The impact of an urban toll ring on housing prices

Building on standard urban economics theory we set up a stylized model within which we demonstrate that the imposition of a toll ring leads to higher housing prices within the ring, and lower outside the ring. We examine this prediction empirically by using transaction data for 15,306 dwellings in the Norwegian town of Kristiansand, where since 1992 there has been a toll ring. We find that the toll ring implies 6.9 per cent higher housing prices within the toll ring than outside it. The relationship between toll fees and housing prices seems to be stable over time. The impact of the toll ring on the prices of detached houses, apartments, row houses and twin houses is strikingly different. For detached houses, we do not find significant evidence of a price premium within the toll ring. For apartments, the price premium is estimated to be 8.1 percent. For row houses and twin houses taken together, we find a price premium of 19.2 per cent for dwellings within the toll ring.