Optimal Density for Municipal Revenues

Adesoji Adelaja and Malika Chaudhuri

No 9779, 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: The distribution of lot sizes and associated improvements affect property values. Hence, zoning affects municipal property tax revenues. If optimal lot size is inconsistent with the targeted zoning density in a community, municipal revenue can be increased through zoning change. This paper theoretically derives the optimal lot size that maximizes tax revenues as a function of the elasticities of improvement value and lot size prices with respect to density, and the elasticities of land and improvement demand with respect to lot size. Empirical hedonic pricing model estimates for a Michigan Community suggest that the optimal lot size for recently sold property is lower than current zoning on existing properties. The possibility that municipal revenue can be enhanced through greater zoning density hints of a cost associated with exclusionary zoning. Local units of government should therefore more seriously consider the fiscal implications of their zoning decisions as they pursue growth control.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 36
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea07:9779

DOI: 10.22004/ag.econ.9779

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