The Effect of Land-Use Restrictions on Agricultural and Residential Land Values

Researchers: Brady James Deaton, Jr., University of Guelph

Research Summary

The project examines the effects of land use regulation and farmland amenties on both agricultural land prices and surrounding residential properties. The price effect of land use regulations is particularly relevant to Ontario because the provincial government recently (2005) passed legislation, “the Greenbelt”, that restricts development on over one million acres of land surrounding the GTA (Greater Toronto Area). The debate surrounding the Greenbelt legislation empasized a number of policy issues that accompany agricultural activities on the urban fringe.

Some agricultural land owners are concerned about the effect of zoning on agricultural land values. However, both the theoretical and empirical literature surrounding the property value effect of land use controls suggest that the land price effect of regulation is ambiquous (See, for example, Brueckner (1990); Henneberry and Barrows (1990)). For these reasons careful empirical research is needed to tease out the effects of regulation and, in addition, to take into consideration the possibility that farmland may provide amenities and disamenities (see Ready and Abdalla (2005)).

Significance of Research

Prime agricultural land is located in close proximity to urban areas. As a result land use policy in agricultural areas is increasingly associated with urban concerns and vice versa. A central source of conflict, with respect to land use controls, involves perceptions of the way regulations affect land values. Much of the conflict is based on speculations about the effects of land use policies on land prices. Farmers are particularly concerned because much of their wealth is tied to the value of their land. This project is designed to provide empirical estimates of the effect of different land use policies. The results will provide an empirical basis for arguments about the likely effects of land use policies (such as the greenbelt). Moreover, it will enhance public understanding of the distributional consequences of such policies. For example, the results will allow us to assess the extent, if any, that the price of agricultural lands is diminished by certain regulations. This information may influence the extent to which policy makers seek to compensate agricultural land owners. These agricultural concerns are an important part of the debate that will accompany future policies designed to manage agricultural activities in areas of expanding urban growth.

Summary of Research Results: Yet to come.