Housing Price Network Effects from Public Transit Investment: Evidence from Vancouver

In this paper, we estimate the effect on housing prices of the expansion of the Vancouver SkyTrain rapid transit network during the period 2001–11. We extend the canonical residential sorting equilibrium framework to include commuting time in the household utility function. We estimate household preferences in the sorting model using confidential micro data and geographic information systems (GIS) data on the SkyTrain network. Using these preference estimates and observed data for 2001, we simulate the equilibrium effects of expanding the SkyTrain. In our counterfactual analysis, the SkyTrain expansion increases housing prices not only in neighborhoods where the expansion occurred, but also in those with access to pre-existing segments of the network. We show how these network housing price effects depend on household commuting patterns, and discuss the implications of our results for targeted taxation policies designed to capture the housing price appreciation stemming from a public transit investment.