GROWTH CONTROLS AND LAND VALUES IN AN OPEN CITY

As a result of rapid regional population growth, many cities in the US have employed growth controls in an effort to divert unwanted extra residents to other areas. The purpose of this paper is to analyse the impact of growth controls in an open-city model. It shows that the effect of growth controls on the value of land differs between developed and undeveloped areas. Typically, the imposition of growth controls in developed areas has a positive impact on house prices, firstly by creating an excess demand for existing homes and secondly, by improving communities "quality of life' largely due to less over-crowding. With regard to undeveloped areas, the model shows that, contrary to previous literature, growth controls may raise the value of undeveloped land in some locations, due to a rise in urban rents as a consequence of lowering the city's population growth path. The paper also identifies total property value as an appropriate welfare measure, with consumer utility as an exogenous factor which is maximised when land value yields the highest returns to landlords. The analysis shows that a very tight growth control policy may reduce welfare by lowering the total value of the land from that which it was before the control was imposed. -after Author