The Cost of Traffic: Evidence from the London Congestion Charge

This paper exploits the implementation of the London Congestion Charge (LCC) to provide credible estimates on the willingness to pay to avoid traffic using the housing market. This policy curtails road traffic by imposing a fee on anyone driving into the charge zone. My results show that the LCC is associated with significant improvement in traffic conditions and housing values. Instrumenting local traffic conditions with the enforcement of the LCC, and limiting the analysis to properties proximate to the charge boundary, I find that the elasticity of housing values with respect to traffic is-0.30. These findings suggest that the consequential improvement in traffic conditions due to the LCC has generated substantial windfall of more than 3.8 pound billion for homeowners in the zone.

Automated summary

This paper investigates the impact of the London Congestion Charge on traffic conditions and housing values, finding significant improvements in both due to the implementation of LCC. The study suggests that the consequential traffic improvement generated substantial windfall for homeowners in the zone, indicating a strong willingness to pay to avoid traffic congestion.