IDEAS home Printed from https://ideas.repec.org/a/eee/jhouse/v58y2022ipas1051137722000468.html
   My bibliography  Save this article

Land value estimation using teardowns

Author

Listed:
  • McMillen, Daniel
  • Singh, Ruchi

Abstract

Teardowns provide direct information on land values in fully developed urban areas because such properties are valued only for their land and location rather than for the characteristics of the structure. We use two approaches to estimate land values. The first approach is a Stein-like procedure that uses teardown properties and makes efficient use of limited data when a group of variables – in this case, the structural characteristics – is expected beforehand to provide little explanatory power. The second approach is based on an unconditional expectation for the pooled data set of teardown and non-teardown sales. We use data from Chicago and Maricopa County to demonstrate the two approaches. These approaches help to estimate land values in built-up areas where vacant land sales are uncommon and unrepresentative of land values in the market.

Suggested Citation

  • McMillen, Daniel & Singh, Ruchi, 2022. "Land value estimation using teardowns," Journal of Housing Economics, Elsevier, vol. 58(PA).
    • Handle: RePEc:eee:jhouse:v:58:y:2022:i:pa:s1051137722000468
    DOI: 10.1016/j.jhe.2022.101874
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1051137722000468
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jhe.2022.101874?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Cheshire, Paul & Sheppard, Stephen, 2002. "The welfare economics of land use planning," Journal of Urban Economics, Elsevier, vol. 52(2), pages 242-269, September.
    2. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492, National Bureau of Economic Research, Inc.
    3. Oates, Wallace E. & Schwab, Robert M., 1997. "The Impact of Urban Land Taxation: The Pittsburgh Experience," National Tax Journal, National Tax Association, vol. 50(1), pages 1-21, March.
    4. Gedal, Michael & Ellen, Ingrid Gould, 2018. "Valuing urban land: Comparing the use of teardown and vacant land sales," Regional Science and Urban Economics, Elsevier, vol. 70(C), pages 190-203.
    5. McGrath, Daniel T., 2000. "Urban Industrial Land Redevelopment and Contamination Risk," Journal of Urban Economics, Elsevier, vol. 47(3), pages 414-442, May.
    6. Thorsnes, Paul, 1997. "Consistent Estimates of the Elasticity of Substitution between Land and Non-Land Inputs in the Production of Housing," Journal of Urban Economics, Elsevier, vol. 42(1), pages 98-108, July.
    7. Braid, Ralph M., 2001. "Spatial Growth and Redevelopment with Perfect Foresight and Durable Housing," Journal of Urban Economics, Elsevier, vol. 49(3), pages 425-452, May.
    8. Jan K. Brueckner & Shihe Fu & Yizhen Gu & Junfu Zhang, 2017. "Measuring the Stringency of Land Use Regulation: The Case of China's Building Height Limits," The Review of Economics and Statistics, MIT Press, vol. 99(4), pages 663-677, July.
    9. Clapp, John M. & Bardos, Katsiaryna Salavei & Wong, S.K., 2012. "Empirical estimation of the option premium for residential redevelopment," Regional Science and Urban Economics, Elsevier, vol. 42(1-2), pages 240-256.
    10. Munneke, Henry J., 1996. "Redevelopment Decisions for Commercial and Industrial Properties," Journal of Urban Economics, Elsevier, vol. 39(2), pages 229-253, March.
    11. Lung-Fei Lee, 1982. "Some Approaches to the Correction of Selectivity Bias," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(3), pages 355-372.
    12. Brueckner, Jan K. & Singh, Ruchi, 2020. "Stringency of land-use regulation: Building heights in US cities," Journal of Urban Economics, Elsevier, vol. 116(C).
