New infrastructure tax - if it happens, will it hit house prices?

It went largely unreported when news broke last week but now the suggestion that home owners should pay a surcharge if their local transport infrastructure improves has won support from a free-market think tank.

Last week the commercial property magazine Estates Gazette broke the news that home owners living within a certain radius of Crossrail 2 stations in London and parts of the south east could face a surcharge to pay for the project.

This is an almost complete reverse of the story about Crossrail 1 - opening in part next year - when home owners near transport hubs enjoyed windfalls because of boosts to their property values. 

But now EG says Transport for London is considering a levy to fund the £30 billion Crossrail 2 which is likely to be built from Broxbourne in Hertfordshire to Epsom in Surrey, through central London.

It would create three zones stretching a kilometre around each station. Each zone, mapped out in concentric circles, would have a scaled charge, known as the Transport Property Charge, descending with the distance from the station. 

It’s not known how such a surcharge could hit property prices or sales in a part of the country already struggling with, in some areas, falling values and stalling transactions.

Now the TfL levy has been backed by the Adam Smith Institute, a right wing free market thinktank. 

“The society around you has increased the value of your land. Why not a tax to pay for the process of increasing your land value?” says the institute’s Tim Worstall on a blog on its website.

“We might also note that this is not uncommon in transport circles. Hong Kong's metro is largely paid for in this manner ... Property owners benefit from this, why not property owners pay for it at least in part?”

He says the may be specifics that could go wrong (“come on, this is government, of course there will be errors” he explains) but the basic idea that those who profit from infrastructure pay for it “seems fair enough.”