Redefining the City: An Empirical Analysis of Land Assembly

Abstract

Parcels are the fundamental building block of metropolitan areas. A parcel is a legally-defined, individually owned piece of land, the shape of which is determined by regulations and builder choices at the time of development. Once set, parcel delineations are typically quite persistent. Legal constraints, the presence of long-lived public and private capital set to parcel boundaries, and fragmented ownership all make alterations difficult. Parcel rigidity has important consequences because metropolitan evolution almost always renders the existing parcel structure suboptimal. Fundamental changes in the boundary, shape, density and use of urban areas typically cannot occur without changes in the delineation of parcels. Cities expand by subdividing large parcels at the urban fringe into smaller ones for homes. In built areas, cities generate greater commercial or residential density by assembling small parcels into larger ones. Thus, understanding changes in the delineation of land ownership is central to our understanding of urban form and the economic activity it generates. Theoretical economists have also been interested in the problem of land assembly as one of the chief mechanisms through which already developed land may be put to denser and more productive uses. Despite this theoretical interest, to the best of our knowledge there is no published empirical work on private market land assembly. Given the fact that the delineation of parcels is central to our understanding of urban areas, and given that we know virtually nothing about how such delineations change over time, our first goal in this project is to provide stylized facts about land assembly. How frequent is land assembly? Where does it occur? Is it equally important for residential and non-residential changes? Our second goal in the project is to assess how consistent observed patterns of land assembly are with several different theoretical conjectures. The filtering literature suggests that properties near the end of their lifecycle should be most likely to be re-developed. The holdout literature suggests that the last parcel to be assembled in a group should be the most expensive, and that properties that are smaller should cost more. We test these conjectures using 10 annual cross sectional observations of the roughly 2.4 million parcels in Los Angeles County joined by a special file that delineates all changes in parcel numbers. This allows us to exactly identify individual pieces of land legally combined into larger plots or broken into smaller plots. Across the 10 years of our sample, an average of 2,000 properties per year are assembled into new plots.