    13. Dye, Richard F. & McMillen, Daniel P., 2007. "Teardowns and land values in the Chicago metropolitan area," Journal of Urban Economics, Elsevier, vol. 61(1), pages 45-63, January.
    14. Wallace E. Oates & Robert M. Schwab & Wallace E. Oates & Robert M. Schwab, 2004. "The Impact of Urban Land Taxation: The Pittsburgh Experience," Chapters, in: Environmental Policy and Fiscal Federalism, chapter 16, pages 273-293, Edward Elgar Publishing.
    15. Munneke, Henry J. & Womack, Kiplan S., 2015. "Neighborhood renewal: The decision to renovate or tear down," Regional Science and Urban Economics, Elsevier, vol. 54(C), pages 99-115.
    16. Brueckner, Jan K., 1980. "A vintage model of urban growth," Journal of Urban Economics, Elsevier, vol. 8(3), pages 389-402, November.
    17. Richard W. England, 2003. "State and Local Impacts of a Revenue-Neutral Shift from a Uniform Property to a Land Value Tax: Results of a Simulation Study," Land Economics, University of Wisconsin Press, vol. 79(1), pages 38-43.
    18. Glaeser, Edward L & Gyourko, Joseph & Saks, Raven, 2005. "Why Is Manhattan So Expensive? Regulation and the Rise in Housing Prices," Journal of Law and Economics, University of Chicago Press, vol. 48(2), pages 331-369, October.
    19. Knight J. R. & Hill R. Carter & Sirmans C. F., 1993. "Estimation of Hedonic Housing Price Models Using Nonsample Information: A Monte Carlo Study," Journal of Urban Economics, Elsevier, vol. 34(3), pages 319-346, November.
    20. Rosenthal Stuart S. & Helsley Robert W., 1994. "Redevelopment and the Urban Land Price Gradient," Journal of Urban Economics, Elsevier, vol. 35(2), pages 182-200, March.
    21. Colwell, Peter F. & Munneke, Henry J., 1997. "The Structure of Urban Land Prices," Journal of Urban Economics, Elsevier, vol. 41(3), pages 321-336, May.
    22. Ihlanfeldt, Keith R., 2007. "The effect of land use regulation on housing and land prices," Journal of Urban Economics, Elsevier, vol. 61(3), pages 420-435, May.
    23. Clapp, John M. & Salavei, Katsiaryna, 2010. "Hedonic pricing with redevelopment options: A new approach to estimating depreciation effects," Journal of Urban Economics, Elsevier, vol. 67(3), pages 362-377, May.
    24. McMillen, Daniel & O’Sullivan, Arthur, 2013. "Option value and the price of teardown properties," Journal of Urban Economics, Elsevier, vol. 74(C), pages 71-82.
    25. Jackson, Jerry R. & Johnson, Ruth C. & Kaserman, David L., 1984. "The measurement of land prices and the elasticity of substitution in housing production," Journal of Urban Economics, Elsevier, vol. 16(1), pages 1-12, July.
    26. Wheaton, William C., 1982. "Urban residential growth under perfect foresight," Journal of Urban Economics, Elsevier, vol. 12(1), pages 1-21, July.
    27. Cunningham, Christopher R., 2006. "House price uncertainty, timing of development, and vacant land prices: Evidence for real options in Seattle," Journal of Urban Economics, Elsevier, vol. 59(1), pages 1-31, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. McMillen, Daniel & Zabel, Jeffrey, 2022. "Special issue on land valuation: Introduction," Journal of Housing Economics, Elsevier, vol. 58(PB).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chia, Liu Ee & Sing, Tien Foo, 2023. "Redevelopment values in multi-family properties: Evidence from en bloc sales in Singapore," Journal of Housing Economics, Elsevier, vol. 60(C).
    2. McMillen, Daniel & O’Sullivan, Arthur, 2013. "Option value and the price of teardown properties," Journal of Urban Economics, Elsevier, vol. 74(C), pages 71-82.
    3. Munneke, Henry J. & Womack, Kiplan S., 2015. "Neighborhood renewal: The decision to renovate or tear down," Regional Science and Urban Economics, Elsevier, vol. 54(C), pages 99-115.
