The Influences of Property Right Restrictions and Rent Seeking on Housing Prices: The Case of Illegal Residential Properties in Commercial and Entertainment District of Taipei City

Under the strict land use regulation, the illegal residential use properties face the risk of being fined and the intensity of law enforcement and the possibility of being legalized will affect their prices. This study examines the influences of property right restrictions and rent seeking behavior on housing price by using the transaction data of illegal residential properties in commercial and entertainment district, Dawan north section, Taipei City. The empirical results show that the price of illegal residential use properties is about 21% discount of legal residential use properties. When Taipei City Government strength its law enforcement, the price discount of illegal residential properties increases to 26%. The empirical results confirm that property right restrictions do have profound influences on property prices, and the price gap between illegal and legal use properties depends on intensity of law enforcement. Since land use regulation and its law enforcement will affect not only the quality of environment, but also the value of property rights, equality among land owners, and government authority. We suggest the governments have a more long-term and comprehensive land use planning and regulation, and a stricter enforcement to avoid speculation activities.