Eric J Heikkila Ch 3 and 4

The Economics of Planning
Eric J Heikkila
Center for Urban Policy Research - CUPR Press 2000 (2007)

Ch 3 and 4

Ch 3

The Economics of Housing

*see photocopy for detailed notes)


Housing as a stock and a flow. Distinction between asset and the accommodation services that can be derived from it.

Housing affordability best achieved by encouraging additional supply eg removing controls

Rent controls can actually lead to price increases as it increases demand but supply doesn’t move so some pay more (those who can afford).

Cost of subsidizing homeownership exceeds benefits

Ch 4
The Economics of Urban Structure

Pkanners affect real estate markets in two ways: first via zoning bylaws and other land use regulations that define the limits placed on landowners. Second, more indirect, planners intervene and shape the overall urban context in various ways

Bid rent curve
Different types of land use value distance to CBD differently, which results in successive rings of land use, with commercial in inner ring, and industrial and residential rings further out

Substitution principle: more expensive land used more intensively


From Wikipedia
The bid rent theory is a geographical economic theory that refers to how the price and demand for real estate changes as the distance from the Central Business District (CBD) increases. It states that different land users will compete with one another for land close to the city centre. This is based upon the idea that retail establishments wish to maximise their profitability, so they are much more willing to pay more money for land close to the CBD and less for land further away from this area. This theory is based upon the reasoning that the more accessible an area (i.e., the greater the concentration of customers), the more profitable.

Land users all compete for the most accessible land within the CBD. The amount they are willing to pay is called "bid rent". The result is a pattern of concentric rings of land use, creating the Concentric zone model.
It could be assumed that, according to this theory, the poorest houses and buildings will be on the very outskirts of the city, as that is the only place that they can afford to occupy. However, in modern times this is rarely the case, as many people prefer to trade off the accessibility of being close to the CBD, and move to the edges of the settlement, where it is possible to buy more land for the same amount of money (as Bid Rent states). Likewise, lower income housing trades off greater living space for greater accessibility to employment. For this reason low income housing in many North American cities, for example, is often found in the inner city, and high income housing is at the edges of the settlement.