CAPITALIZATION OF URBAN TRAVEL IMPROVEMENTS INTO RESIDENTIAL AND COMMERCIAL REAL ESTATE: SIMULATIONS WITH A UNIFIED MODEL OF HOUSING, TRAVEL MODE AND SHOPPING CHOICES*

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Abstract
An equilibrium model of multimodal travel time improvements is developed and calibrated for the New York Metropolitan Area. The model employs a unified treatment of housing type, residential location and commuting mode choices with shopping (destination, frequency and mode) choices. Benefits of halving subway headways are reflected in consumer surplus and capitalized into producer surplus, with the latter divided between housing and commercial real estate. Sensitivity tests and simulations on other modes are also presented. Unlike the subway mode, across‐the‐board travel time improvements for bus, auto and commuter rail reduce central area housing rents, but auto improvements yield higher total benefits and increases in commercial rents.