Landownership and Welfare Impacts of Zoning Regulations
In Chapter 3 we have proposed a basic model of residential land use, called an α-landownership model, in which a group of city residents is assumed to own the circular area from the CBD up to a radius α. In this model, it was assumed that there are no urban externalities. In reality, however, since a city is a place where a large number of people reside in close quarters, this concentration of people causes various kinds of externalities such as crowding externalities, racial externalities, and traffic congestion.1 In this chapter, we focus on crowding externalities. In order to remedy crowding externalities, mast cities practice various forms of land use regulations. These regulations are implicitly assumed to improve the welfare of residents in these cities. In practice, however, it is often unclear how much each group of residents gains from a specific measure of land use regulation. Since an effective regulation will improve the efficiency of the land market in the city, it will generally increase the land rents in the city. Then, we can conjecture that the welfare effect of a regulation on each specific group of residents will crucially depend on whether they have land in the city. In particular, if the benefits of a regulation are mostly internalized into land rents, then residents without landownership may gain little from the regulation or even become worse off. If so, then city planners must be careful in evaluation of the impact of land use regulations on various groups of city residents.
KeywordsUtility Level Urban Economy Land Rent Land Market Zoning Regulation
Unable to display preview. Download preview PDF.