ECON413 UMASS Week 5 Urban Economics and Space Amenity Questions Response Exercise 4.1 Suppose that landowners have the power to restrict , the distance to

ECON413 UMASS Week 5 Urban Economics and Space Amenity Questions Response Exercise 4.1 Suppose that landowners have the power to restrict , the distance to the edge of the city, in order to increase the land rent they earn. Suppose that, with no restriction, the urban land rent function is given by r = 100 – x, where x is distance in blocks to the CBD. Suppose that agricultural land rent rA is equal to 20. (a) Compute in the absence of any restriction by landowners, and illustrate your result in a diagram. Now suppose that landowners can restrict to a value of 65 blocks. When they impose this restriction, the urban land-rent curve shifts up, with the new rent function given by r = 105 – x. (b) Show the new land-rent curve in your diagram, and indicate the area corresponding to the land-rent loss resulting from the restriction, as well as the additional area showing the land-rent gain. (c) Compute the sizes of these areas, and compute the net gain or loss in land rent from imposing the restriction. Is the restriction beneficial to the landlords? Will it be imposed? (Hint: The area corresponding to the land rent gain is a parallelogram, but instead of using the area formula for that type of shape, the area can be computed more easily by multiplying the horizontal length of the parallelogram (65 blocks) by its height.) Now suppose that the landowners can impose a further restriction, with set equal to 50 blocks. When this restriction is imposed, the urban land-rent curve shifts up more, with the new rent function given by r = 110 – x. (d) Repeat (b) and (c). Relative to the original x restriction of 65, is this further restriction beneficial to the landlords? Will it be imposed? (e) If your answer is different from before, explain intuitively why a difference emerges.Brueckner, Jan K.. Lectures on Urban Economics (The MIT Press) (p. 255). The MIT Press. Kindle Edition. URBAN ECONOMICS
ECON 413/613
Professor: Keren Mertens Horn
Office: Wheatley 5-31
E-mail: Keren.horn@umb.edu
Twitter: @kerenhorn
URBAN ‘SPRAWL’
? Definition – expansion of development away from central
urban areas into low -density areas.
? Criticisms:
? Consumes too much agricultural land
? Long commutes generate excessive traffic and air pollution
? Growth at fringe depresses incentive for redevelopment of land closer
to city center
? Low density developments could be causing increased social
isolation
? Sprawl could be leading to increased obesity, as car dependent
lifestyles are more sedentary
? Do these criticisms have merit? Should government or
individuals take action towards reducing sprawl?
REVIEW OF SPATIAL MODEL
? represents distance to edge of the city
? ??
? Rises when city’s population L or income y increase
? Falls when commuting cost per mile t or agricultural rents r a increase
?
? Do these variables really af fect ???
SHOULD WE REGULATE
SPRAWL?
? American cities have grown wider as populations have grown,
incomes have grown and governments have made big
investments in transportation.
? If these ‘fundamental’ forces are driving increased
suburbanization, can we find fault even if consequences are
undesirable?
? One rationale for government intervention is market failure
? When a group of decentralized actors fail to achieve the right
outcomes from society’s point of view.
? Others frame this discussion as ‘natural evolution’ causes for
suburbanization vs. ‘flight from blight’ arguments.
MARKET FAILURE:
URBAN SPACE AMENIT Y
? Open farmland is lost to development when cities expand.
These acres of farmland have an amenity value to society –
lets say each acre of agricultural land yields b benefits to
society. (example of an externality)
? Farmer will rent land to developer when r>r a but society
(represented by ‘social planner’) would want them to consider
r>r a +b
MARKET FAILURE:
URBAN SPACE AMENIT Y
MARKET FAILURE:
URBAN SPACE AMENIT Y
? Policy Solutions?
? Tax on developed land? Will increase cost to farmer of renting land to
developer. If it is exactly equal to b then this will effectively
internalize the externality.
? But do people really care about land at the fringe?
? If not then this policy would increase the cost of housing for all in the
city without increasing consumption benefits.
? This is an empirical question.
MARKET FAILURE:
TRAFFIC CONGESTION
? Congestion externality – presence of single extra car slows
down all the other cars slightly.
? To correct for this externality drivers should be charged a
congestion toll equal to the dollar value of the congestion
costs they impose on other drivers. (more specifics in chapter
5)
? For now just focus on fact that raising commuting costs will
lead to spatial shrinkage of the city.
? Again free market city, which fails to take into account
congestion externalities, is shown to take up too much space.
? Transportation economists have agreed that per mile
congestion charges of 0.17 are appropriate, and that when
appropriate congestion tolls are charged urban size declines
by 10 percent and population densities rise dramatically in
the city center.
WHAT HAPPENS WHEN
COMMUTING COSTS INCREASE?
OTHER DISTORTIONS:
GOVERNMENT FAILURES
? Underpricing infrastructure
? Infrastructure costs may NOT exhibit economies of scale, with farther
sewer lines costing more to service than those in the core.
? If the suburban residents still pay the average cost, even though providing
them services is more expensive, this then raises costs on urban
residents.
? This may make suburban homes look ‘artificially’ cheap encouraging
growth of the suburbs.
? New practices now called ‘impact fees’ which attempt to charge developer
for the additional costs the project will pose on the town.
? Subsidizing homeownership
? Mortgage interest deduction
? Subsidizing drivers
? Gas tax is not large enough to pay for building and maintaining roads
? Subsidizing farmers
? Makes farm land more valuable than otherwise would be – forcing cities to
be more compact
SPRAWL AND BLIGHT
? Claim that allowing excess sprawl leads to abandonment of
core areas creating situations of ‘blight.’
