Evidence of the Effects of Oregon’s Land Use Planning System on Land Prices (Working Paper)

Author(s): Jaeger, William K. with Cyrus Grout, and Andrew J. Plantinga
Publication Date: May 2008

26 pages; Inventory ID WP08WJ1; English


Evidence of the Effects of Oregon’s Land Use Planning System on Land Prices	3.70 MB

Abstract

The effect of land use regulations on property values has long been a topic of interest because of the potential welfare effects, distribution effects, and housing affordability effects. In Oregon, the land use planning system was designed to influence the location of land development but not the amount of land development.

Oregon’s landmark land use planning system has been the subject of intense scrutiny since it was introduced in the mid-1970s. This study examines how Oregon’s land use planning system affects land prices in the Portland metro area. Since Oregon’s land regulations are intended to guide and control the location of development rather than to limit the supply of developable land, they should not produce scarcity-induced price increases as has been suggested in much of the prior literature.

Using data on land values for vacant parcels in and around the Portland urban growth boundary, we employ two types of empirical models;

Hedonic price models
Regression discontinuity design

Both approaches offer evidence of a “locally binding” urban growth boundary on the western side of Portland, but neither approach supports the idea that Portland’s urban growth boundary is binding overall. Indeed, to the east and south of Portland there is no evidence of a positive price effect on parcels as a result of being located inside the urban growth boundary.

Oregon’s land use planning system

Oregon’s land use planning system, by design, requires each municipality in Oregon to establish a land use plan that includes a 20-year supply of vacant land inside the urban growth boundary. Reviewed periodically, municipalities are required to expand their urban growth boundary (if necessary) to provide this size buffer.

This aspect of Oregon’s land use planning system does not appear to be widely recognized or discussed, and it raises questions about the underlying economic theory that would explain higher land costs and housing prices if, indeed, Portland’s urban growth boundary does not represent a binding limitation in the aggregate.

The Oregon system is not designed to limit the amount of development that occurs, but rather it is intended to influence the location of the development that occurs, and to make the location and concentration of that development consistent with various other land use planning goals.

Each of the four studies conducted for this report provide insights into the effects of Oregon’s land use planning system in its largest city. However, questions remain regarding the overall effects.