LSE LSE Research Laboratory LSE
LSE Research Laboratory (RLAB)

Abstract for:

Traffic Externalities and Housing Prices: Evidence from the London Congestion Charge

Cheng Keat  Tang,  August 2016
Paper No' SERCDP0205: | Full paper (pdf)
Save Reference as: BibTeX BibTeX File | Endote EndNote Import File
Keywords: housing prices, capitalization effects, congestion charge, traffic externalities, marginal willingness to pay, difference-in-difference

JEL Classification: R21; R31; R38; R41; Q25

Is hard copy/paper copy available? YES - Paper Copy Still In Print.
This Paper is published under the following series: SERC Discussion Papers
Share this page: Google Bookmarks Google Bookmarks | Facebook Facebook | Twitter Twitter

Abstract:

This study exploits the introduction of the London Congestion Charge (CC) that greatly improves traffic conditions in Central London to provide new evidence on the capitalization of traffic externalities onto housing values. The Congestion Charge restricts traffic into the cordoned area by imposing a flat fee on drivers whenever they enter during charging periods. I show that the introduction of the CC in the Western Extension Zone (WEZ) increases home prices by 3.68\% relative to untreated housing units within 1 kilometre away from the CC boundary. These estimates, which measures the marginal willingness to pay to avoid negative traffic externalities, are robust to many changes in specifications, suggesting that homeowners pay to avoid traffic so as to reduce commuting time, to enjoy better air quality and less traffic noise, and to travel on safer roads.