© CA Pushkar Ogale

Module 5
Chapter 10
Urban land values

1. Various factors affecting the values of urban land:

Land value can be defined as the monetary cost of the land. It can be the cost of
undeveloped land or a built property, but land value is primarily associated with a vacant
plot. When discussing the importance of a built structure the term ‚property value‛ is more
appropriate.
The land value is determined by the economic principle of highest and best use of
land which produces the highest net return in any term, over a period. The property value is
dependent on the structural attributes, land rates, land use and the location of the land. It is
determined by the specific character of the land such as land use, location, accessibility,
aesthetics, etc. Factors affecting Land Value are of importance to calculate or estimate land
prices, understanding of these factors will provide more accurate and realistic cost of land.
These factors affecting Land Value do not necessarily give the exact amount but are helpful
in comparison.

Factors affecting Land Value mainly include the following:

1. Physical attributes: These include quality of location, topography, climate, availability of

water, sewer lines, etc. More and better facilities are attributed to a higher price of land.
Topography further has a direct effect on the construction cost and thus the overall
development cost. The facilities thus developed on an uneven land will have a much higher
cost as compared to the flat plain.

2. Accessibility to economic activities: The more easily economic activity is accessible, the
more is the value of the land. For example, most of the metropolitan cities have the
maximum land values at the center, or at the central business district of the city. This is
because of the nearness to the economic activities and workplace. This factor affecting land
value is the sole most important factor which led to the development of various land price
models in urban economics.

3. Neighborhood amenities: The cost of land is also affected by the availability of the
facilities such as shopping areas, medical facilities, school, parks& playgrounds, and other
basic need of the humans. This helps in saving the time of people every day, the time saved
adds up the cost of land. Also, the reduced travel and reduced trip distance will directly
have the monetary benefits of the person residing in an area with many such facilities in
proximity.

4. Present and future land use: The value of the land is also determined by the land use
permitted in the land premises. For example, if we compare the values of two lands of same
prices and same location but the land use permitted in the lands are different, one is
commercial and one is residential. In such case the value of the land with the land use which
has more rate of return over a period of time will be valued more.
People are willing to pay a higher amount for commercial land, in some cases industrial or
institutional land use might attract even higher prices.

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5. Demand and Supply Function: With the significant demographic changes in the cities
with time, the need for land also increases with the same factor, with the increase in
population there is an increase in economic and other activities. This directly increases the
demand in the of the land components. The anticipation of high yields may also induce false
scarcity of land; hence the location advantages of the properties at any time within the urban
boundaries and hence causes economic values of land to be increased. For any site, there are
specific points of transition in use, closely related to the infrastructure and services, where a
jump in property value is likely to happen.

6. Location and Transport Linkages: The property located in the area of high level of
infrastructure facilities or the one located in or adjacent to the area of intensive economic
activities such as markets or industries have higher values. Transport linkages are also
crucial since they govern the mobility & ease of movement to and from the area. Clearly
defined hierarchy of roads, efficient public transportation and lack of congestion are some of
the desired transportation attributes of any area. Residential land values are also observed to
be in direct proportion to the hierarchical order of the adjacent road.

The valuation of land is done keeping in mind the factor mentioned above; however, the
actual selling price of an area is ultimately determined by the paying capacity of the buyer.
All the factors mentioned above-affecting land value might give a price which no one is
willing to pay, and thus the actual amount paid becomes the price instead of the evaluated
price.

2. Difference between land use and land cover:

Although the terms land cover and land use are often used interchangeably, their
actual meanings are quite distinct. Land cover refers to the surface cover on the ground,
whether vegetation, urban infrastructure, water, bare soil or other. Land cover is the
physical material at the surface of the earth. Land covers include grass, asphalt, trees, bare
ground, water, etc
Land use refers to the purpose the land serves, for example, recreation, wildlife
habitat, or agriculture. Land use is a description of how people utilize the land and of socio-
economic activity.
Land use and land cover have some fundamental differences. Land use refers to the
purpose the land serves, for example, recreation, wildlife habitat or agriculture; it does not
describe the surface cover on the ground. For example, a recreational land use could occur in
a forest, shrubland, grasslands or on manicured lawns.
Land cover refers to the surface cover on the ground, whether vegetation, urban
infrastructure, water, bare soil or other; it does not describe the use of land, and the use of
land may be different for lands with the same cover type. For instance, a land cover type of
forest may be used for timber production, wildlife management or recreation; it might be
private land, a protected watershed or a popular state park.
In short, land use indicates how people are using the land, whereas land cover
indicates the physical land type. Both types of data are most often obtained from analysis of
either satellite or aerial images.
Understanding both the land use and land cover of a track of land provides a
comprehensive picture of a particular area. This data is a fundamental component of the
planning and decision-making processes for many communities because it helps them to
understand better where to plan for different types of growth and where to preserve; it also

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helps them to understand the connectivity or fragmentation of various features in their
community.

3. Bid Rent Theory:

This Theory was developed in 1964 by William Alonso. The bid rent theory is
a geographical economic theory that refers to how the price and demand for real
estate change as the distance from the central business district (CBD) increases. A central
business district (CBD) is the commercial and business centre of a city.
It states that different land users will compete with one another for land close to
the city centre. This is based upon the idea that retail establishments wish to maximize
their profitability, so they are much more willing to pay more for land close to the CBD and
less for land further away from this area. This theory is based upon the reasoning that the
more accessible an area. Various land users in this theory are referred to as Commercial
establishments, industrial establishments and residential establishments.