? Extending basic urban model, Brueckner and Helsey (2011)
show that market failures leading to sprawl generate undermaintenance of buildings in the central city.
? Others argue the opposite, that higher-income households
move to suburbs to escape blight. Both are likely true.
URBAN GROWTH BOUNDARY
? This is a quantity mechanism as opposed to a price
?
mechanism – prevents development past a particular ??.
? If properly set an UGB has the same impact as a development
tax on size of city.
? However, if set too high, could impose great costs on
residents (housing that is way too expensive and compact).
CONCERNS WITH UGB
BUILDING HEIGHT RESTRICTIONS
URBAN SPATIAL STRUCTURE
http://sapiens.revues.org/914
REGULATING LAND USE
Zoning!
WHAT IS ZONING?
? Zoning is “the division of a community into districts or zones
in which certain activities are prohibited and others are
permitted.” (Fischel, 1985)
? In each district, zoning codes define what types of buildings
are permitted or prohibited—ex/single family homes only,
permitted commercial uses like a laundromat
? Zoning codes also set limits on the size, bulk and location of
buildings—ex/how high they can be, how far from the curb and
from other property lines they must be set back, and how
much total floor area they can encompass
ZONING EXAMPLE
WHY ZONING?
? Zoning is a way of regulating land uses
? Economists usually suspicious of regulations
? “Blunt Instrument” – unlikely we will set level of regulation
appropriately to get to socially efficient output level
? Usually prefer prices, which can be adjusted towards the true
marginal cost of an activity (including external costs)
? Mechanisms such as taxes
? Ex/Pollution – tradable permits more efficient than regulations
? Under what circumstances may economists support
regulations?
? When health and safety are involved – costs of producing too much
are very high (ex/too many people on a ship)
? When its too difficult/troubling to place a dollar value on external
costs (ex/when changes are durable/irreversible, like destruction of
wetlands)
USE ZONING
? Classic reason for zoning, to separate land uses.
? What is the underlying problem that separating industrial
sites attempts to address?
? Use externalities
? Ex/Zoning out factories
? What are the specifics of this approach?
? Designates a list of allowable uses for particular spaces
? What are the expected market outcomes?
? Depends on whether externalities do in fact exist
USE ZONING
? If externalities are present then it could be ef ficient for the
government to set a zoning boundary.
? If they get the boundary right!
? Problem with using zoning to handle pollution?
? Doesn’t reduce pollution, just moves it around
? Alternatives: Performance Zoning
? City sets performance standards for each zone, polluting firms must
locate in industrial zones, cleaner firms can locate closer to
residential areas
? Encourages abatement because it gives cleaner firms more location
options
APARTMENT BUILDING?
USE ZONING FOR APARTMENTS?
? What is the justification for zoning out apartments?
? Traffic and noise
? Light and air
? Character of area?
? Other motivations usually highlighted
? Fiscal Zoning – since local jurisdictions are funded mostly by
property taxes, they have motivation to zone in uses that will
contribute to the tax base
? Want to attract households who are “fiscally neutral”
? Exclusionary Zoning – existing residents want to keep out different
types of residents from their neighborhood
? May be ways to internalize these external costs rather than
prohibiting them all together
? In practice communities sometimes allow larger developments into
their neighborhood, and charge them a fee – exactions
ZONING AND SPRAWL
? How does zoning af fect the way our cities develop?
? Two sides of the argument:
? Large-lot zoning often blamed as contributing to sprawl
? Zoning in the form of tougher land-use regulations often seen as
saving us from sprawl
? Ex/Growth Controls
INCLUSIONARY ZONING
? Basic premise of most attempts to change zoning to help poor
people has been that exclusion is not a legitimate goal of zoning
? New Jersey Supreme Court Case – Southern Burlington NAACP v. Township
of Mount Laurel, 1983
?Exclusionary Zoning unconstitutional
?Response has been to mandate inclusionary zoning
? Under inclusionary zoning developers are required to set aside a
fraction of the units—often 15 or 20 percent—for sale or rent to
low -income people at below -market prices. In exchange they are
often given density bonuses so that they can build more housing.
? Like development tax – example
? Developer required to build 5 dwellings for lower income households and
loses $10,000 per unit
? This $50,000 cost will be spread across 50 houses, or tax will be $1,000
per unit.
? Cost will be passed onto consumers (housing prices increase) and
landowners (price of vacant land decreases)
HOMEWORK
? Questions from the Text
? Chapter 4 Exercise 4.1
URBAN SPRAWL
NECHYBA AND WALSH
URBAN SPRAWL
NECHYBA AND WALSH
URBAN SPRAWL
NECHYBA AND WALSH
URBAN SPRAWL
NECHYBA AND WALSH
FINAL PAPER – WORK PLAN
? In our groups and as a class we will put together a work plan
for our client projects. Please bring in a signed version of this
work plan for class next week (October 10 th )
1. Write one sentence describing your research question
(questions are OK too – we can send to client).
2. Include the names and contact information for all group
members.
3. Write out outline of final paper.
4. Divide sections and tasks to students in your group.
? Next deliverable will be full MLA or APA citation for 5
academic articles which will form the basis for your literature
review (October 17 th )
FINAL PROJECT OUTLINE
?
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Introduction
Literature (includes complete citations at end of paper)
Theory
Data and sample description
Empirical Approach
Results (will include Tableau tables)
Conclusion

Purchase answer to see full
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