Best Land Use with Negative Externalities: Determining Land Values from Residential Rents

Item Type Monograph (Working Paper)
Abstract

The value of land is determined by the locations’ attractiveness and the degree of regulation. When land regulations are binding, e.g. when a restriction on the maximum floor area ratio exists, the best use land price can be directly expressed as a function of the maximum floor area ratio and local amenities. We show theoretically and empirically how this approach can be used to determine land values from residential rents. From our empirical results, we derive two main sources for a monocentric structure of land prices. First, the location attractiveness of centrally located dwellings makes land prices more expensive. Second, as the maximum floor area ratio is high in central areas, the regulation works as a multiplier for land prices and inflates prices accordingly. Our model gives insights into the determinants of urban land prices and provides a useful approach for land appraisal in urban regions where land transactions are scarce.

Authors Füss, Roland; Koller, Jan A. & Weigand, Alois
Language English
Keywords Apartment Rent; Land Use Regulation; Floor Area Ratio (FAR); Land Prices; Monocentric Structure.
Subjects business studies
economics
finance
HSG Classification contribution to scientific community
HSG Profile Area SOF - System-wide Risk in the Financial System
Date 1 April 2017
Publisher SoF - HSG
Place of Publication St. Gallen
Series Name School of Finance Working Paper Series
Number 2017/05
Number of Pages 44
Contact Email Address roland.fuess@unisg.ch
Depositing User Geraldine Frei-Böbel
Date Deposited 03 Apr 2017 14:50
Last Modified 13 May 2019 12:14
URI: https://www.alexandria.unisg.ch/publications/250684

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Citation

Füss, Roland; Koller, Jan A. & Weigand, Alois: Best Land Use with Negative Externalities: Determining Land Values from Residential Rents. School of Finance Working Paper Series, 2017, 2017/05.

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https://www.alexandria.unisg.ch/id/eprint/250684
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