Economic Rents and Betterment Tax: The Case of Condominium Projects Near Sky Train Station in Bangkok

Abstract

This study presents a new potential financial resource for Thailand called the property value capture mechanism. The mechanism could be applied to finance a public infrastructure project by capturing either some or all of the incremental value of real estate generated by a public scheme. The first step in this study is to investigate the amount of economic rent for condominium projects located along the sky train station (Light Green Line Extension, On Nut to Bearing station) by employing the hedonic price method. The economic rents of condominium units are between 176.17 to 183.38 baht per unit for every meter closer to the sky train station. The second step is to apply a concept of a betterment tax imposed on property holders who received a benefit from the sky train station in an assessment area within 1,500 meters of a station. The betterment tax rate is 8.95% of the economic rent.