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Housing markets and vacant land

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  • Keuschnigg, Christian
  • Nielsen, Soren Bo

Abstract

The paper examines land use in an urban zone. We propose a partial equilibrium model of housing markets with both vacant and built up land. The existing literature assumes building decisions to be irreversible and treats any given stock of vacant land as an exhaustible resource. By way of contrast, we argue that vacant land is built upon in finite time rather than asymptotically, and reduces to a temporary phenomenon only. When housing stocks depreciate, previously built up land is released and may be rebuilt at any structural intensity dictated by the going market conditions. The continued replacement of existing structures allows to adjust the average structural intensity in the city even if all land is built upon. We explain analytically the long-run equilibrium with full land use and demonstrate numerically that vacant land may still be an important transitional phenomenon. In particular, we emphasize the implication for land prices.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 20 (1996)
Issue (Month): 9-10 ()
Pages: 1731-1762

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Handle: RePEc:eee:dyncon:v:20:y:1996:i:9-10:p:1731-1762

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Web page: http://www.elsevier.com/locate/jedc

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References

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  1. Lawrence H. Goulder, 1989. "Tax Policy, Housing Prices, and Housing Investment," NBER Working Papers 2814, National Bureau of Economic Research, Inc.
  2. Capozza, Dennis & Li, Yuming, 1994. "The Intensity and Timing of Investment: The Case of Land," American Economic Review, American Economic Association, vol. 84(4), pages 889-904, September.
  3. Turnovsky, Stephen J. & Okuyama, Toshiyuki, 1994. "Taxes, housing, and capital accumulation in a two-sector growing economy," Journal of Public Economics, Elsevier, vol. 53(2), pages 245-267, February.
  4. Feldstein, Martin S, 1977. "The Surprising Incidence of a Tax on Pure Rent: A New Answer to an Old Question," Journal of Political Economy, University of Chicago Press, vol. 85(2), pages 349-60, April.
  5. Rosen, Harvey S., 1985. "Housing subsidies: Effects on housing decisions, efficiency, and equity," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 7, pages 375-420 Elsevier.
  6. N. Gregory Mankiw & David N. Weil, 1990. "The Baby Boom, The Baby Bust, and the Housing Market," NBER Working Papers 2794, National Bureau of Economic Research, Inc.
  7. repec:fth:harver:1424 is not listed on IDEAS
  8. Goulder, Lawrence H., 1989. "Tax policy, housing prices, and housing investment," Regional Science and Urban Economics, Elsevier, vol. 19(2), pages 281-304, May.
  9. Guillermo A. Galvo & Laurence J. Kotlikoff & Carlos Alfredo Rodriguez, 1978. "The Incidence of a Tax on Pure Rent: A New Reason for an Old Answer," UCLA Economics Working Papers 125, UCLA Department of Economics.
  10. Sinn, Hans-Werner, 1986. "Vacant land and the role of government intervention," Regional Science and Urban Economics, Elsevier, vol. 16(3), pages 353-357, August.
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Citations

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Cited by:
  1. Elias Oikarinen, 2009. "Dynamic linkages between housing and lot prices: Empirical evidence from Helsinki," Discussion Papers 53, Aboa Centre for Economics.
  2. Luis H.R. Alvarez & Jukka Lempa & Elias Oikarinen, 2009. "Do Standard Real Option Models Overestimate the Required Rate of Return of Real Estate Investment Opportunities?," Discussion Papers 52, Aboa Centre for Economics.

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