A Discrete Space Urban Model With Environmental Amenities

This paper analyzes the effects of providing environmental amenities associated with open space in a discrete space urban model. The discrete space model assumes distinct neighborhoods in which developable land is homogeneous within a neighborhood but heterogeneous across neighborhoods. We solve for equilibrium allocation of development, prices and welfare given a pattern of open space provision. We also analyze the optimal provision of open space across neighborhoods. In equilibrium, housing density and price in a neighborhood is increasing in the amount of open space provided in that neighborhood. Whether housing density and prices in other neighborhoods increases or decreases depends on whether the push from reduced availability of developable land in the neighborhood with increased open space, or the pull of the local amenity value in that neighborhood, is stronger.