FIN3351_Ch.4_Notes

FIN3351_Ch.4_Notes - Chapter 4 Government Controls and Real...

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Chapter 4: Government Controls and Real Estate Markets I. The Power of Government Regulate Land Use o Monopolies, Externalities, and Other Market Distortions Monopolies – misallocate resources by overpricing goods and services and producing less output than is efficient from society’s view; very costly to establish competition with monopolies (ex: city transportation, water, and sewer systems). Externalities – aka “spillover effects”; the unintended and unaccounted for consequences of one land user upon others. Can be positive and negative: Positive – beneficial effects on property value, quality schools, etc. Negative – pollution, traffic congestion, crowding of schools, etc. Urban Sprawl – development taking place in rural areas well beyond the urban fringe (“leapfrog” development). More Market Failures: Incomplete information – buyers unaware of structural risks of hurricanes, etc. Uncertainty of Residential Values II. Public Planning for Land Use Control o Comprehensive planning Comprehensive plan – a general guide to a community’s future growth and development. Growth management laws at the state level require local laws to meet certain requirements: Local jurisdictions (counties/parishes and cities) must have comprehensive plans summited and approved by a state agency Proposals for large-scale developments must be accompanied by economic and environmental impact statements (studies) that analyze the project’s effect on surrounding areas. Further development at local level must be prohibited unless adequate infrastructure are in place Local governments must include affordable housing allocation in their comprehensive plans Comprehensive Planning as a Solution to Market Failure Project future population growth Determine requirements for water and waste disposal
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Project needs for public services (utilities, streets, etc.) Projected demand for various land uses (public, residential, nonresidential, etc.) Design compatible arrangement of needed land uses (land use map) Urban planning is needed for Traffic management, Schools, and Other Services Traditional vs. New Urban Planning – Traditional planning Separate land uses
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FIN3351_Ch.4_Notes - Chapter 4 Government Controls and Real...

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