Behavioral Impact of the
Financing Collection
Mechanism on Accessibility: !
Two Cases from Chinese Cities
David Block-Schachter
Based on research w Jinhua Zhao & Drewry Wang
October 22, 2013
Plan
A dialogue: ASK QUESTIONS!
15 minutes: Framework of impacts of collection mechanism on accessibility
15 minutes: Vehicle ownership
»  Empirical work based on surveys in Beijing & Shanghai
»  Use information on location and travel behavior
15 minutes: Land sales (land grabbing)
»  Examine data on where and when land grabbing took place
in Shanghai for a single point in time
20 minutes: Distributive impacts by income, hukou, vehicle ownership
5 minutes: Wrap up
2
Framework
•
Evaluate policies in terms of accessibility: the potential for opportunities
•
Collection mechanism (prices) influence behavior
B A P Land Transport •
Transport The goal: financing as part of the solution set
3
Framework
•
•
•
Consumers, developers, and other governmental agencies respond to costs
–  by modifying their choices of what and where to build and locate
–  by changing how, when, and where to travel Three affected groups
–  General public and indirect users
–  Direct users
–  Land holders General principle: if something costs more, people do it less
–  Tax bads not goods
–  Tax recipients of benefits (user pays principle)
P B
Land A
Transport Transport 4
General Public and Indirect Users
•
•
Income, sales, payroll, business taxes
Hypothecated or general revenue
•
•
No direct impact via collection mechanism
Except
–  Introduce inefficiencies by substituting for optimal taxation policy
–  May effective function as land tax in multi jurisdiction settings
–  Price an unpriced externality, e.g. employers’ agglomeration benefits
P B
Land A
Transport Transport 5
Direct Users: !
use of roads
•
Tolls, gas or VMT tax
•
•
Discourage use, but indiscriminate as to where
Contribution of fuel to operating costs generally low, except for buses
P B
Land A
Transport Transport 6
Direct Users: !
restricted area vehicle use or storage
•
Congestion pricing, parking taxes
•
Decrease vehicle usage in given area, increasing accessibility for continuing
users
May effect location choice of auto oriented businesses, residents
Increase accessibility by mass transit, since more effected by congestion
Increase central area accessibility à denser urban forms and faster travel by
all vehicles
But, distribution issues, and dependence on elasticity of demand for travel
•
•
•
•
P B
Land A
Transport Transport 7
Direct Users: !
use of mass transit
•
Fares
•
•
•
Second best pricing: correct underpriced externalities in autos
Flat fares may encourage transit-oriented sprawl
Distributive effects depend on affordability, which varies wildly by context
P B
Land A
Transport Transport 8
Direct Users: !
purchase or existence of vehicles
•
Vehicle sales, excise taxes, wheelage (vehicle storage) taxes, auction prices
•
•
Increase costs and thus decrease overall levels of ownership
Restrict value of land inaccessible by other forms of transport à increase
density, and centralize accessibility Influence on usage depends on length of entitlement, user treatment of sunk
costs
Distribution: windfalls to existing owners if grandfathered; may bifurcate
accessibility based on income
•
•
P B
Land A
Transport Transport 9
Land Owners: !
variations
•
•
•
•
•
•
•
Before (e.g. impact fees or valorization) or after (e.g. special assessments)
Related to an infrastructure improvement in a specific area, or on an ongoing
basis in a municipality or region
On an annual or semi-annual basis, or on sales transaction
Apply to entire property, or differ land v. structures (e.g. Land Value Taxes)
Differential based on groups or uses (homeowners, commercial, vacant)
Vary in base (e.g. on owners equivalent rent), on capital, or on the increment in
value (e.g. Tax Increment Financing)
Include non-monetary transactions (e.g. land readjustment or takings)
10
Land Owners: !
effects
•
•
In general lower taxed areas (uses) will see increased demand, depending on
magnitude, but magnitude matters
To improve accessibility, tax
–  Land rather than improvements
–  Entire value rather than the increment
–  Whole area rather than just that adjacent to a piece of infrastructure
–  Do not treat uses differentially
–  Additional increment on vacant land
P B
Land A
Transport Transport 11
Therefore
•
•
•
If density costs more than it otherwise would, there will be less of it If the private cost of auto usage is taxed in order to equal the social cost, there
will be less auto travel
Indirect effects because of allocation between budgets for location and
transportation
Questions
•  How practical is this in the real world?
•  Is China “different”?
