Tolling Roads Could Bring Down Housing Prices

Comprehensive road pricing through tolls and congestion charges could play a major role in reducing housing prices and sprawl, according to a new study.

November 23, 2008, 5:00 AM PST

By Nate Berg


"An elaborate modeling of housing prices and traffic congestion in cities across the US concludes that financing roads with comprehensive congestion priced tolls rather than taxes rather would provide major benefits in reducing housing prices and sub-optimal densities - 'sprawl' - as well as reducing the familiar delays and uncertain travel times. Moving to tolls or other direct road use charges will significantly improve overall welfare, economic efficiency and standards of living, the study says. Authors are Ashley Langer University of California Berkeley and Clifford Winston, Brookings Institution. The study is reported in Brookings-Wharton Papers on Urban Affairs 2008.

It's a complex work. The methodology attempts to model the effects of congestion pricing on home location decisions, home prices and density. It allows for changes in land use and density, but sets limits to density permitted. Existing congestion conditions in various metro areas are fed into the model, and an array of different values of time saved provided for. The model differs from earlier ones in that it allows for that heterogeneity of values of time saved rather than assuming people are the same and using an average.

The model allows for the fact people will sort into commute distances inversely with their value of time, so different people will react differently to congestion pricing and gain different benefits.

The overall effect of comprehensive road pricing managed for free flow is likely to be decreased housing prices, higher density living especially in middle suburbs. Pricing encourages people to live somewhat closer to their work."

Thursday, November 20, 2008 in Toll Roads News

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