The impact of down-zoning on land values: A theoretical approach
AbstractPurpose – This paper aims to build a mathematical model to determine the price of an acre of developable land, whether it is part of a large open tract (farm) or a smaller residential parcel that can legally be subdivided. The primary purpose of the model is to explore the effect of various minimum lot-size regulations on the price of these two types of vacant land. The study also attempts to explain apparently conflicting findings that have recently appeared in empirical studies of “down-zoning” in the states of Maryland and New Jersey. Design/methodology/approach – The mathematical model of land value is based on principles of asset valuation under uncertainty at various locations within a metropolitan area. The price of an acre of land is modeled as the present value of a stream of indirect utility to homeowners, and economic rents to farmers, developers or landlords, depending on an endogenous date of development. The cases of New Jersey and Maryland are compared using parameterized simulations, with minimum lot size allowed to vary. Findings – The simulations reconcile earlier empirical studies on Maryland and New Jersey. The observed absence of any price effect of down-zoning in rural Maryland appears to be caused by the fact that development is not imminent there. In New Jersey, development is imminent virtually everywhere, and a high proportion of today's vacant land value is due to its development potential. This means that down-zoning will typically lead to dramatic declines in vacant land value in New Jersey. Research limitations/implications – The study relies on state averages, so its results should not be applied to particular parcels in Maryland or New Jersey. The study incorporates uncertainty in expected developer profits, but not in future political decisions. Practical implications – By clarifying the context in which zoning changes will or will not lead to decline in a landowner's asset value, the study can inform legal and political debates over re-zonings in the USA. Included in these debates is the claim that some re-zonings violate the “takings” clause of the USA constitution. Originality/value – The majority of papers on this subject are empirical, using a hedonic or an appraisal methodology. This paper provides a coherent theoretical model of per-acre land prices under different levels of zoning restriction. It can be used for simulation or prediction with relatively few input parameters.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Emerald Group Publishing in its journal Agricultural Finance Review.
Volume (Year): 69 (2009)
Issue (Month): 2 (July)
Contact details of provider:
Web page: http://www.emeraldinsight.com
Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Gottlieb, Paul D. & O’Donnell, Anthony & Rudel, Thomas & O’Neill, Karen & McDermott, Melanie, 2012. "Determinants of local housing growth in a multi-jurisdictional region, along with a test for nonmarket zoning," Journal of Housing Economics, Elsevier, vol. 21(4), pages 296-309.
- Magliocca, Nicholas & McConnell, Virginia & Walls, Margaret & Safirova, Elena, 2012. "Zoning on the Urban Fringe: Results from a New Approach to Modeling Land and Housing Markets," Discussion Papers dp-11-32, Resources For the Future.
- Magliocca, Nicholas & McConnell, Virginia & Walls, Margaret & Safirova, Elena, 2012. "Zoning on the urban fringe: Results from a new approach to modeling land and housing markets," Regional Science and Urban Economics, Elsevier, vol. 42(1-2), pages 198-210.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Louise Lister).
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.