From vacancy to verdancy? The impact of land options on the timing of vacant lot investment

Abstract

Land vacancy is a persistent phenomenon leading to various socioeconomic issues in postindustrial cities. We examine the relationship between the timing of vacant lot investment and land options and compare two investment options using a quasi-experimental design: housing investment that develops vacant lots into housing, and greening investment that converts vacant lots into gardens and reserves redevelopment options. By compiling a unique lot-level time-to-event dataset based on a large-scale vacant lot greening program in Philadelphia, we address the questions of whether and how introducing the option of greening investment to vacant lots can expedite initial investment and reduce vacancy. With the greening option, initial investment on vacant lots becomes less irreversible, thus reducing time in vacancy by 50% and elevating the hazard rate of investment by 80%. We test for the presence of the real options channel, identifying a decelerating (accelerating) effect of price uncertainty (price growth rate) on the timing of housing investment and insignificant effects of the factors on the timing of greening investment. Our findings suggest that vacant lot greening as an anti-blight strategy is more effective to expedite investment in neighborhoods with elevated uncertainty, subdued growth rate, moderately lower income, and heightened vacancy.