New paper compares sales of individual parcels of land to sales of plots that are immediately assembled into bigger aggregate parcels used for building higher density buildings, like high-rise apartments. Controlling for amenities like distance to a highway and access to commuter rail, the authors find that soon-to-be-assembled parcels sell for 35-40% more than similarly situated individual parcels in the same neighborhood.
Why?
The 40% price differential means that it is not possible to turn individual parcels into soon-to-be-assembled parcels for one of two reasons:
1. Zoning, like that in Sweden where residents can veto new development plans, makes it difficult, if not impossible, to assemble bigger individual parcels into plots of land (on which higher density apartments can be built).
2. The hold out problem, where owners of individual parcels of land hold out in expectation of a better offer. This is a type of "free riding," that can be analyzed as a prisoners' dilemma.
Either or both of these problems could account for the premium on land that can be assembled into larger parcels.
HT: Marginal Revolution
The hold out problem is currently occurring in Oxford, MS. Demand for off campus student housing & weekend condos has skyrocketed, but the land to build them on is running out quickly. There's also a law that buildings can't be taller than the Courhouse Square, which is the epicenter of the town, so that limits the capacity of housing in that area.
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