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NYC 9/11 Public Portal Document

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CHAPTER TWO

design, algorithm, computational requirements, and applications of an operational equilibrium model of urban land value and transit relationships A regional model (NYREG) has been designed and calibrated for the New York Metropolitan Area to simulate the equilibrium effects of urban transport improvements on residential and commercial real estate markets. The model has been applied to evaluate the economic benefits of a number of hypothetical improvements in the travel times of the subway, highway, bus and commuter rail modes.

Two kinds of benefits are computed by the model: o the change in the consumers' surplus measures the approximate improvement in the welfare level of urban households, taking into account the changes in housing and commercial rents induced by the transport improvement, and o the change in producers' surplus measures the profits which accrue to the owners of residential and commercial real estate, and which are capitalized into land values. The model is a short run equilibrium model in that building stocks are assumed fixed. The effects of transport improvements on changes in the stocks of residential and commercial real estate are not predicted in the model. However, exogenously predicted changes in building stocks, such as a proposed office development in the Manhattan CBD, can be simulated in the model to generate changes in work trip distributions, travel modes, housing location choices, consumer surpluses, and producer surpluses (or land value increments). The model is designed in the tradition of urban economics. The equilibrium is driven by decisions of representative households with fixed places of work, but free to choose a place of residence, a mode of commuting from work to home, the type of housing at the place of residence, and a pattern of annual shopping trip frequencies by travel mode from the place of residence to each of a number of shopping zones. The decisions are made simultaneously, taking as given incomes, the rents of housing, and the travel times and costs of each of the travel modes. The rents of housing and commercial floor, space respond to the aggregate demands generated by these choices so that demands and supplies are equal in each relevant geographic submarket and for each type of real estate.

How NYREG Relates to the Literature and to Historical Work The idea that transportation and real estate markets are

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