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Housing Markets and Vacant Land

Author

Listed:
  • Keuschnigg, Christian

    (Institute for Advanced Studies, Vienna and Centre for Economic Policy Research)

  • Nielsen, Soren Bo

    (Economic Policy Research Unit)

Abstract

The paper examines land use in an urban zone. We propose a partial equilibrium model of housing markets with both vacant and built up land. The existing literature assumes building decisions to be irreversible and treats any given stock of vacant land as an exhaustible resource. By way of contrast, we argue that vacant land is built upon in finite time rather than asymptotically, and reduces to a temporary phenomenon only. When housing stocks depreciate, previously built up land is released and may be rebuilt at any structural intensity dictated by the going market conditions. The continued replacement of existing structures allows to adjust the average structural intensity in the city even if all land is built upon. We explain analytically the long-run equilibrium with full land use and demonstrate numerically that vacant land may still be an important transitional phenomenon. In particular, we emphasize the implication for land prices.

Suggested Citation

  • Keuschnigg, Christian & Nielsen, Soren Bo, 1994. "Housing Markets and Vacant Land," Economics Series 1, Institute for Advanced Studies.
    • Handle: RePEc:ihs:ihsesp:1
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    File URL: https://irihs.ihs.ac.at/id/eprint/801
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    References listed on IDEAS

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    1. Calvo, Guillermo A & Kotlikoff, Laurence J & Rodriguez, Carlos Alfredo, 1979. "The Incidence of a Tax on Pure Rent: A New (?) Reason for an Old Answer," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 869-874, August.
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    6. James M. Poterba, 1984. "Tax Subsidies to Owner-Occupied Housing: An Asset-Market Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(4), pages 729-752.
    7. 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.
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    10. repec:fth:harver:1424 is not listed on IDEAS
    11. Feldstein, Martin S, 1977. "The Surprising Incidence of a Tax on Pure Rent: A New Answer to an Old Question," Journal of Political Economy, University of Chicago Press, vol. 85(2), pages 349-360, April.
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    Cited by:

    1. Elias Oikarinen, 2009. "Dynamic linkages between housing and lot prices: Empirical evidence from Helsinki," Discussion Papers 53, Aboa Centre for Economics.
    2. Luis H.R. Alvarez & Jukka Lempa & Elias Oikarinen, 2009. "Do Standard Real Option Models Overestimate the Required Rate of Return of Real Estate Investment Opportunities?," Discussion Papers 52, Aboa Centre for Economics.
    3. Saha, Anuradha, 2023. "Land and housing: The twin forces of non-balanced growth," Journal of Macroeconomics, Elsevier, vol. 76(C).

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    More about this item

    JEL classification:

    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns

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