Urban Economics
Cities do not grow by accident. Every subdivision, skyscraper, and empty lot is the direct result of economic incentives shaped by zoning law.
Core Principle: Land as a Call Option
Undeveloped land near a growing city functions like a financial call option. When cities artificially restrict density via zoning, they increase the strike price of this option, causing leapfrog development and sprawl.
Market Failures in Planning
| Intervention | Intended Effect | Actual Economic Result |
|---|---|---|
| Rent Control | Protect existing tenants | Reduces new supply; incentivizes condo conversion |
| UGBs (Urban Growth Boundaries) | Prevent sprawl | Spikes central land values; requires upzoning to maintain affordability |
| Parking Minimums | Ensure street parking availability | Subsidizes cars; raises commercial rent by 15-20% |
Frequently Asked Questions
- Does upzoning decrease property values?
- No. It increases the underlying land value (by allowing more intensive use) while decreasing the per-unit cost of housing.
- Why do developers only build 'luxury' housing?
- Because fixed costs (land, permitting, impact fees, parking mandates) are so high that only high-margin units pencil out financially.
Explore Land Value Capture or calculate impacts with the FAR Calculator.