Geography, Regulation and the Value of Land

Most analyses of the determinants of land prices in urban areas make inferences from data on housing transactions which combine payments for land and long-lived improvements. In contrast, this study utilizes a large sample of market transactions on unimproved land in a major US metropolitan area to investigate directly the determinants of urban land prices. Using all land transactions in nine counties in the Bay Area during the 2000-2009 period, we investigate the link between the physical access of sites, their topographical characteristics, and the prices of vacant land on those sites suitable for development for residential or nonresidential uses. We investigate in detail the link between variations in the quality of public services available in different parts of metropolitan areas and the price of raw land. Most importantly, our analysis documents the powerful link between variations in the regulatory environment within a metropolitan development and the prices commanded by unimproved land as an input to residential or commercial development