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Forced Development and Urban Land Prices

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  • Brent Ambrose

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Abstract

This paper examines the distortions in property markets resulting from government actions to alleviate externalities associated with vacant lots. Using an equilibrium based real option model, the analysis indicates that announcement of a program of forced development may actually delay market-based development. By incorporating externalities associated with vacant lots into the model, the analysis indicates that owners of neighboring developed property benefit suggesting such programs will be politically popular. Copyright Springer Science + Business Media, Inc. 2005

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File URL: http://hdl.handle.net/10.1007/s11146-005-6406-y
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Bibliographic Info

Article provided by Springer in its journal The Journal of Real Estate Finance and Economics.

Volume (Year): 30 (2005)
Issue (Month): 3 (April)
Pages: 245-265

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Handle: RePEc:kap:jrefec:v:30:y:2005:i:3:p:245-265

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Web page: http://www.springerlink.com/link.asp?id=102945

Related research

Keywords: real options; development; government intervention;

References

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  1. Capozza, Dennis R. & Li, Yuming, 2002. "Optimal Land Development Decisions," Journal of Urban Economics, Elsevier, vol. 51(1), pages 123-142, January.
  2. Bar-Ilan, Avner & Strange, William C., 1996. "Urban Development with Lags," Journal of Urban Economics, Elsevier, vol. 39(1), pages 87-113, January.
  3. Arnott, Richard J., 1980. "A simple urban growth model with durable housing," Regional Science and Urban Economics, Elsevier, vol. 10(1), pages 53-76, March.
  4. 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.
  5. Anderson, John E., 1986. "Property taxes and the timing of urban land development," Regional Science and Urban Economics, Elsevier, vol. 16(4), pages 483-492, November.
  6. Titman, Sheridan, 1985. "Urban Land Prices under Uncertainty," American Economic Review, American Economic Association, vol. 75(3), pages 505-14, June.
  7. Capozza, Dennis R & Sick, Gordon A, 1991. "Valuing Long-Term Leases: The Option to Redevelop," The Journal of Real Estate Finance and Economics, Springer, vol. 4(2), pages 209-23, June.
  8. Arnott, Richard J & Lewis, Frank D, 1979. "The Transition of Land to Urban Use," Journal of Political Economy, University of Chicago Press, vol. 87(1), pages 161-69, February.
  9. Grenadier, Steven R, 1999. "Information Revelation through Option Exercise," Review of Financial Studies, Society for Financial Studies, vol. 12(1), pages 95-129.
  10. Anas, Alex, 1978. "Dynamics of urban residential growth," Journal of Urban Economics, Elsevier, vol. 5(1), pages 66-87, January.
  11. Bentick, Brian L, 1979. "The Impact of Taxation and Valuation Practices on the Timing and Efficiency of Land Use," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 859-68, August.
  12. Williams, Joseph T, 1991. "Real Estate Development as an Option," The Journal of Real Estate Finance and Economics, Springer, vol. 4(2), pages 191-208, June.
  13. 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.
  14. Grenadier, Steven R, 1996. " The Strategic Exercise of Options: Development Cascades and Overbuilding in Real Estate Markets," Journal of Finance, American Finance Association, vol. 51(5), pages 1653-79, December.
  15. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
  16. Riddiough, Timothy J., 1997. "The Economic Consequences of Regulatory Taking Risk on Land Value and Development Activity," Journal of Urban Economics, Elsevier, vol. 41(1), pages 56-77, January.
  17. Mills, David E., 1981. "Urban residential development timing," Regional Science and Urban Economics, Elsevier, vol. 11(2), pages 239-254, May.
  18. Clarke, Harry R. & Reed, William J., 1988. "A stochastic analysis of land development timing and property valuation," Regional Science and Urban Economics, Elsevier, vol. 18(3), pages 357-381, August.
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Cited by:
  1. I.Omar & W. Djurjani & N. D. Prijono, 2009. "Transaction cost analysis in redeveloping indigenous lands in Malaysia," Economia. Seria Management, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 12(1), pages 21-40, June.

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