The Bullet Train as a Boost for Second-Tier Cities
California's high-speed rail line is good at attracting mixed news, and this week was no exception. On the positive end of the spectrum, lawmakers approved the issue of billions in taxpayer bonds to fund the project's groundbreaking in the Central Valley, and a new public poll found that 59 percent of people believe the system is important to the state's future. On the negative end, lawsuits continue to threaten the line's progress, and the same poll found that many Californians remain opposed to the projected costs.
The line may remain embattled for years to come, but there's other news this week that should have everyone in the state taking a temporary break from the fighting to rejoice. It comes in the form of a very encouraging report by Chinese researcher Siqi Zheng and Matthew Kahn of UCLA published online ahead of print in the Proceedings of the National Academy of Sciences. The work found that bullet trains facilitate "market integration"; in simple terms, high-speed rail boosts life in satellite cities while relieving pressure in major ones:
Through facilitating market integration, bullet trains will stimulate the development of second- and third-tier cities. By offering households and firms a larger menu of location alternatives, bullet trains help to protect the quality of life of the growing urban population. We document that this transport innovation is associated with rising real estate prices in the nearby secondary cities.
The idea works like this: by reducing travel time, high-speed rail effectively pushes secondary cities closer to major cities. (That's especially true for places roughly 60 to 470 miles apart — too far to drive but often not far enough to justify the cost of flying.) This enhanced proximity enables employers to base themselves in the major city and create satellite offices in the now-accessible secondary cities where rents are much cheaper.
Meantime, employees themselves can settle in secondary cities and have the amenities of the major cities without (again) the high cost of living and also without draining public resources. That relieves the crowded infrastructure of the major cities, in particular traffic congestion, and also may lead to less sprawl, promoting a more sustainable development pattern. As Zheng and Kahn portray it, the situation offers the best of both worlds:
In this sense, the BT [bullet train] creates the possibility that the nearby second- and third-tier cities become a safety valve for the megacity, which alleviates concern about such cities growing too big.
At least that's what appears to be happening in China. The researchers found evidence that housing prices are appreciating in the secondary cities connected to Beijing, Shanghai, and Guangzhou by the bullet systems. These spikes in real estate reveal a rise in the market potential of the satellite areas, according to the study.
Zheng and Kahn point to three main factors that can trigger this market integration effect. First, there must be a reasonably high population density in a high-speed corridor. Next, there must be sufficient secondary cities to handle the extra population load. Third, the competing travel modes must already be congested or at capacity.
Now, for sure, China's case is unique. Its political structure enables the national government to pour money into projects with an arguably reckless abandon, to supply land for the train system, and to ignore whatever NIMBY opposition might exist. It also stands to reason that Chinese real estate might be rather difficult to value at the present time.
With all that said, California's emerging system generally meets the requirements outlined by the report. The situation seems to set up particularly well for a place like Bakersfield — roughly 100 miles north of Los Angeles, right in that high-speed rail sweet spot. In this regard, the new research helps to validate the Obama administration's much-maligned (but very rational) decision to start the California project in the Central Valley and not the mega-cities.
While the paper itself cautions that its conclusions might not transfer to California, co-author Kahn told the UCLA press office the work is great news for the "Bakersfields of the world":
"It's crossed my mind that I should buy land in one of these locations," Kahn joked. "There are serious real-estate implications."
Coming from Kahn — a very engaging urban scholar, but not necessarily a fan of big federal spending — such a comment carries weight even in jest. Bakersfield (and other secondary areas) have fought the California plan in the past, but they are also poised to benefit enormously by its completion. Since the line is likely coming whether these secondary cities are ready or not, the energy being used for battle seems more wisely spent on preparation instead.
Top image: A China Railway High-speed Harmony bullet train pulls into the Shenyang Railway Station in Shenyang. (Reuters)