Forecasting demand for urban land

Abstract

To this point, the chapters in this volume have focused on land supply. They have addressed issues such as (1) what constitutes buildable land; (2) how environmental constraints, infrastructure and other public policies can affect its buildability; and (3) how to identify land that, though effectively built, can still accommodate new growth through redevelopment. Their assumption has been that there would be some need for a supply of buildable land: in other words, that a demand for buildable land exists. Supply of and demand for buildable land are essentially two sides of the same coin. Assessment of land supply would be incomplete without an assessment of the demand for buildable land. This chapter provides a framework for thinking about the demand for urban land and provides some examples of techniques for estimating that demand. That land use planning should explicitly address the supply of and demand for urban land is not surprising. Land use planning in the twentieth century United States has always been about forecasting and tinkering with market forces. Land development in the U.S. results from market transactions that occur in the context of public regulations. Municipal and regional governments try to anticipate the demands of growth and to supply the serviced, buildable land to accommodate it. In the U.S., planning occurs in the context of markets. Planning for growth and land use means, inevitably, intervening in the markets for land and development. If planners think such intervention will make an urban area better (more efficient, aesthetic, satisfying or fair) for the people who live or work there, they must make some assessment of where the market is likely to go with and without a proposed intervention (e.g., a land use regulation). Any evaluation of public policies to manage growth and land development must consider markets, and the accepted paradigm is basic microeconomics: supply and demand. Consider sprawl, as urban areas across the nation are doing increasingly. Sprawl has been cited by voters in recent political polls as the most serious problem facing regions such as Denver and San Francisco (Pew Center for Civic Journalism 2000). Yet there remains substantial debate about the causes and effects of sprawl, and about the efficacy of alternative strategies to contain or mitigate its adverse consequences. Planning for smart growth requires an understanding of the determinants of demand for urban land, the interaction of demand and supply within urban land markets, and how government intervention affects the operation of these markets. Achievement of public policy objectives for metropolitan areas requires balancing individual and community property rights, local control and regional responsibilities. Consumer choices about location and development within metropolitan areas are responding to available alternatives, prices, constraints and incentives that are heavily influenced by government action within local political and economic structures that have never approximated free markets in the U.S. Moreover, social and environmental externalities within urban markets for land and transportation, natural monopoly in the provision of some public infrastructure and services, and concerns regarding the equity of various market outcomes have long provided a basis for market intervention through planning, regulation and infrastructure provision. In short, policy makers, planners and the public must better understand the nature of market demand and supply of urban real estate if they hope to improve the public policies that intervene in those markets. This chapter has two aims that shape its organization. The first is to present an understandable framework for exploring the nature of demand for urban land, including its interaction with land supply and the effects of governmental interventions in urban land markets. The second is to assess techniques based on the framework for use in planning to achieve growth management goals. We do not extensively review the literature on the factors influencing demand for specific types of real estate. Rather, we focus on the requirements for a useful analytical approach, and provide an example to illustrate the application of the framework. © 2008 Springer Science+Business Media, LLC.