The Economics of Land Use Change: Advancing the Frontiers

The pace and pattern of land use change in the United States drives many communities to demand new policies due to both the environmental and fiscal impacts associated with the increasing urban and suburban landscape as well as questions of food security and global climate change resulting from the loss of farm and forest land. Between 1982 and 1997, U.S. population grew by 17 percent, while total urbanized land area grew by 47 percent (Fulton et al. 2001). However, the total amount of resource land lost is not the only concern to society: the location, distribution, and pattern of the land use change also matter. The pattern of land use determines the local government costs of providing infrastructure such as roads, schools, sewer, water, and other public services; the amount and type of nonpoint source pollution into water bodies; loss of farmland, forest, habitat, and other open space amenities; how much time people spend commuting—commute times have increased and contributed to negative air quality as well as to global climate change; and ecological effects including hydrological disturbances and habitat fragmentation. In addition, the amount of land converted per each person for new housing has been trending upward—almost doubling in the past 20 years. Since 1994, housing lots greater than 10 acres accounted for 55 percent of total land developed in the U.S. (Heimlich and Anderson 2001). Understanding the threshold impacts of different patterns—whether they relate to the percentage of impervious surface in a watershed, the impacts of and alternatives to achieving TMDLs (total maximum daily loads), or the number of acres of interior forests—has also become more important, but these threshold impacts are difficult to analyze given the modeling methods currently available. Numerous local, state, and federal regulations have the potential to affect land use patterns. Land use planning and regulation are usually functions of state and local governments, traditionally performed through zoning regulations and subdivision ordinances, as well as other related land use tools such as adequate public facilities ordinances, differential development fees, urban growth boundaries, and public provision of water and sewer. Local governments can also use market mechanisms such as transferable development rights to create incentives for development to occur in specific regions, or they can explicitly buy parcels of remaining open space. In addition, federal government activities can indirectly affect land use patterns. These include the allocation of resources for the transportation network and the deductions of mortgage interest and property taxes in the federal income tax code. However, in many cases, government policies can result in unintended consequences on the spatial pattern of land use and land use change, as they are not always implemented specifically to affect this pattern. Given these as motivating policy issues, spatially explicit economic modeling focusing on the pattern of land use change has increased dramatically in recent years, with advances in theoretical modeling as well as with innovations in methodology. Empirical advances have been facilitated by the availability of spatially explicit social science data. Applied economists have become increasingly interested in these issues as the availability of spatial data (remotely sensed data, such as satellite data, as well as other geo-referenced _________________________________________