Subways + Urban Spatial Structures

Does government investment in subways spur gentrification? Evidence from Beijing.

The traffic congestion and air pollution that comes with rapid urbanization has alarmed Beijing’s city government.

This has led to a series of policies to promote public transit and restrict private vehicle use.

The Beijing municipal government has made enormous place-based investments to improve public transit. By May 2014, the subway system consisted of 18 subway lines totaling 527 km in length and 279 stations. The average distance to the nearest subway station halved from 2.34km in 2005 to 1.02km in 2011

IMPROVING PUBLIC TRANSIT

CAR DRIVING RESTRICTION (CDR)

Although the expanding subway system and CDR policy enhance accessibility and provide incentives for people to take public transit, urban rail transit often contributes to the value of local real properties.

SUBWAY INVESTMENT EFFECT ON....

CAR DRIVING RESTRICTION POLICY EFFECT ON...

We examine the gentrification consequences of urban rail transit investment by looking at changes in housing values, number of restaurants, and demographics (income and education).

We also seek to understand the extent of subway demand increase (reflected in willingness to pay) after the Beijing city government imposed restrictions on private driving.

Note: Gentrification here is defined as taking place when a place experiences an increase in the quality of private-sector economic activity as reflected by rising local home prices, new housing construction and new restaurants opening. 

Land + Housing Values

Do land and housing prices include the benefit of living near a subway station?

When distance from a new subway stop decreases by 10%, the land and housing value increases by...

To understand the capitalization of subways in land and housing price, we use data from the Beijing Municipal Housing Authority. This data consists of new commodity housing sales in Beijing for 232,000 units from 2006 - 2008.

 

We find that the capitalization effect for housing values takes place immediately after the news comes that the new subway line construction has started.

We find that the capitalization effect for housing values takes place immediately after the news comes that the new subway line construction has started

When distance from a new subway stop decreases by 10%, rent increases by...

The results from the repeat rentals transaction data is 3x less (0.2% compared to 0.7%) than that estimated using the cross-sectional hedonic method indicating significant bias caused by missing variables in the cross-sectional estimates

The results above are from a cross-sectional hedonic method which is susceptible to estimation bias due to omitted variables. Results from a repeat-rentals model are compared to the ones above.

We use 2005 - 2011 repeat rentals transaction data from WoAiWoJia, the second largest real estate broker in Beijing, that consists of 11,578 housing units with 37,161 transactions.

Note: using the cross-sectional hedonic model on this second dataset yields about the same estimation (0.7%) as the first dataset (0.6%).

New Housing Construction

Do subway investments spur housing development?

When distance from a new subway stop decreases by 10%, the number of land parcel sales increases by...

To understand if subway investment spurs housing development, we use auctioned residential land parcel data by year (2005-2011) from the China Real Estate Index System.

The increase in number of auctioned residential land parcels closer to new subway stations means that developers are investing more in constructing new housing projects near subways.

Restaurant Openings

Do subway investments spur restaurant openings?

When distance from a new subway stop decreases by 10%, the annual number of chain restaurant openings increases by...

To understand if subway investment spurs restaurant openings, we use use data from dianping.com, China’s version of Yelp, to provide location and opening date information for 902 establishments of 33 chain restaurants.

 

We interviewed 20 representative households in five new commodity housing communities to get a list of 33 chains they favor (11 western and 22 Chinese cuisine). 

Chain restaurant openings follow the same spatial patterns as new housing construction – more restaurants opened around new subway stops.

Income + Education

Does improving accessibility attract higher-income and higher-educated people?

When distance from a new subway stop decreases by 10%, the annual avg household income

+ head of household's years of schooling increases by....

To understand the movement of higher-income and education into more accessible areas, we use zone-level average annual household income data and head of household's years of schooling data from the National Bureau of Statistics of China. The Bureau conducted two large-scale surveys in Chinese cities in 2007 and 2010. The sample size in Beijing is 26,187 (2007) and 24,348 (2010).

Note: Beijing has 114 zones; a zone is similar to a US Census Tract.

New subway station neighborhoods are experiencing some growth in income and educational attainment.

CDR Policy + Housing Values

How much do restrictions on private transportation increase subway demand reflected in home prices?

Additional willingness to pay for subway proximity...

To understand the effect of CDR policy on subway demand reflected in home price, we use individual transaction data  (24,104 transactions) in Beijing’s resale housing market for the period of 2006-2010 from WoAiWoJia, one of the largest real estate brokers in Beijing.

The CDR policy took effect on oct 2008, in the middle of our sample period. We focus on 6 months before and after the implementation of the CDR policy. 

The price premium for subway proximity increased for housing units within 2km or 3km of a subway station after CDR was introduced.

 

This willingness to pay varies spatially. The willingness to pay for subway proximity increases more in locations where subways are a better substitute for driving in terms of travel time.

Investments in public transit has triggered gentrification in areas close to new subway stations. Gentrification brings in opportunities as well as challenges. One of which is that lower-income households face displacement from land whose value has increased.

Team

Siqi Zheng

MIT Sustainable Urbanization Lab, Department of Urban Studies and Planning,  Center for Real Estate

 

Matthew Kahn

Johns Hopkins University and NBER

 

Weizeng Sun

School of Economics, Central University of Finance and Economics

 

Rui Wang

University of California, Los Angeles

 

Yangfei Xu

Tsinghua University, University of California Berkeley

 

Qinghua Zhang

Peking University

Publications

Siqi Zheng and Matthew E. Kahn. “Does Government Investment in Local Public Goods Spur Gentrification? Evidence from Beijing”, Real Estate Economics, 2013, 41(1): 1-28.

 

Weizeng Sun, Siqi Zheng and Rui Wang. “The Capitalization of Subway Access in Home Value: A Repeat-Rentals Model with Supply Constraints in Beijing”, Transportation Research Part A: Policy and Practice, 2015, 80: 104-115.

 

Yangfei Xu, Qinghua Zhang and Siqi Zheng. “The Rising Demand for Subway after Private Driving Restriction: Evidence from Beijing's Housing Market”, Regional Science and Urban Economics, 2015, 54: 28-37. 

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