5 ms·
No it isn't. The land cost goes up, because now it's possible to use it for a much more lucrative purpose. This is called the zoning windfall problem. At some
by irq11 11y ago
No it isn't. The land cost goes up, because now it's possible to use it for a much more lucrative purpose. This is called the zoning windfall problem.
At some point, in theory, the greater supply begins to bring down land costs in aggregate, but since real estate pricing is a localized phenomenon, this effect isn't universal.
- VintageCool 11y agoThe original owner gets some money from that windfall. The developers make money by selling 10 units on a lot that used to have a single residence. The new tenants get to live closer to jobs and nightlife and possibly pay less in rent. The city makes more money from property taxes. That seems like a win-win-win-win for everyone directly involved in this growing city.
- AnthonyMouse 11y agoThe land value goes up but not by the full amount. If the land was worth $400K before, with less restrictive zoning it's worth maybe $800K, but then you can build ten units there and the per-unit cost of land is $80K instead of $400K.