How responsive is the demand for residential land to changes in its price?

Richard Voith's estimates help measure the effect of public policies on land consumption in the United States.Land use

The suburban housing market: the effects of city and suburban job growth

How does the location of new jobs in a metropolitan area affect the suburban housing market? Does it matter whether job growth occurs in the city or in the suburbs? And who, if anyone, benefits from job growth? Dick Voith takes a look at housing prices and construction rates in some Philadelphia suburbs to determine the impact of employment growth on the value of real estate assets.Employment (Economic theory) ; Housing ; Philadelphia (Pa.)

Does the federal tax treatment of housing affect the pattern of metropolitan development?

The U.S. tax code allows home owners to deduct mortgage interest and property taxes on their federal income tax forms. It also gives special treatment to the capital gains realized from the sale of owner-occupied housing. These advantages encourage investment in owner-occupied housing. But do these tax breaks have other, more far-reaching consequences? In this article, Dick Voith looks at how the tax code's special treatment of owner-occupied housing may affect metropolitan developmentHousing - Finance ; Metropolitan areas - Statistics ; Taxation

The downtown parking syndrome: does curing the illness kill the patient?

Consumers and businesses alike cite the lack of free parking as one of the major problems associated with working, playing, and shopping downtown. A shortage of parking spaces can also lead to higher prices for those parking slots available as well as violation of parking ordinances by frustrated citizens. In light of widespread concerns about parking downtown, should large cities adopt policies to encourage more parking in a central business district (CBD), or should they improve public transit as an alternative to driving? Cities must consider many factors before answering such questions. Effective parking policies must strike a balance between convenient parking and maintenance of the dense urban fabric that makes the CBD uniqueCities and towns ; Local transit ; Philadelphia (Pa.)

Transportation investments in the Philadelphia metropolitan area: who benefits? Who pays? And what are the consequences?

In this paper, the author examines the geographic distribution of transportation investments as well as the question of who pays for the investments in the Philadelphia metropolitan area, focusing on differences between the city and its surrounding Pennsylvania suburban counties. The author presents estimates of total, per capita, and per user benefits of highway investments, as well as fees generated by highway users at the county level. The author also examines the combined highway and transit investments in the suburbs as a whole and in the city. ; There are three central findings in this analysis: (1) Highway capital expenditures in the Greater Philadelphia region are significantly higher on a per capita basis in the Pennsylvania suburbs than in the city of Philadelphia. Over the 10 years from 1986-1995, expenditures benefiting suburban residents are estimated to be $1041 per capita, about 2.5 times as large as those benefiting city residents, which were$424 per capita. (2) Total highway user fees generated differ significantly across communities because of different auto ownership rates. Users fees do not, however, have differential effects on the attractiveness of communities because the user fees that individual drivers pay are the same across communities. (3) The per user differences between Philadelphia and its suburbs are smaller than per capita differences. Per user differences affect the degree to which car travel is favored in the city versus the suburbs, but it does not capture the location effects of investment in transportation infrastructure. ; The difference in per capita expenditures is likely to have a significant effect on the competitive position of the city of Philadelphia relative to its suburbs. Highway investments have provided an economically significant, although not overwhelming, incentive for suburban rather than city locations for people and firms. The author estimates that the highway investment differential reduces employment in the city by about 40,000 jobs.Local transit ; Philadelphia (Pa.)

Has suburbanization diminished the importance of access to Center City?

Nine years ago, the Business Review examined the role that access to Center City Philadelphia played in people's choices about where to live and how to commute. Using 1980 census data, that analysis concluded that access to Center City by both car and public transportation shaped people's choices in important ways. But since 1980, the Philadelphia metropolitan area has undergone a great deal of change, including a decentralization of both population and employment. In this article, Dick Voith revisits the questions first posed almost a decade ago to see how employment and population shifts influenced people's choices in the 1990s.Cities and towns ; Philadelphia (Pa.)

The tax treatment of housing: its effects on bounded and unbounded communities

This paper examines the potential impact of the federal tax treatment of housing, which provides tax advantages that increase with income and house value, on the pattern of development in U.S. metropolitan areas. The authors argue that the tax treatment of housing is likely to have impacts on older, developed communities with fixed boundaries, such as central cities, that differ from those on suburban areas, where there is an elastic supply of land. Using simple analytic models, the authors show that the tax treatment of housing not only increases the incentives for lower density development, but it also provides incentives for increased sorting of high- and low-income households into separate communities. Given the very large magnitude of the annual subsidies to housing ($65 billion) and the fact that these subsidies accrue to a relatively small share of home owners, the authors believe that the impact of these subsidies on the pattern of metropolitan development is potentially very important.Housing ; Taxation

Capitalization of federal taxes, the relative price of housing, and urban form: density and sorting effects.

