Castro Gomez, Pedro Alfonso (2024) The land value tax against urban sprawl: a real options approach. Master thesis.
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Abstract
Urban sprawl is a pressing issue due to the negative externalities it produces, that result in the general loss of well-being. Ensuring the efficient use of already urbanized land is key to protect unsealed land beyond the urban fringe. Recently, the land value tax (LVT) has gained the attention of researchers due to its potential use as a planning tool for this purpose, yet why its effect on uncertainty and the timing of development has been overlooked seems inexplicable, considering it has been central in other studies investigating the effect of alternative planning tools on development and urban sprawl. The aim of this research is to address this gap in the literature, by conducting an empirical analysis within a real options framework, simulating different LVT rates, and studying the effect of two variables on the timing of development: house price uncertainty because it is an indicator of developers’ knowledge of market conditions and willingness to develop, as well as the sensitivity of vacant land to house price uncertainty as distance from the CBD increases, since it could help determine whether the simulated LVT would accelerate development near the CBD or further away causing urban sprawl. I use property tax roll data from the Duval County Assessor’s Office, which provides appraisals for land and improvements separately. The proposed methodology may allow to study the effects of a LVT without the need for specific case study data with exogenous variation. Moreover, it could be helpful to policy makers who wish to make an ex-ante assessment of the effects of applying a LVT or of making changes in the capital-land tax-base ratio. The results showed that levying a LVT decreased the value of land and therefore also the volatility of land values, which in turn decreased the negative effect of house price uncertainty on the timing of development, increasing the likelihood of immediate development by 0.13%. In practice this would intensify urban sprawl. Yet, additional results showed that after levying a LVT the sensitivity of vacant land value to house price uncertainty increased with distance from the CBD, suggesting that a LVT could help decrease development at the fringe and encourage it in already urbanized areas near the CBD, thus reducing urban sprawl.
| Item Type: | Thesis (Master) |
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| Degree programme: | Spatial Sciences (Research) |
| Supervisor: | Daams, M.N. and Sijtsma, F.J. |
| Date Deposited: | 12 Apr 2024 10:24 |
| Last Modified: | 12 Apr 2024 10:24 |
| URI: | https://frw.studenttheses.ub.rug.nl/id/eprint/4493 |
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