    4. McMillen, Daniel & Zabel, Jeffrey, 2022. "Special issue on land valuation: Introduction," Journal of Housing Economics, Elsevier, vol. 58(PB).
    5. Lindenthal, Thies & Eichholtz, Piet & Geltner, David, 2017. "Land assembly in Amsterdam, 1832–2015," Regional Science and Urban Economics, Elsevier, vol. 64(C), pages 57-67.
    6. Suzanne Lanyi Charles, 2013. "Understanding the Determinants of Single-family Residential Redevelopment in the Inner-ring Suburbs of Chicago," Urban Studies, Urban Studies Journal Limited, vol. 50(8), pages 1505-1522, June.
    7. Siodla, James, 2015. "Razing San Francisco: The 1906 disaster as a natural experiment in urban redevelopment," Journal of Urban Economics, Elsevier, vol. 89(C), pages 48-61.
    8. repec:bea:wpaper:0209 is not listed on IDEAS
    9. Gedal, Michael & Ellen, Ingrid Gould, 2018. "Valuing urban land: Comparing the use of teardown and vacant land sales," Regional Science and Urban Economics, Elsevier, vol. 70(C), pages 190-203.
    10. Roland Füss & Jan A. Koller & Alois Weigand, 2021. "Determining Land Values from Residential Rents," Land, MDPI, vol. 10(4), pages 1-29, March.
    11. Moon, Byunggeor & Ahn, Sungin, 2022. "The effects of a FAR regulation in a model of durable building with redevelopment: The case of New York City," Regional Science and Urban Economics, Elsevier, vol. 95(C).
    12. Rosenthal, Stuart S. & Ross, Stephen L., 2015. "Change and Persistence in the Economic Status of Neighborhoods and Cities," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 1047-1120, Elsevier.
    13. Gyourko, Joe & Krimmel, Jacob, 2021. "The impact of local residential land use restrictions on land values across and within single family housing markets," Journal of Urban Economics, Elsevier, vol. 126(C).
    14. Greenaway-McGrevy, Ryan & Phillips, Peter C.B., 2023. "The impact of upzoning on housing construction in Auckland," Journal of Urban Economics, Elsevier, vol. 136(C).
    15. Sims, Katharine R.E. & Schuetz, Jenny, 2009. "Local regulation and land-use change: The effects of wetlands bylaws in Massachusetts," Regional Science and Urban Economics, Elsevier, vol. 39(4), pages 409-421, July.
    16. K. Chau & S. Wong, 2014. "Externalities of Urban Renewal: A Real Option Perspective," The Journal of Real Estate Finance and Economics, Springer, vol. 48(3), pages 546-560, April.
    17. Clapp, John M. & Lindenthal, Thies, 2022. "Urban land valuation with bundled good and land residual assumptions," Journal of Housing Economics, Elsevier, vol. 58(PA).
    18. Dubé, Jean & Desaulniers, Sarah & Bédard, Louis-Philippe & Binette, Antoine & Leblanc, Emmanuelle, 2018. "Urban residential reconversion through demolition: A land use model based on administrative spatial micro-data," Land Use Policy, Elsevier, vol. 76(C), pages 686-696.
    19. Scott Wentland & Gary Cornwall & Jeremy G. Moulton, 2023. "For What It's Worth: Measuring Land Value in the Era of Big Data and Machine Learning," BEA Papers 0115, Bureau of Economic Analysis.
    20. Clapp, John M. & Eichholtz, Piet & Lindenthal, Thies, 2013. "Real option value over a housing market cycle," Regional Science and Urban Economics, Elsevier, vol. 43(6), pages 862-874.
    21. Ryan Greenaway-McGrevy & Gail Pacheco & Kade Sorensen, 2018. "Land Use Regulation, the Redevelopment Premium and House Prices," Working Papers 2018-02 JEL Classificatio, Auckland University of Technology, Department of Economics.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jhouse:v:58:y:2022:i:pa:s1051137722000468. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622881 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.