Time is Money: An Empirical Examination of the Effects of Regulatory Delay on Residential Subdivision Development

33 Pages Posted: 23 Mar 2015

See all articles by Douglas H. Wrenn

Douglas H. Wrenn

Pennsylvania State University, Agricultural Economics, Sociology, and Education

Elena G. Irwin

Ohio State University (OSU) - Department of Agricultural, Environmental & Development Economics

Date Written: December 10, 2014

Abstract

Variation in regulatory costs over time and across different types of investment projects creates risk for developers who hold land. These so-called implicit costs, which arise as a result of regulatory delay in the land development process, are hypothesized to be potentially large, but empirical evidence of their influence on development outcomes is limited. Using a unique micro-level data set on parcel-level subdivision development that includes data on the timing of subdivision approvals, we test the effects of implicit costs that arise as a result of increased subdivision approval times on the timing and pattern of residential subdivision development. Consistent with theory, we find that these regulation-induced implicit costs reduce the probability of subdivision development on any given parcel. In addition, we find that systematic variation in regulation-induced implicit costs across space has reduced development in more heavily regulated urbanized areas intended for development and intensified development in less regulated exurban areas located farther away. The results provide a new explanation of scattered, low-density urban development as the result of optimal land development with multiple development options and heterogeneous regulatory costs.

Keywords: Land development, Land Use Regulations, Urban Spatial Structure

JEL Classification: R14, R12, R52

Suggested Citation

Wrenn, Douglas H. and Irwin, Elena G., Time is Money: An Empirical Examination of the Effects of Regulatory Delay on Residential Subdivision Development (December 10, 2014). Available at SSRN: https://ssrn.com/abstract=2583481 or http://dx.doi.org/10.2139/ssrn.2583481

Douglas H. Wrenn (Contact Author)

Pennsylvania State University, Agricultural Economics, Sociology, and Education ( email )

University Park, PA 16802-3306
United States

Elena G. Irwin

Ohio State University (OSU) - Department of Agricultural, Environmental & Development Economics ( email )

2120 Fyffe Rd
Columbus, OH 43210-1067
United States
614-292-6449 (Phone)

HOME PAGE: http://www-agecon.ag.ohio-state.edu/people/display.cfm?User_ID=irwin78

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