Railway tracks at ground level in towns and cities destroy value of adjacent property because of the sight, sound and smell (diesel fumes) of trains. (In the country, they may destroy property value by cutting across rural properties.) In cities, property values are reduced for up to half a kilometre on both sides of the track compared to property further away. Higher values around stations are created by their additional convenience and their access to jobs. There is a transition in the value effect from tracks to stations in the approach to stations.
Railway tracks on embankments and viaducts destroy more property value as the effects are amplified and can extend for up a kilometre on both sides. New high stations may still create net value around them, but if they replace old ground level stations they destroy value.
Tracks in cuttings or open trenches may have less effect on adjacent property values as their deleterious impact is moderated, except creating value at stations.
Tracks in closed trenches (“underground”) and in tunnels have no value effect, except near stations. Closed trenches are built on the “cut and cover” principle.
Property built over tracks in closed trenches creates value compared to other forms of track when there is no property built above them. The value created depends on the building height permitted by neighbouring property and building regulations. This form does not destroy adjacent property values. It recreates value previously lost, if the trenches and buildings above replace ground level tracks that earlier destroyed value. Value created when buildings above closed trenches are sold pays for the railway construction.
Owners of property near old ground level tracks (“at Grade”) may have purchased at lower prices reflecting previous value destruction. The many owners of property near new tracks experience significant loss in value, especially loss from new viaducts for even more owners. Usually there is no compensation as the total loss is vast, the longer the track the greater the total loss.
Tracks at ground level through towns and cities cut them in half, destroy value and cause more inconvenience, including at level crossings. They result in the added expense of railway and road bridges. Tracks in closed trenches with buildings above and road crossings built in do not cause these negative effects. They create value before new towns and cities are built around new rural stations.
Tracks in closed trenches may cost more to build, but they create more value from buildings above which when captured through sale pay for the railway construction.
The railway effect on property value begins with the presence or absence of a railway. It is further increased according to frequency of trains, by their length and speed, and whether they are electric or diesel trains. The overall effect on property depends on the length of track through built-up areas.
When existing ground level tracks in old towns and cities are replaced by tracks in closed trenches with buildings above, they create direct value of the buildings and vast indirect value for adjacent property. Part of this value may be captured through land tax and returned to the value creator.
Replacement of ground level tracks by tracks in closed trenches in major cities and creation of new regional cities to distribute large population increase creates the value of restraining congestion growth and sustaining precious liveability in the major cities. A small increase in land tax of the many who benefit would contribute to the cost of creating the value. The tax revenue should be paid to the value creator to reduce the net cost of construction and as an incentive to railway innovation and development, which is usually an unattractive investment.