APPRAISAL OF PEDESTRIANIZATION EXTERNALITIES

Abstract

Motorized private vehicles have plagued urban areas with their incessant use and consequent negative externalities. Thus, the concept of active transport modes as a substitute is gaining prominence. The aim of this study is to investigate pedestrianization impact on value creation. Firstly, fundamental concepts and approaches are evaluated by reviewing related literature of pedestrianization and open spaces, and economics. In the second stage, the impact of pedestrianization impacts is realized with respect to abutting property values in terms of rental income and land value increment, by employing econometric tools like Hedonic Price Method (HPM). Since there is no market for value improvement arising out of pedestrian infrastructure, there occurs a lacuna on the appraisal of incidental bystander gains for pedestrians in terms of air environmental, economic, and other gains. These values can be translated to the likeability of that place attracting flocks of people and booming commercial growth especially in pedestrianized markets. Pertinent to note that a few abutting landowners apportion these gains in terms of land value increment which need to be captured by the government for an equitable and fair distribution. Thus, appraisal of the overall value creation (if any) becomes important. The Hedonic Price Method (HPM) can be used to estimate the effect of relevant variables on the price of the asset in question. The study seeks to put forth pedestrianization and pedestrianized streets as a public open space bestowing a relative measurable economic value like other public realms, its impacts on the sale and rental price of properties in form of positive externalities. Hedonic Regression analysis will allow us to show the effect of the pedestrian way, when the level of perceived quality of pedestrian way are well appreciated by pedestrians, can significantly be an underlying factor for property prices in form of shopkeepers’ willingness to pay for the premium rent. Consequently, the approach seeks to justify the expenditure incurred on pedestrianization projects. Previous research and case studies have reported open spaces like green belts, lakes, riverfront etc. providing a premium for property prices but research on pedestrian way as an open space in this regard has been limited. Thus, Hedonic Price Method can be a promising tool in measuring the impact of environmental attributes of property on its rental prices.