Land users all compete for the most accessible land within the CBD. The amount
they are willing to pay is called "bid rent". The result is a pattern of concentric rings of land
use, creating the concentric zone model.
It could be assumed that, according to this theory, the poorest houses and buildings
would be on the very outskirts of the city, as this is the only location that they can afford to
occupy. In modern times, however, this is rarely the case, as many people prefer to trade
off the accessibility of being close to the CBD and move to the edges of a settlement, where it
is possible to buy more land for the same amount of money (as the bid rent theory states).
Likewise, lower-income housing trades off greater living space for increased accessibility to
employment.

4. Theoretical city models based on land use and land values:

a) Burgess’s Concentric Zone theory:
The concentric model was devised in 1923 by E.W. Burgess. He was a sociologist. The idea
behind the concentric model is that the development of a city takes place outwards from its
central area in a series of concentric circles to form zones.
The model therefore is also known as concentric zonal model.
(i) The downtown retail district, and
(ii) The wholesale business district encircling the downtown.

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These zones begin with Zone I as Central Business District (CBD), the focus of the
city’s social, commercial and civic life. CBD is also the focus of transportation. Zone II is the
‘zone in transition’ surrounding the CBD. It is a zone of residential deterioration of older
private houses consisting of largely subdivided dwelling units. The transition area is
occupied by immigrants and infested by ‘vices’. In this zone rotten business and light
manufacturing from Zone I have encroached upon residential areas. Some of the parts of
this zone are likely to be found in the city’s slums or areas of poverty and crime.
Zone III is the third ring made up of the houses of ‘working-men’s homes’. This is
the zone of old residential buildings occupied by stable social groups of working class
families. These are families of people who have moved out of Zone II to live near their place
of work.
Zone IV concentric space still farther from the centre is occupied by spacious
dwellings. Here, middle-class groups of native-born Americans live. These people are likely
to be proprietors of small businesses, professional people, clerks and salesmen.
Final and beyond the city limits is Zone V of small cities, towns, dormitory areas to make up
the commuters’ zone. From the city centre it is almost at the distance of one hour’s travelling
time. This zone may still be an open country. Most of the people of this zone seem to
commute daily for their livelihood in the CBD.

Criticism of the Concentric Theory:

Burgess’ theory is popular and widely used by current authors with a few modifications. But
the concentric zonal theory is severely criticized on the grounds of local topographical
features which affect the location of residential areas. This type of criticism seems invalid

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because Burgess himself pointed out those zonal distortions may result from variations in
relief features.

b) Hoyt’s Sector Theory:

Homer Hoyt observed, picture of cities had changed and therefore, he advanced in 1939, the
sector theory. His idea was that because of rise of automobile, access to the downtown had
been improved and lot of shifting of uses in the CBD had arisen. On major routes of
transportation sectors of specific land use were likely to grow with the expansion of city.
Residential land uses tend to be arranged in wedges radiating from the centre. (Figure 8.7A)

Hoyt’s theory, of course, deals only with residential land use. Rent areas in cities
tend to conform to a pattern of sectors rather than of concentric circles. (Figure 8.7A) The
highest rent areas tend to be located in one or more sectors of the city. But various rent areas
are not static. High quality residential areas tend to migrate outward in the sector, older
houses remaining behind to become medium-quality areas.
The movement of the high rent area is important because it has tended to pull the
growth of the entire city in the same direction. The net result of urban growth is that a zone
of High-class housing tends to be located on one side of a city rather than in the continuous
ring. At the same time, the age of buildings is more likely to show a concentric arrangement.

c) The Multiple Nuclei Theory:

Urban development and growth of a city in different parts of the developed and
developing areas is not a simple phenomenon which can be explained by geometric designs
– either concentric circles or sectors radiating from the centre. Its land use too, is not simple
and singular. It represents intermingling of various functions like commercial, industrial,
cultural, administrative and social.
As a result, morphology of a city cannot be unicentred. Its evolution cannot be the
product of a zone or sector. Various types of land uses and their patterns develop often
around several separate nuclei. Chauncy D. Harris and Edward L. Ullman suggest multiple
nuclei for accommodating growth of residential, business, industrial or other elements
taking place in cities during the course of time from their inception to the present day
(Figure 8.10).

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The rise of separate nuclei has been due to factors which influence the distribution of human
activities within a city.

The various factors may be of four categories:

(a) Certain activities require specialized facilities, for example, CBD can function at the point
where maximum accessibility is available.
(b) There are also group of activities which prefer cohesion. Clothing industry is clustered in
the densely packed inner districts of large cities. They profit from cohesion.
(c) Certain activities are detrimental to one another, and generally seek separate sites. For
example, heavy industry and high-class residential areas do not prefer to be near-
neighbours.
(d) Certain activities are unable to pay the rents of most desirable sites: residential areas of
low-income residents or bulk storage facilities have to seek nuclei in remote corners.

The above factors, and also factors of social, cultural and economic significance give
a peculiar urban landscape with separate nodes. Nuclei may be of two categories – those
which take their shape at the time of city’s origin, and some nuclei develop with the growth
of a city. Nuclei existing at the time of origin of the city have a long history behind them.

The multiple nuclei theory reveals two significant observations based on historical
and site elements of morphology. One is that the theory produces a model involving
complexities of urban structure which may not be easily and immediately discernible
because of historical stratification of land uses during the process of urban growth.
Although most cities have only one CBD they have a series of sub-centres around
nuclei. These are less specialized but enough to provide needs of smaller sections of the city.
Second observation which is more significant is about the probability of elements of the
concentric and sector models present in its depth. Nothing new is involved conceptually in
the multiple nuclei, and, it should not be given the status of a theory.
Actually, land uses around nuclei and in between areas filled in, they display land
uses intermixing of concentric and wedge areas. The multiple nuclei approach should be
looked upon ‚as a guide to thought about the structure of the city, rather than as a rigid
generalization about urban form‛.