Socialising Land Rents — Land Readjustment Example
Kashiwonoha campus station is located 32 km northeast from central Tokyo. The campus station land readjustment project is part of the Tsukuba Express suburban railway that opened in 2005. This is a 58.4-kilometre line which offers 130 kilometre an hour passenger services between central areas of Tokyo and multiple satellite towns, such as, Kashiwonoha Campus town. The whole Tsukuba Express project adapted the land readjustment concept with the addition of zero-interest loans, as well as some public assistance to together finance the roughly $7.5 billion cost of rail construction. There were 18 land readjustment districts, accounting for about 2,903 hectares around 13 stations.
The campus station land readjustment project began in 2000 by Chiba prefecture when it designated a 272.9-hectare district occupied by a golf course, fields, forested hills, and small factories. Through readjustment, the large area has been converted into developable land parcels for residential, commercial, industrial, educational, and social service uses served by roads, utilities, parks, green spaces, and a new railway station. Land readjustment covered 63% of the $893m cost. Residential demand and retail opportunities (a new shopping mall) facilitated by Mitsui Fudosan Corporation; an original owner of the former golf course were key drivers of the project. Local educational facilities (two university campuses) added further value.
Land owners (land parcels A to E in the above illustration) although losing 40% of their land size and being allocated a different parcel of land are incentivised to cooperate with the reallocation process by the rise in land values that results from the infrastructure provided.
Because local land owners contribute a significant proportion of infrastructure costs (63% in the above example) land reallocation is considered a land value capture technique.
For public goods whose benefits are localised then land value capture techniques are preferable to general taxpayers funding the infrastructure cost. Because some general taxpayers will live distantly and therefore not receive much benefit while more localised landowners will receive a significant benefit in appreciating land value.