The Holdout Problem, Urban Sprawl, and Eminent Domain

Abstract

Developers attempting land assembly often face a potential holdout problem that raises the cost of development. To minimize this extra cost, developers will prefer land whose ownership is less dispersed. This creates a bias toward development at the urban fringe where average lot sizes are larger, resulting in urban sprawl. This paper examines the link between the holdout problem and urban sprawl and discusses possible remedies, including the use of eminent domain for urban redevelopment.

Keywords: eminent domain, holdout problem, urban renewal, urban sprawl

JEL Classification: K11, R14, R52