Timing of Urban Residential Land Development

摘要

This paper focuses on the timing of urban residential land development and presents a dynamic model of the process in a city with a supply of land which is fixed by law or geography. The development process is described as the product of decisions made by occupants, builders, and landowners. The model also assumes that all residential construction is undertaken by a competitive homebuilding industry and that landowners are the main decisionmakers in the model. Each landowner has an infinite number of development options in terms of the type and time of development. Among properties of the model that are in competitive equilibrium, no development option will be exercised when a more profitable one exists. Thus, all options actually exercised will be equally profitable in a present - value sense. As a result, profit does not begin to accumulate on dwelling units of any type until all units of that type have been constructed. Under conditions specified as regular growth, undeveloped land appreciation is greater than that of developed property of types for which construction continues, which in turn is greater than the appreciation of developed property of types for which construction has already stopped. Cessation among the types of residential development occurs in order of increasing building cost per unit of land. When an ad valorem property tax is imposed, fewer dwelling units of each type exist, but the order of cessation does not change. A survey of the economic literature on this subject, notes, and a list of 14 references are provided.