A rational premium for bike-friendly housing?

Rationally, if we intended to live in a house for just ten years it would be worth spending up to an extra £24,000…

In “how I saved a house deposit cycling to work” I showed that being able to keep a second car off the road has saved us £9500 over the last four years, or £2375pa. (That’s based on our real bank account balance).

Let’s imagine that there’s no difference in terms of health or enjoyment and stick with the financial figures. Rationally, if we intended to live in a house for just ten years it would be worth spending up to an extra £24,000 to secure one which allowed us to ride to work.

That would have to include the costs of borrowing extra money and ignores the opportunity cost of investing the money in the house (after all, we could use it to become loan sharks instead) but it’s still a hefty amount of cash when Scotland’s average home costs less than £200,000.

Image courtesy Andrew_Writer

Say you want to settle down and have kids which means you’re going to be around for the next twenty years- it would make sense to spend up to £50,000 more on a house which is bike-friendly than one which isn’t.

Being rational, it’s safe to say that many people are making such decisions – although of course you could look at it as a way of getting more house for the same money rather than a requirement to physically spend more. I have no doubt people do both.

Of course, rational cyclists being willing to pay significantly more money to live on a good cycle route can be used as an easy justification for the construction of more cycle routes too. Let’s imagine the £600,000 cost of the Quality Bike Corridor had delivered an excellent commuter route instead of a shocking waste of effort painting lanes under parked cars. That £600k would potentially have benefited local residents to the tune of £2,000 per annum, per household. (Even giving up a bus pass is worth £6000 per decade on your house value).

If just 300 households were able to give up a car as a result of the provision of a Dutch-class segregated cycle route at that price, it would deliver a return on investment *in the first year*.

Even better, the money people stop spending on cars when the council builds a segregated cycle facility feeds directly into the economy – perhaps largely the local economy. Is this why cities that do build world-class facilities see such a dramatic rise in the turnover of local business?

You may find talk of inflated house prices improbable, but there’s good evidence from the school catchment system that parents have been paying up to £200,000 more for comparable properties with better schools (the average is apparently around a 20% premium, although that article is a few years old).

Because there’s no firm line separating “people close enough to use this cycle facility” from “people not allowed to use this cycle facility”, you wouldn’t expect a sharp, easily detectable price jump in the same way that catchments have. However, there must be a good masters or PhD. thesis in measuring the effect.

Houses identical to ours (with bigger gardens) go for six figures less in Fife than they do here. We’re also buying into a good school catchment, but our budget definitely included a “cycling premium”.

Doesn’t yours?

4 thoughts on “A rational premium for bike-friendly housing?”

  1. I like your thinking, but I think the problem is that even if you have a beautiful set of cycling facilities outside your house, it doesn’t guarantee that you could get where you want to go on nice facilities. You’ll inevitably get dumped out onto a 12 lane roundabout.

    Now, a whole city / suburbs with good cycling facilities might be a game changer. Interestingly, I can’t believe that anyone wants to live somewhere where they can only get around in the car and their kids have to run across dual carriageways, however, trying to get anyone to agree to the small steps to avoid this seems impossible. Perhaps some vision from government?

    1. Thanks for the comment John.

      Partial coverage should still justify a price premium. We’re a good example of this because my better half does not benefit from continuous cycle provision (i.e. from Currie to Edinburgh University) and consequently we have higher car use than we might. Our house would be worth even more if such a cycle facility existed (to be fair, we bought the house partly in the foreknowledge that the university gig is fixed-length).

      The point you make is extremely valid however. Look at the original plan for Leith Walk, which segregated cyclists riding between the two roundabouts of certain death. It had almost zero value because the entrance requirement (being willing to ride around the roundabouts) completely excluded everyone who would really benefit from segregation.

      Longer facilities connect exponentially larger numbers of homes and businesses, so their value increases exponentially. This is why it’s so important for the council to get proper segregated links between, say, the Union Canal and NEPN sorted out…

  2. I guess I’m not as convinced by my job security as you are. I’ve figured that if I sell my car and buy a similar one, I’ll be about 5k down. I’ve held off selling my car (my wife also owns one) despite being able to cycle to work (or catch a train if I’m really ill) every day. That’s because there are several places round here (Aldershot) I couldn’t 100% cycle commute to and I want to hedge my bets against having to get another job.

    1. Good point. Although I could imagine having to get another job for all sorts of reasons, I’d certainly be able to stick in the Edinburgh area.

      (Which, to digress, is I suppose why it’s more expensive to live in cities in general, since you’re well connected by whatever mode of travel you prefer to a lot of relatively nearby jobs, amongst all sorts of other things.)

      I suppose what you’d need to do is look at the cost of keeping your car on the road each year, divide it into £5k and that’s how many years you’d need to stick at your job (or another rideable one) before breaking even, which could be quite a few years if it’s very low mileage?

      Of course, you can buy a pretty reliable car for well under £5k, so arguably you’re pricing in some extra expense for yourself there?

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