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Land market regulation: market versus policy failures

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  • Paul C. Cheshire

Abstract

This paper reviews the role of market failures in land markets, evidence as to their quantitative significance and the impact of land use policies designed to offset for such failures. Policies of containment and densification limit the supply of land for all urban uses. When applied as stringently as in Britain, a full net welfare evaluation shows the increased costs of space for housing substantially exceed the value of amenities generated. There is also evidence that constraints on land supply impose costs on productive uses of land in both office and retail use. Although the estimates are that these costs are considerable they relate only to the gross costs. Three possible policy changes are identified which could preserve the role of regulation in offsetting for problems of market failure while greatly relieving the costs of policy-imposed supply restrictions.

Suggested Citation

  • Paul C. Cheshire, 2013. "Land market regulation: market versus policy failures," Journal of Property Research, Taylor & Francis Journals, vol. 30(3), pages 170-188, September.
    • Handle: RePEc:taf:jpropr:v:30:y:2013:i:3:p:170-188
    DOI: 10.1080/09599916.2013.791339
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    1. Jan Rouwendal & Willemijn Weijschede- v.d. Straaten, 2008. "The costs and benefits of providing open space in cities," CPB Discussion Paper 98, CPB Netherlands Bureau for Economic Policy Analysis.
    2. Cheshire, Paul, 2009. "Urban containment, housing affordability and price stability - irreconcilable goals," LSE Research Online Documents on Economics 59240, London School of Economics and Political Science, LSE Library.
    3. Sheppard, Stephen, 1999. "Hedonic analysis of housing markets," Handbook of Regional and Urban Economics, in: P. C. Cheshire & E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 3, chapter 41, pages 1595-1635, Elsevier.
    4. Wouter Vermeulen & Jan Rouwendal, 2007. "Housing supply in the Netherlands," CPB Discussion Paper 87, CPB Netherlands Bureau for Economic Policy Analysis.
    5. Paul Cheshire & Stephen Sheppard, 2004. "Capitalising the Value of Free Schools: The Impact of Supply Characteristics and Uncertainty," Economic Journal, Royal Economic Society, vol. 114(499), pages 397-424, November.
    6. Wouter Vermeulen & Jan Rouwendal, 2007. "Housing Supply and Land Use Regulation in the Netherlands," Tinbergen Institute Discussion Papers 07-058/3, Tinbergen Institute.
    7. Alan W. Evans, 1973. "The Economics of Residential Location," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-01889-5.
    8. P. C. Cheshire & E. S. Mills (ed.), 1999. "Handbook of Regional and Urban Economics," Handbook of Regional and Urban Economics, Elsevier, edition 1, volume 3, number 3.
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    Cited by:

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    2. Wang, Weifang, 2021. "Nuanced insights into land buyer perceptions of engaging in rural land transactions from a cost perspective: Evidence from China’s emerging rural land market," Land Use Policy, Elsevier, vol. 108(C).
    3. Wang, Weifang & van Noorloos, Femke & Spit, Tejo, 2020. "Stakeholder power relations in Land Value Capture: comparing public (China) and private (U.S.) dominant regimes," Land Use Policy, Elsevier, vol. 91(C).
    4. Vejchodská, Eliška & Barreira, Ana Paula & Auziņš, Armands & Jürgenson, Evelin & Fowles, Steven & Maliene, Vida, 2022. "Bridging land value capture with land rent narratives," Land Use Policy, Elsevier, vol. 114(C).
    5. Ehrlich, Maximilian V. & Hilber, Christian A.L. & Schöni, Olivier, 2018. "Institutional settings and urban sprawl: Evidence from Europe," Journal of Housing Economics, Elsevier, vol. 42(C), pages 4-18.
    6. Wenjie Wu & Guanpeng Dong & Wenzhong Zhang, 2017. "The puzzling heterogeneity of amenity capitalization effects on land markets," Papers in Regional Science, Wiley Blackwell, vol. 96, pages 135-153, March.
    7. Christian Reiner & Robert Musil, 2023. "The regional variation of a housing boom. Disparities of land prices in Austria, 2000–2018 [Die regionale Differenzierung eines Immobilien-Booms. Disparitäten der Baulandpreise in Österreich, 2000–," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 43(1), pages 125-146, April.
    8. Kauko Tom, 2019. "Institutions at the Interface of Urban Planning and Real Estate," Real Estate Management and Valuation, Sciendo, vol. 27(3), pages 17-30, September.
    9. Dani Broitman, 2020. "The Game of Developers and Planners: Ecosystem Services as a (Hidden) Regulation through Planning Delay Times," Sustainability, MDPI, vol. 12(15), pages 1-14, July.
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    11. Glaeser, Edward & Kourtit, Karima & Nijkamp, Peter, 2021. "New urban challenges: Shared spaces in smart places – Overview and positioning," Land Use Policy, Elsevier, vol. 111(C).

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