UC Riverside

This dissertation addresses two major aspects concerning urban land development. The first is the effect of a floor area ratio (“FAR”) regulation on land values and urban land development patterns. The model shows that holding all else equal, an increase in the stringency of regulation (a lower maximum-allowed FAR) 1) leads to a decrease in land value, even for those parcels where the regulation may not be binding today; 2) lowers the density of all converted buildings; and 3) hastens the development of all buildings. Our empirical exercise then tests certain aspects of this model in the context of New York city, using data constructed from a publicly available source. Second, this dissertation explores the role of market power in urban land development patterns. Utilizing social surplus analysis, we derive and contrast the optimality conditions for a social planner’s and a monopolist’s choice of density of housing and the rate at which land is released for development. We then provide a numerical example and a numerical comparative statics analysis. In our numerical examples, the monopolist always develops at a lower density than is optimal. The rate at which land is released for development, however, will depend on the parameters.