‘Then, as the millennium was dawning, a miracle happened. The government returned every penny that I had paid in taxes over the previous 40 years. So for four decades I had lived tax free – and I had not dodged the taxman! How was this possible?
I ‘confessed’ in ‘Taken for a Ride’. Taxpayers generously funded the extension to the Jubilee Line, one of London’s Underground lines. Two of the stations were located close to office properties that I own. Those two stations raised the value of my properties by more than all the taxes that I had paid into the public’s coffers over the previous 40 years.’
Don Riley in Harrison, F (2006) Wheels of Fortune
The future East-West rail link between Oxford and Cambridge has the potential to transform an entire region of the country, helping to boost UK growth, bring well-paid jobs closer to people and provide funding for better public services nationwide. The new railway offers exciting opportunities for new stations to connect New Towns.
East-West Rail – confusingly also the name of the body charged with delivery – will improve connections along the corridor of small towns between Oxford and Cambridge. The case for doing so is strong. Oxford and Cambridge are economic powerhouses full of good jobs and opportunities that can benefit the people, businesses and communities within commuting distances. Key to the success of the railway will be the ability to maximise this impact to the greatest number of people. The location of new stations and proximity to housing will be vital.
The current process for deciding where stations should be placed or upgraded along the route is poorly designed to deliver the biggest benefits in new homes and economic growth. Between Betchley and Bicester, work has started on a new station in Winslow. The new station will be just under 27 minutes from Oxford, a global focus for cutting-edge research and innovation. The location is home to a sleepy village of 4,400 people. While planning permission has been granted for 120 new homes in the village and the council allocated 455 new homes in their neighbourhood plan, that is peanuts compared to a multi-billion pound investment in transport. It is an enormous missed opportunity.
The potential for new homes is vast. Two of the proposed new stations on the line would be within 20 minutes travel of Cambridge. That should raise the value of existing homes near to those stations by roughly 30%. The impact of London’s Elizabeth Line on property prices demonstrates the potential uplift with the value of homes within a 1km of stations increasing by 19% in 2021.
For example, a home in Sandy, which is about 40 minutes’ drive away from Cambridge, is currently worth approximately £3,500 per sq m. In comparison, homes in Ashwell and Morden, 20 minutes away from Cambridge by train, are worth nearer £5,000.
These prices are far above the cost of building new homes, which means that substantial value can be created and captured by allocating new sites for housing.
However, new rail infrastructure in the UK fails to capture the greatest possible amount of the new land value created by the government’s investment in rail. Instead, much of the benefit of taxpayer investment in transport goes to existing landowners. East-West rail simply picks sites following consultation and has to spend the money to develop the station, paying compensation to neighbouring landowners for any inconvenience. It completely ignores the fact that the landowners’ land has been transformed from a poorly accessible area to one that is highly connected. That benefit is entirely paid for by you and me.
One way to discover which locations for stations would deliver the most housing and value for the public good would be by auction. Landowners, motivated by the huge gains, would compete by bidding on having the station located on their land. Included in the auction would be development rights. The development rights could be for attractive mid-rise housing up to (say) 10 storeys, ensuring that as many people as possible can live within an easy walk of the station.
Auctions for government-led projects have had great success in the UK: the 3G spectrum auctions raised £22.5 billion for taxpayers. Those auctions saw telecoms businesses bidding over several rounds for one of five 3G options. It works well in situations where the Government takes a lead role in investment but the benefits can only be realised by private firms. Auctions offer transparency and encourage a competitive process that ensures that private individuals don’t profit excessively from public investment.
Currently, East-West Rail is engaged in an exercise to decide which are the most appropriate station locations between Bletchley and Cambridge. The process involved a public consultation driven by local stakeholders to decide on a range of preferred routes and consideration of the additional required infrastructure. Of course, it is important to work with local stakeholders, but that cannot be the only determining factor governing potentially transformative multi-billion pound projects of national importance.
One option would be for landowners along the proposed East-West Rail route to be invited to submit proposals specifying what they offer (in cash instalments, profit share or other) for a station to be placed on their land, coupled with an outline planning consent for development up to ten storeys within walking distance of the station.
The Government could then review the bids and decide whether any additional stations in some of those locations would create sufficient net environmental, economic, housing and fiscal benefits to make them worthwhile, bearing in mind the benefits of dense urban development with access to good public transport. Our initial estimates are that ambitious development could raise land values by up to £1 billion at each new station. That would help pay for the new rail link, accelerating progress, and help pay for wider benefits along the line.
Carrying out what would effectively be an auction for new station locations will not only create better economic outcomes and better returns for taxpayers, but will incentivise any successful bidder to build as many homes as they can. These locations could be among the New Towns that the Labour Party has proposed, with private investment footing the bill. Unlike some older car-dependent New Towns, these new communities would be low-carbon with the railway station within walking distance.
The East-West rail will be transformative for the towns between Oxford and Cambridge. But following previous models for picking station locations would just ensure that the biggest profit from public investment goes to random private landowners. Auctions are one tried and tested method for capturing the most amount of value for the public.