Suburban Housing Creation: Result of Transit Network Expansion in Central City

Abstract

Housing affordability is often concerning in superstar cities. Like the Taipei metropolis, housing is too expensive in the fully built-up central city, but jobs are there. How can the government incentivize developers to create new housing in areas where households need not be stretch commuters? This research analyzes how public-transport network expansion in the central city of Taipei induced new housing projects in distant suburbs with metro services. Difference-in-differences assesses the impacts of two metro lines’ completions on neighborhood housing prices; a 1% better commuter market access increased home values by 0.33%. For every neighborhood, land values of homes are uncovered to gauge average land price and construction permits are used to aggregate new housing launches, resulting in a balanced panel of annual neighborhood data. IV Tobit addresses demand-supply determination and contextualizes developable lands as real options, with commuter market access instrumenting land prices. Consistent with theory, developments are stimulated by returns but deterred by uncertainty. Outside the central city of Taipei, annual housing construction was 2.26% more in housing units and 4.00% more in gross floor area in neighborhoods with metro-station access than those without. A 1% better commuter market access increased the annual construction by 2.47% in units and 3.76% in GFA. Transit network expansion to cover more places in the central city can stimulate housing construction in commutable suburbs where citizens can enjoy relatively more affordable housing and mobility at the same time. We recommend a policy for the sustainable development of real estate, public transportation, and cities.

Keywords: housing affordability, housing supply, superstar cities, real option, public transport, transit oriented development

JEL Classification: R00, R21, R31, R38, R40, H42, L92