The authors investigate the impact of the tax treatment of owner-occupied housing on urban form in an economy in which high- and low-income households choose among city and suburban communities. Because housing tax policies differentially affect the relative, after-tax price of housing for high- and low-income households, and because the extent of capitalization of housing tax policies can differ across city and suburban communities, their analysis finds that housing tax policies can affect not only the density of the metropolitan area, but also can influence where rich and poor households choose to live.> > The authors also show that the impacts of housing tax policies differ depending upon whether land use constraints such as suburban large lot zoning exist. If there are no land use constraints present, increasing a subsidy to home ownership that is positively correlated with the income of the owner tends to lead to the decentralization of both rich and poor, although there are conditions under which the rich would choose to concentrate in the central city. The ambiguity of the effect on the choices of high income households suggests that impacts of the federal tax treatment of housing may differ across metropolitan areas.> > In the presence of binding large lot zoning in the suburbs, the rich have a greater incentive to decentralize while the poor are constrained to the city. Thus, housing tax policy that affects the relative price of land differentially for the rich and poor could have helped exacerbate the intense residential sorting by income that we see in many parts of the United States. Importantly, our analysis of community choice is not driven by different preferences for city or suburb that may be associated with the income elasticity of housing demand. Rather, it results from changes in relative after-tax housing prices faced by poor and rich households. Determining the empirical relevance of prices versus preferences in this matter should be an urgent task for future research.Housing ; Taxation

Does the U.S. tax treatment of housing promote suburbanization and central city decline?

This paper examines the role of U.S. housing-related tax expenditures in creating incentives for decentralization and encouraging residential sorting by income and central city decline. Tax expenditures associated with the deductibility of mortgage interest and property taxes make housing less expensive relative to other goods and, hence, increase the quantity of housing and residential land purchased and lower the density of urban areas. Because the tax expenditures increase with income and the consumption of housing services, they lower the cost of geographic sorting by income typically associated with exclusionary zoning and other land- market imperfections. A direct consequence of this sorting process is that housing-related tax expenditures are concentrated in communities with the highest incomes and house values. These effects do not arise simply because of housing-tax policies alone, but rather from the interaction of these policies and other factors that affect local real e state markets, such as zoning or fixed housing capital stocks. Three models are developed to formally analyze these issues. In the authors' base case model in which there are no land-use constraints and local amenities are fixed, tax deductions related to home ownership result in population decentralization within the metropolitan area and a less dense central city, but do not induce sorting by income. Moreover, land prices in the city increase because the subsidy increases the aggregate demand for housing in all communities. Thus, the mere presence of the federal housing tax expenditures increases decentralization, but cannot generate America's patterns of income sorting and central city decline. These conclusions change in an important way in the authors' second model in which a land-use constraint, such as the type of minimum lot-size zoning prevalent in the suburbs, is introduced. In this case, the housing subsidies foster the separation of the rich from the poor. Inco me sorting results, and consequently, there is an increasing concentration of the poor in the central city. However, there still is no weakening of prices in city land markets in this model. The third and final model endogenizes the production of local amenities in the sense that they are made an increasing function of community income. In this case, three characteristics common to American urban form result: population decentralization within the metropolitan area, increased concentration of the poor in the urban core, and weak city land markets. These results indicate that America's current urban form reflects, at least in part, incentives arising from the interaction of the national tax and local zoning systems, rather than unique American tastes for low-density living environments.Cities and towns ; Housing ; Taxation

Risk and return within the single-family housing market

The trade-off between risk and return in equity markets is well established. This paper examines the existence of the same trade-off in the single-family housing market. That market is dominated by homeowners, who constitute about two-thirds of U.S. households. For them the choice about how much housing and what house to buy is a joint consumption/investment decision. Furthermore, owner-occupied housing is by nature a lumpy investment whose risk cannot be completely diversified. Does this consumption/investment link negate the risk/return trade-off within the single-family housing market? Theory suggests the link still holds. This paper supplies empirical evidence in support of that theoretical result.Housing