Crossrail 2 is considering a new land value capture model called DRAM to help fund the £31bn scheme, according to Crossrail 2 managing director Michele Dix.
Speaking at real estate conference MIPIM in west London, Dix explained that some people who benefit from major transport schemes are not contributing sufficiently, such as landowners whose land value increases as a result of new transport links.
“What we have to do is do more work to understand how to capture that value in the first place,” said Dix.
As a result a trial funding model called the Development Rights Auction Model (DRAM) is being developed by the City Hall, Transport for London (TfL) and other government bodies. It was announced as part of a London Devolution Agreement in the March Budget earlier this year.
DRAM works by using the extra benefits from a transport scheme, such as an uplift in land values as a result of new rail stations, to fund new infrastructure projects such as Crossrail 2.
In areas with a high potential for development, particularly for housing, land would be pooled and auctioned to developers as a package to get the best use out of the available space.
Any landowners in the zone who did not want to join would face a high Community Infrastructure Levy (CIL) payment.
In July transport secretary Chris Grayling gave his backing to Crossrail 2, but warned that 50% of the funding for the £31bn project would have to be sourced during its construction.
Dix said that the Mayor’s Community Infrastructure Levy (MCIL), a developer contribution tax which is helping to pay for Crossrail 1, works well in London. However some London boroughs have expressed concern over proposed raises to the current MCIL level.
Earlier this month it emerged that Crossrail 2 could be pushed back until the 2040s to give TfL more time to raise the required funds.