Opportunities for Value Capture to Fund Public Transport: A Comprehensive Review of the Literature with a Focus on East Asia

Abstract

A good public transport system is often one of the defining features of a city, attracting residents, businesses, and tourists. However, even in the case of the world’s great public transport systems, fares do not fully cover costs. Substantial government subsidies are required to build, maintain, and operate most public transport systems. One of the challenges faced by cities is where this money should come from.

An often‐discussed option is known as land value capture. Successful public transport systems lead to increasing land values. Value capture is the concept that government should be able to capture at least part of this increase in land value along public transport corridors, and use these funds to subsidize the system.

Our goal is to use findings from the existing literature to shed light on when and how value capture strategies could be used to finance public transport systems in East Asian cities. We review three related strands of literature: evidence of the land development impacts of public transport, estimates of land value increases attributable to public transport, and case studies of the use of value capture mechanisms to finance public transport. We then draw upon this literature review to identify specific recommendations for the implementation of value capture in a variety of contexts.

Keywords: public transport, value capture, bus rapid transit, hedonic pricing

JEL Classification: R40