Today’s editorial pages in the Oregonian include an outstanding commentary piece on the economic implications of land use planning on property value and why a Marion County judge rightfully overturned Measure 37. It’s written by two economists who debunk the theory, claimed by pro-sprawlers, that without land use regulations property owners could develop their subdivisions and make a pretty penny. “Not so” say the economists. It is exactly because of regulations that property values go up:

Suppose in the hypothetical example there was demand for 10 new subdivisions, and developers could choose from 100 parcels to build them. With no restrictions, developers need to pay just enough to get 10 landowners to sell. By contrast, what happens when zoning has put all 100 parcels off-limits? First, there is pent-up demand for development, which raises prices. Second, I and all 99 other landowners, along with our appraisers, perceive a lucrative monopoly opportunity. If I alone were given a waiver, I would have developers bidding against each other for my land, further driving up the price to $2 million.

Would mine have been one of the 10 parcels bought by developers in the absence of zoning? An appraiser cannot answer that question. If the answer is no, then the regulation did not reduce my property value. If the answer is yes, an appraisal still cannot estimate what a developer would have been willing to pay for the land.

These considerations are central to the issues surrounding Measure 37. Yet a careful look at the economics shows that a simple appraisal cannot answer them. The court appears to have recognized this.

Now put that into a bumper sticker slogan that everyone can understand!

Check out the entire commentary.

This entry was posted on Tuesday, November 8th, 2005 at 11:13 am and is filed under Economy, Environment, Livability. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.