Urban Land Values and Urban Form Lecture 3 Urban Land Values and Urban Form

Productivity and Value The more productive land is, the more price and rent it will generate Transportation costs are a major factor affecting productivity and, therefore, value of land Gas Public Transportation Insurance Capital Costs (purchase costs and real depreciation) Time

Urban Form Physical spatial characteristics of a city How big is the city spatially? What is the overall density and geographical dimensions? How does this density vary across different parts of the city? What are the patterns of the locations of different land uses? Where do high-income and low-income neighborhoods tend to locate?

Variations of Urban Form Steep urban form with central focus of intense land use and value Sprawled urban form with multiple focus points and even more land values Value

Factors Influencing Spatial Patterns The higher transportation costs are for a market as a whole, the steeper will be the land value gradient over space away from centers of economic activity. The more populous a given region and the more concentrated the supply of land from natural or political regulation, the higher the value of useable land. The more productive any given user of space, the more rent the user can pay.

Factors Influencing Spatial Patterns In competitive markets, more efficient and productive users of space will need to pay excess profits in order to outbid other users. Land captures all of the residual productivity through rents or prices.

Factors of Production Land Labor Capital Raw Materials

Residual Theory of Land Value Land is only Factor of Production that is fixed in location—it cannot be moved Value of labor, capital, and raw materials are derived first, as these factors are mobile (could be worth more elsewhere) Rent is paid from remaining revenue after mobile factors are paid respective market costs

Residual Theory of Land Value Revenue $10,000,000 Less: Raw Materials ($4,000,000) Less: Payroll ($5,000,000) Less: Cost of Physical Capital ($900,000) Profit After Mobile Factors $100,000

Transportation Costs and Land Value Major differences in land value from one location to another are differences in transportation costs Energy Costs Maintenance and Capital Costs Time Costs

Monocentric Cities Land Value is Highest CBD

Multicentric Cities Land Value is Highest NBD CBD NBD

Lecture 3 Urban Sprawl

Problems with Land Sprawl Traffic congestion and longer commute time Auto pollution Lost green space and farmland Deterioration of the central city Concentration of poverty and unemployment Low-quality city schools Loss of community General economic inefficiency Disregard for nature

Growth of Suburbs Increase in number of cars Interstate system has decreased travel time Zoning Changes

Government Problems with Suburban Growth Governmental and public services of the central city are usually not decreased in line with fewer residents. Middle- and upper-income populations have largely left the central urban core, placing most purchasing power in the suburbs Traffic congestion from highways connecting CBD to suburbs, increasing transportation costs

Lecture 3 “Smart Growth”

Smart Growth Planning concept that calls for more compact and transit-oriented development Developed in 1990’s and early 2000’s Aims at curbing sprawl, which is “spreading out the population away from an older central city core along with reduction in density of households”

Market Solutions to Traffic Congestion and Pollution Increases in permitted building heights and density within all neighborhoods Municipalities to encourage walkable communities with flexible mixed-use zoning clusters Reduction in air pollution