Jubilee Line was built largely at the expense of British taxpayers in the 1990s. The subsequent tube service brought a bonanza to developers with property overhead. One developer, Don Riley, has been candid enough to write about his windfall. His book, Taken For A Ride, urges governments to stop the value of public investment falling into private hands.
Here, the issue is receiving greater scrutiny as central government looks increasingly to local authorities to fund road improvements, new bus routes and other transport links. There is also a larger issue at play: when property is enhanced by transport investment, who gets the benefit of higher land values? Is it the community or the individuals?
The price of serviced land is currently being examined by the Oireachtas Committee on the Constitution. One of the submissions to the committee came from Tom Dunne, head of real estate and construction economics at the Dublin Institute of Technology (DIT).
Constitutional property rights are not boundless, according to Dunne. Owners of land have the right to enjoy it. However, changes in zoning and the provision of services "supplement" the property right - they do not form part of it.
As things stand, the local authority cannot recoup some of the increase in land value brought about by a rezoning, even though the change in designation may multiply the market price of the property 10 or 20 times. Also, when a local authority provides a road or a quality bus corridor to a new development, the authority can demand only a contribution towards cost.
A good example of the shortcomings of the current system is Louth's draft county development plan, amended on September 15th last. While the blueprint has yet to be considered by Minister for the Environment, Mr Martin Cullen, more than 65 acres have tentatively been rezoned for development.
If the minister approves the draft, a small number of developers will reap the rewards of a billion-euro State investment in the M1 and the Dublin-Belfast rail corridor. It has been estimated that the rezoning vote could have the effect of boosting the market price of one developer's holding from €470,000 to €9 million.
The existing regime, according to Dunne, transfers community wealth to individuals. He proposes changing the Planning Act to allow the local authority recoup some of the value added. No referendum is required to make these changes, Dunne believes.
"Under the new law," he says, "the local authority would rebate the contribution on a sliding basis if the land is developed in accordance with a schedule set out in the local authority development plan."
The idea here is to discourage the stockpiling of land that has been rezoned for development. If the developer follows the local authority's preferred timetable there is a win-win situation. Also, linking the amount to be recouped to timely development is likely to reduce the pressure placed on councillors to rezone.
As Dunne points out, the current Planning Act addresses itself only to the issue of capital cost. However, the day-to-day costs of transport are significant. Capturing value rather than cost allows the local authority to cope with the burden over the longer term.
An effort by the community to recoup its expenditure is often termed "value capture". The life-cycle cost of transport investment should be paid mainly by those who profit from its provision. Currently, Irish taxpayers, through local authorities, are carrying too much of the bill.
James Nix is pursuing an MPhil in transport studies at the DIT and is in final year at Kings Inns (james.nix@dit.ie)
Feasta, a not-for-profit think tank, will host a conference on "value capture" tomorrow and Friday at the Tara Tower Hotel, Booterstown, Co Dublin