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Innovative approaches and instruments for infrastructure

What implications do contemporary approaches have for real estate developers and the financing tools they use? Read more about funding models.
Close up of two model houses sitting on calculator and fans of cash
© RMIT Europe and EIT Urban Mobility

As you would have seen, there are some unique challenges and opportunities Townsville faces when planning for urban renewal of its city.

To address some of the complexities of these issues the city, James Cook University and the hospital and the health services have been working together to apply innovative thinking to unlock the potential of the surrounding environment and meet the contemporary living, working and cultural needs of its residents.

But what implications do contemporary approaches like these have for real estate developers and the financing tools they have traditionally used to develop local infrastructure projects?

Funding models

To respond to this question let’s explore some examples of funding models in Australia and overseas.

Townsville

Continuing with our Townsville theme recently there has been a recommendation that funding for Australian public transport infrastructure development be supported by the implementation of a financing mechanism known as value capture on a large scale.

Image by Gertzy via Wikimedia Commons.

As discussed in step 1.8, value capture is a type of public financing that recovers some or all of the value that public infrastructure generates for the private landowner. Here we see it in practice in our Australian example. This proposal aims to use value capture to ensure that the taxpayers funding the cost of transformative infrastructure projects get to share proportionally in the economic benefits that are created.

Washington, D.C.

This is in contrast to public transport funding models like the one in Washington, D.C. (United States). In this example, the transit agency is funded directly by multiple state and local governments in the region. This means that the coordination of a taxation scheme to finance innovative developments of the infrastructure like public transport is unfeasible.

Image by SeanPavone via Envato Elements.

While it is not practical to apply value capture and innovative funding models to all public transport projects, it is representative of a move toward an increasingly equitable and sustainable market.

The infographic below demonstrates the spectrum from private capital to public investment to fund projects, with the middle being the best for value capital.

Alt textClick to expand

Image by Reality Learning, adapted from Jones

Your task

Think of a recent infrastructure development in your own local area? What funding model/mechanism were used to finance its implementation? What impact, if any, do you think different funding models might have on the development of its infrastructure? Share your thoughts in the comments.

Further resources

If you would like to explore some of the concepts we have covered in more detail, the following resources are optional.

Developing Public Space and Land Values in Cities and Neighbourhoods

© RMIT Europe and EIT Urban Mobility
This article is from the free online

Urban dynamics: Spatial Accessibility and Real estate

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