Effects of an Urban Growth Management System on Land Values

These examples of three of the best known and oldest growth management systems illustrate that, at both the metropolitan and submetropolitan level, a general effect of such systems can be to segment land markets into developable and undevelopable portions. Whether the system utilizes fixed growth boundaries, quotas or adequate facilities ordinances, the effect is essentially the same-primarily because of the addition of timing to the traditional controls dealing with type and location of development. Not only is timing important in itself, but it also tends to strengthen the traditional land use controls by increasing the difficulty of using them flexibly. We would expect that this segmenting of the land market would lead to a divergence in land prices between the developable and undevelopable portions. We would further expect that the undevelopable portion would retain land values in line with those of other land in undeveloped uses. Similarly, we would expect that as demand for developable land increased, prices in the developable portion would parallel those of land in comparable uses elsewhere in the market. This divergence in land prices between the two portions would occur only to the extent that the growth management system retains its credibility, that is, to the extent that there is an expectation that the land in the undevelopable portion indeed will not be developed for some time.
Finally, we would expect that the public restrictions on the supply of developable land would cause prices in the developable portion not only to diverge (due to difference in use value) but actually to increase somewhat. The amount of the increase would depend on the degree of restriction-whether severe or mild, and whether applied to the whole market or to only part of it. The amount of increase would also, of course, depend on demand conditions.

Michael E. Gleeson

Land Economics

August 1979

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