Transport improvements and new station openings can act as a catalyst for development and regeneration, including additional housebuilding. However, given the time taken to approve and implement large projects, the effects of new infrastructure are longer term compared to the other catalysts we have identified in this report.
To deliver the transport infrastructure London needs by 2050 will cost over £100bn according to figures from Arup and TfL. The budget for Crossrail 1, already underway, is set at £14.8 billion. The cost of a second Crossrail line, running diagonally from south west to the north east, has been estimated at £27.5 billion including a 66% optimism bias and the cost of rolling stock.
Smaller projects are also important including a £3 billion extension of the Bakerloo line and a £1.7 billion extension of the DLR between Bank and Victoria. Extending the London Overground line to Barking Riverside would cost about £200 million.
Crossrail 2 opportunity
While the central aim of Crossrail 2 is to provide additional transport capacity, the reach of Crossrail 2 could unlock the latent potential of many outer London areas, particularly if plans for new stations are accompanied by plans for regeneration, more new homes and new employment space.
Up to 500 meters from proposed Crossrail 2 stations, there is currently capacity on identifiable development sites for 20,000 new homes. However, the new line will bring opportunity for more if plans for transport improvement and housing are closely integrated.
The development of Crossrail 1 provides some valuable lessons. Our analysis shows property values in some areas immediately surrounding new Crossrail 1 stations have already outperformed the rest of the borough ahead of the line’s opening in 2018.
However, value uplift has by no means occurred uniformly along the line. The strongest performance has been recorded where there has been a corresponding increase in development activity. Hence reduction in journey times and increased connectivity must be accompanied by place improvement, including mixed use development and the creation of public space.
Where development is occurring, new build schemes are selling at a premium to existing stock, benefitting from the value uplift larger scale development can provide. This demonstrates the need to proactively integrate housing into the planning for Crossrail 2.
Investment costs
The cost of Crossrail 1 will be met by Government, the Mayor of London and London businesses. Around half of the costs will be met by the Mayor of London through TfL and the GLA, including contributions raised through the Crossrail Business Rate Supplement, Section 106 and Community Infrastructure Levy (CIL).
Similarly, a significant contribution for Crossrail 2 is expected to come from sources outside central Government. Research from London First suggests a combination of funds from fares, London taxes (business rates and council tax) and developers should contribute to the costs. The group, which represents London businesses, also argues for a degree of fiscal devolution to support big projects.
Beyond that, capturing new value created by development, particularly in emerging neighbourhoods, should help support the costs. Tax increment financing (TIF) structures, which rely on future gains in taxes to subsidise current projects, are worth investigating.
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