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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

Suggested Citation

  • Brent Ambrose, 2005. "Forced Development and Urban Land Prices," The Journal of Real Estate Finance and Economics, Springer, vol. 30(3), pages 245-265, April.
  • Handle: RePEc:kap:jrefec:v:30:y:2005:i:3:p:245-265
    DOI: 10.1007/s11146-005-6406-y
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    References listed on IDEAS

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    1. 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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    7. Bar-Ilan, Avner & Strange, William C., 1996. "Urban Development with Lags," Journal of Urban Economics, Elsevier, vol. 39(1), pages 87-113, January.
    8. Anas, Alex, 1978. "Dynamics of urban residential growth," Journal of Urban Economics, Elsevier, vol. 5(1), pages 66-87, January.
    9. 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.
    10. 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.
    11. Grenadier, Steven R, 1999. "Information Revelation through Option Exercise," Review of Financial Studies, Society for Financial Studies, vol. 12(1), pages 95-129.
    12. 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.
    13. 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 209-223, June.
    14. 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 637-654, May-June.
    15. 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 1653-1679, December.
    16. Titman, Sheridan, 1985. "Urban Land Prices under Uncertainty," American Economic Review, American Economic Association, vol. 75(3), pages 505-514, June.
    17. Capozza, Dennis R. & Li, Yuming, 2002. "Optimal Land Development Decisions," Journal of Urban Economics, Elsevier, vol. 51(1), pages 123-142, January.
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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.
    2. Gang-Zhi Fan & Zsuzsa Huszár & Weina Zhang, 2013. "The Relationships between Real Estate Price and Expected Financial Asset Risk and Return: Theory and Empirical Evidence," The Journal of Real Estate Finance and Economics, Springer, vol. 46(4), pages 568-595, May.

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