Cities and the Urban Land Premium

Cities and the Urban Land Premium

Henri L.F. de Groot, Gerard Marlet, Coen Teulings and Wouter Vermeulen

After a long period of suburbanisation, cities have been in vogue again since the 1980s. But why are people prepared to spend far more money on a small house in the city than on a large house in the countryside – and why doesn't this apply to all cities? This book shows that the appeal of the city in the 21st century is not only determined by the production side of the economy, but also by the consumption side: its array of shops, cultural activities and, for example, an historic city centre. All these factors not only translate into land prices that are worlds apart but, in terms of production, into different wages for urban and rural citizens. This book maps out these differences.

Chapter 1: The resurrection of the city

Henri L.F. de Groot, Gerard Marlet, Coen Teulings and Wouter Vermeulen

Subjects: economics and finance, urban economics, urban and regional studies, cities, urban economics

Extract

Great cities are not like towns, only larger. They are not like suburbs, only denser. Jane Jacobs, 1961. Cities are as old as the road to Jericho. People tend to go where others are. That is where they can benefit from the merchandise that others have to offer and from the many opportunities to build a network, find jobs, exchange knowledge and ideas or seek a marriage partner. The geographical space is, therefore, not neutral. Activity concentrates in certain locations creating spiky economic landscapes. Due to the concentration of activity, those locations are appealing and the land is expensive. The price of land is the best measure of the attractiveness of such locations, and hence for the excess value of urbanisation. The concentration of people in a certain location makes cities one of the most important targets for politics and public policy. After all, there are external effects: the well-being of city dwellers is inextricably linked to their neighbours’ presence and activities. Therefore, they must mutually agree. That requires a complex form of political decision making.