An interesting report by the Fels Institute of Government (University of Pennsylvania) was quoted in Yes Magazine:
… [We] found that within 1/4 mile of one of Philadelphia’s 54 branches, the value of a home rose by $9,630. Overall, Philadelphia’s public libraries added $698 million to home values—which in turn generated an additional $18.5 million in property taxes to the City and School District each year. That benefit alone recouped more than half of the city’s investment.
More detail was found the Fels report:
Value to Homes and Neighborhoods
- Homes within ¼ mile of a Library are worth, on average, $9,630 more than homes more than ¼ mile from a Library. For homes between ¼ and ½ mile of a Library, the additional value is $650.
- Homes in Philadelphia are located, on average, about a half mile (.56 mile) from a Library; 95% of Philadelphia homes are within 1.13 miles of a branch, 75% of Philadelphia homes are within .73 miles, and 25% of Philadelphia homes are within .34 miles of a Library.
- Libraries are responsible for $698 million in home values in Philadelphia. That’s an increase in home values that homeowners can borrow against to finance education, home improvements and other types of spending.
- The additional home values generated by proximity to a Library produce an additional $18.5 million in property taxes to the City and School District each year. Under a scenario of accurate and timely assessments, this is how much property tax revenue could be lost per year if all libraries were closed.
The value of public works to the locational value of the home is undeniable. In our primer Land Value Capture for Infrastructure, we outline how public works often benefit the landowner many times over the cost of the project.
The new High Speed Rail 2 is a case in point. The UK’s Sunday TImes states:
Homeowners near these stations have cause to celebrate. Research by Savills shows that a one-minute reduction to a commuter rail journey adds £1,000 to the average value of a home.
People from all over the state/ nation are expected to pay for improvements that capitalise into higher land values in one particular location. In economics this is called leakage.
What have we done to deter such leakages?
On the contrary, with such windfall gains available, society has set up elaborate systems to promote them.
Infrastructure Australia, the peak body for public works funding by the Federal government, is one such organisation. Of the 18 person board, there is only one representative for the public interest – Mr John Fitzgerald, Victorian Department of Treasury and Finance, Commercial.
The 17 other members of the board have a vested interest to ignore the fact that public works deliver windfall gains to private owners of property.
From accountants specialising in infrastructure tax offsets, to heads of infrastructure companies to housing and construction heavyweights, one wonders how decisions are made at the Infrastructure Australia board level when so many must excuse themselves from voting with a conflict of interest over any given project.
Perhaps more public libraries will be built when similar reports are written in the Australian context…