Are current cities dense enough? a case study for the Netherlands

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One of the main predictions of urban economic theory is that the density of land use reacts to the price of land. For many activities, substitution between land and built-up structure is possible when land is scarce, often by constructing more square meters of floor space on a given amount of land. In recent decades, interest in living and working in (big) cities has increased markedly and urban land prices have increased substantially. Since it appears unlikely that the cost of construction of square meters of floor space has increased much or more than land prices, one expects that optimal land use is now denser than it was in the past. This seems to be confirmed by recent observations of densification in Dutch urban areas. Density of urban areas has implications for traffic, energy use, the total size of the urban area and agglomeration benefits in consumption and production. The sluggish response to higher land prices that is associated with durable real estate and significant adjustment costs probably implies that actual cities are less dense than would be optimal.

For this research a spatial model is developed that offers the possibility to systematically investigate the issue of densification. It compares the density of current and alternative uses in the Netherlands. Alternative uses are calculated using for this research constructed hedonic price indices (based on roughly 70% of all house transactions in the Netherlands), construction costs and demolition costs. Analysis of past changes in land use, using information of the relevant prices and construction costs offers the possibility to consider the conditions under which a switch to higher density takes place as well as the ‘jump’ in density that may occur. This offers insight into the speed with which the adjustment to higher density takes place. Moreover, the results provide an important ingredient for a general equilibrium analysis of the way the city would look like if adjustment would be complete. In this analysis it is taken into account that in the rebuilt city more households can live and more workers can be employed in a square kilometre, which implies that with the same population and employment size the city can be smaller. This implies that prices of existing real estate at the current edge of the city will adjust in the absence of population growth, thereby counteracting further densification.
Original languageEnglish
Publication statusPublished - 31 Aug 2018
Event58th Congress of the European Regional Science Assocation : Places for People - University College Cork, Cork, Ireland
Duration: 28 Aug 201831 Aug 2018


Conference58th Congress of the European Regional Science Assocation


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