•  …
12
Vehicle Ownership Policies
13
Recap
•
•
•
•
Beijing + Shanghai both have ~2m vehicles in 2004, in 2010 Shanghai 3.1m,
Beijing 4.8m
Shanghai raised CNY 7.1b in 2012 vs. total expenditure on transport of 8b
Social public fund to hypothecate revenues to transportation in the form of
capital expenditure, fare reductions for elderly, transfers
Shanghai has plate C license outside 3rd ring
14
Expectations
•
Policies that impose costs on areas differentially will modify travel behavior and
urban form in those areas à less auto ownership inside third ring
–  Premium on both workplace accessibility and accessibility to public transit
w/in third ring
–  People with lower incomes would live farther from public transit, because
higher demand and a fixed supply will increase prices adjacent to PT
–  Increased density near PT as a result of vehicle ownership restrictions –
whether in the form of auction or lottery. P B
Land A
Transport Transport 15
Car ownership and usage by
distance to central Shanghai How many cars does your household own?
What is your percentage of car trip in all trips?
100
0.3
90
0.25
80
70
0.2
60
50
0.15
40
0.1
30
20
0.05
10
0
0
within Inner Ring Road Inner-Middle Ring Road Middle-Outer Ring Road
Zhao & Block-Schachter (forthcoming)
outside Outer Ring
Road
16
Expectations (2)
•
People with lower incomes would live farther from public transit, because
higher demand and a fixed supply will increase prices adjacent to PT
–  Premium on both workplace accessibility and accessibility to public transit
w/in third ring
–  Increased density near PT as a result of vehicle ownership restrictions –
whether in the form of auction or lottery. Land P B
Land A
Transport Transport 17
Accessibility to public transport in
different areas Distance from home to subway station
Distance from home to bus stop
Walking time from home to subway station
Walking time from home to bus stop
2
30
1.5
20
1
10
0.5
0
0
within Inner Ring Road
Inner-Middle Ring
Road
Middle-Outer Ring
Road
outside Outer Ring
Road
Note: the bars show the distance from home to PT service (km). The lines show the walking time from home to PT
service (min).
18
Perceived public transport
accessibility by location
from house place
from workplace
to daily activity
to travel
4
3.9
3.8
3.7
3.6
3.5
3.4
3.3
within Inner Ring Road Inner-Middle Ring Road
Middle-Outer Ring
outside Outer Ring
Road
Road
Zhao & Block-Schachter (forthcoming)
19
Land Sales Financing
20
Recap & expectations
•
•
•
•
Municipal governments are authorized to represent the state to sell land use
rights to buyers for a fixed period ranging from 40 to 70 years Increasing economic pressure on municipal governments to maximize
revenues by (re)development. Gross land premium amounted to 1.59 trillion CNY in 2009, representing 19%
of the aggregate local fiscal revenue for all levels of government from the
provincial level on down Form of tax on land with upfront payment
–  Incentives exist at time of payment, not in ongoing connectivity
à Reduction in accessibility where land grabbing takes place
P B
Land A
Transport Transport 21
Spatial distribution of land leases !
in Shanghai in 2013 Revenue
Area
45
12000000
40
10000000
35
30
8000000
25
6000000
20
15
4000000
10
2000000
5
0
0
Within Inner Ring Road Inner-Middle Ring Middler-Ourter Ring Outside Ourter Ring
Road
Road
Road
Zhao & Block-Schachter (forthcoming)
Source: Shanghai Urban Planning and Land Resource Management Bureau (2013)
22
Distribution of unit land lease price in
Shanghai in 2013 Price of Land Lease (CNY / m 2 )
120,000
100,000
80,000
60,000
40,000
20,000
0
Within Inner Ring Road
Inner-Middle Ring Road
Middler-Ourter Ring Road
Outside Ourter Ring Road
23
Lot sizes of land leases !
in Shanghai in 2013
Image removed due to copyright restrictions. Map of Shanghai, displaying relative sizes of land leases from 2013.
Source: Shanghai Urban Planning and Land Resource Management Bureau.
