The Dynamic Effects of Open-Space Conservation Policies on Residential Development Density

Recent economic analyses emphasize that designated open-space increases the rents on neighboring residential land, and likewise, the probability of undeveloped land converting to residential uses. This paper addresses a different question: What is the effect of local open space conservation on the rate of growth in the density of existing residential land? The analysis is relevant for exurban development and also for remote lakeshore development, where shoreline development density can rapidly increase over time and open-space policies are often advocated as a way to protect ecosystems by reducing development. A discrete choice econometric model of lakeshore development is estimated with a unique parcel-level spatial-temporal dataset, using maximum simulated likelihood to account for i) the panel structure of the data, ii) unobserved spatial heterogeneity, and iii) sample selection resulting from correlated unobservables. Results indicate that, contrary to the intuition derived from the current literature, local open space conservation policies do not increase the rate of growth in residential development density, and some open space conservation policies may reduce the rate of growth in residential development density. This is consistent with land-value complementarity between local open space and parcel size. Spatially-explicit simulations at the landscape scale examine the relative effects of conservation policies on the time path of development.