NCPA - National Center for Policy Analysis


November 11, 2008

In many communities, particularly those on the urban-rural fringe, most housing is located in subdivisions.  Increasingly, those developments are subject to "clustering" rules in which houses must be located on a portion of the total land and the remainder is left as open space.  Even though open space may provide benefits to subdivision residents, it is unclear whether those benefits offset the loss experienced by smaller lots and higher density, says a recent study.

Using data on subdivision house sales occurring between 1981-2001 in Calvert County, Maryland (on the fringe of the Washington, D.C., metropolitan area), researchers examined how households value adjacency to open space and more open space in the subdivision, as well as how readily they will trade off those amenities with their own private lot space. 

They found that:

  • Private acreage positively affects prices, but so does subdivision open space.
  • More interesting, subdivision open space does substitute for private lot size, but the magnitude of the effect is small.
  • Having a lot that is adjacent to subdivision open space appears to enhance the value of a house, particularly if the open space is not too steeply sloped.
  • However, there is no evidence that homeowners are willing to trade off their own lot size for adjacency to the open space.

Thus, reducing private acreage to provide more public subdivision open space tends to lead to overall reductions in house prices, say researchers. 

Even though researchers only measured the effects of subdivision open space on property values within the subdivision, the external benefits of subdivision open space -- aesthetic values and ecological and environmental benefits -- may accrue to the larger community.  Those benefits will not be capitalized into subdivision property values.  To the extent that they are important, they suggest additional reasons why the private market may under-provide open space and government intervention may be necessary, conclude researchers.

Source: Elizabeth Kopits, Virginia McConnell, and Margaret Walls, "Big Yards or Green Space?" Regulation: The Cato Review of Business and Government, Fall 2008.

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