Source: Shanghai Urban Planning and Land Resource Management Bureau (2013)
24
Mismatched neighborhoods !
and urban services •
•
•
•
Single-use monolithic residential and industrial developments emerge where
urban services are still in the blueprint phase The source of revenue is the sale of land, not the use of that land
Services are expensive for the city to provide, and the very reason they
resorted to land sales financing à informal services
Result: longer trips to existing city services, a growing demand for vehicles,
and worsened accessibility
25
Perceived public transport
accessibility by location
from house place
from workplace
to daily activity
to travel
4
3.9
3.8
3.7
3.6
3.5
3.4
3.3
within Inner Ring Road Inner-Middle Ring Road
Middle-Outer Ring
outside Outer Ring
Road
Road
Zhao & Block-Schachter (forthcoming)
26
Distribution
27
Rich and poor
•
3 options for the poor. Trade accessibility for well being
–  Settle at the periphery to reduce land costs, but increase travel time to
opportunities
–  Remain in the center, but reduce their consumption of other goods to pay
for the increased price of housing
–  Reduce their consumption of housing
Land P Land Transport Transport 28
Housing and working location of
people with different incomes How far away is your workplace from home?
Distance from house location to city center
12
4.5
4
10
3.5
8
3
2.5
6
2
4
1.5
1
2
0.5
0
0
~2K
2K~
3K~
Zhao & Block-Schachter (forthcoming)
4K~
5K~
7K~
10K~
15K~
20K~
Note: the bar shows the distance from home to work place (km), and the line shows the distance from home to city
center (1: within inner ring, 2: inner-middle ring, 3: middle-outer ring, 4: outside outer ring). 25K~
29
~
40
K
~
30
K
~
25
K
~
20
K
~
15
K
~
10
K
7K
~
5K
~
4K
~
3K
~
Car Ownership
2K
~
~2
K
Car ownership of people with
different incomes 30
Car owners and non car owners
•
•
•
•
Shanghai: redistribution of accessibility gains from car owners to public transit
users
Decreased travel times for those with cars, at a monetary cost Expenditure of the revenues from the auction has increased accessibility for
those without cars
To the extent that this infrastructure has kept up with the increased demand
displaced from the road network, there are net gains on all sides
–  Fare subsides may also impact residential location choice, reducing
accessibility in the long-run
–  Last-mile problem and coordination failures reduce realized accessibility
31
Migrants and locals
•
Recall: approximately 40% migrants in Shanghai, with many not qualifying for
permanent residence permit
32
Housing and working decision of
local citizens and migrants How far away is your workplace from home? (km)
How long does it take you to your workplace from home? (single trip,min)
Distance from house location to city center
4
40
3.5
35
3
30
2.5
25
2
20
1.5
15
1
10
0.5
5
0
0
Shanghai hukou
Nonlocal hukou, with Shanghai Nonlocal hukou, with Shanghai
residence permit
temporary residence permit
Note: the bar shows the distance from home to work place (km), and the line shows the travel time from home to
work place (min).
33
Accessibility to public transport of
local citizens and migrants from house place
from workplace
to daily activity
to travel
3.9
3.8
3.7
3.6
3.5
3.4
3.3
3.2
Shanghai hukou
Nonlocal hukou, with
Nonlocal hukou, with
Shanghai residence permit
Shanghai temporary residence
Zhao & Block-Schachter (forthcoming)
Note: the plot shows different groups' attitudes towards availability of PT service (1: very low, 5: very high). permit
34
Migrants: evidence
•
•
•
•
Substitute auto access for home ownership in the use of their capita
–  Equally likely to own and use a vehicle as local residents, but are much
less likely to own their homes
Reasons
–  less family-oriented
–  financial resources – migrants live farther from the center of the city where
less expensive housing exists
–  use the flexibility of renting to optimize their accessibility to a given
workplace, while sacrificing accessibility to the rest of the urban area
Result: migrants live in a far less accessible city for their daily activities than
non-migrants. Land-grabbing as an inadequate response to meet the needs of the urban
area to expand to accommodate these migrants
35
Conclusions
36
Recap
•
To increase accessibility via the collection mechanism make bad things
expensive, and good things cheap
–  vs. revenue goals, politics, history, equity, etc. –  Challenge of moving from an existing system •  Moving from an upfront to an ongoing system make the politics of
“double” charging existing users difficult
37
Final thoughts
•
•
•
•
A sustainable source of funding for basic accessibility needs has yet to be
achieved
–  Building institutional will and political and technical capacity
Land grabbing as exactments
Land grabbing as streetcar suburbs
–  Private operators of streetcars make money from selling land
•  And then go broke
–  vs MTR/SMRT model where retain an interest
Financing infrastructure based on the sale of long term licenses – whether 70
year land leases or lifetime vehicle licenses – reduces the incentive to husband
those resources sustainably
38
MIT OpenCourseWare
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11.S945 Urbanizing China: A Reflective Dialogue
Fall 2013
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