Urban Economy Urban Economy: Real Estate Economics and Public Policy analyses urban economic change and public policy in a more practical way than a typical urban economics book. The book has a distinctive framework that considers the underlying reasons, and the consequences of, urban change for real estate investors and policy makers. Part 1 covers the basics of urban economics and real estate markets, including hous- ing and commercial. Part 2 looks at the reformulation of urban systems and the rea- sons why. It then considers the consequences for real estate markets and investment of decentralisation forces and emerging technology. The issues that arise for urban public policy are then discussed, notably transport policies, public finance and sus- tainability, before a chapter examining housing neighbourhood and housing market dynamics and a shift from spatial change to regeneration. Part 3 reverses the dominant perspective of Part 2 to assess the effectiveness of how property-led policies can posi- tively influence a local economy and urban regeneration. The chapters consider several important policy questions and constraints and draw on a number of case studies that illustrate the benefits and drawbacks. The book includes chapter objectives, self-assessment questions, chapter summa- ries, learning outcomes, case studies, global data and statistics and is a new textbook for core courses in urban economics and real estate economics on global Real Estate, Planning and related degree courses. Colin Jones is an urban economist who has been a professor at Heriot-Watt Univer- sity since 1998. He formerly worked at the Universities of Manchester, Glasgow and the West of Scotland. His research interests span commercial, industrial and housing market economics, investment and policy, the macroeconomy and local economic de- velopment. Colin has edited or authored eight books, published more than seventy pa- pers in academic journals and has taught urban economics and real estate investment at undergraduate and postgraduate levels for more than 40 years. Urban Economy Real Estate Economics and Public Policy Colin Jones First published 2022 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 605 Third Avenue, New York, NY 10158 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2022 Colin Jones The right of Colin Jones to be identified as author of this work has been asserted by him in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Names: Jones, Colin, 1949 January 13– author. Title: Urban economy : real estate economics and public policy / Colin Jones. Description: Abingdon, Oxon ; New York, NY : Routledge, [2022] | Includes bibliographical references and index. Subjects: LCSH: Real estate development—Government policy—Great Britain. | Real estate development—Government policy—United States. | Urbanization—Great Britain. | Urbanization—United States. Classification: LCC HD593 .J65 2022 (print) | LCC HD593 (ebook) | DDC 307.76/0941—dc23 LC record available at https://lccn.loc.gov/2021020265 LC ebook record available at https://lccn.loc.gov/2021020266 ISBN: 978-0-367-46197-3 (hbk) ISBN: 978-0-367-46194-2 (pbk) ISBN: 978-1-003-02751-5 (ebk) DOI: 10.1201/9781003027515 Typeset in Times New Roman by codeMantra Access the Support Material: www.routledge.com/9780367461942 Contents Preface xi 1 Introduction 1 PART I Spatial pattern of economic activity 7 2 Location of economic activity 9 Objectives 9 Definitions of a city 9 Location of cities 11 Industrial location theory 13 Summary 16 Learning outcomes 17 3 Spatial agglomeration 18 Objectives 18 Role of agglomeration economies 18 Types of agglomeration economies for firms 19 Urban agglomeration benefits for households 22 Why cities grow? 23 The scale of urban development 24 Summary 25 Learning outcomes 27 4 Spatial structure of towns and cities 28 Objectives 28 Agricultural land rent determination 28 Intra-urban patterns of land use and rents 30 Hierarchical nature of services and retail centres and subcentres 36 Summary 39 Learning outcomes 41 vi Contents 5 Spatial structure of the housing market 42 Objectives 42 Access-space model of the urban housing market 42 Spatial patterns of house prices and incomes within cities 43 Neighbourhood submarkets 45 Urban functional areas 45 Summary 46 Learning outcomes 47 6 Planning and the land market 49 Objectives 49 Functions of planning 49 Real estate market implications 53 Distributional implications 55 Land value capture 55 Summary 59 Learning outcomes 60 7 Urban housing markets 62 Objectives 62 Housing tenure 62 Choice and constraint: household movement in the housing market 64 Affordability and affordable housing 66 Financial constraints 69 Migration and spatial house price trends 71 Summary 72 Learning outcomes 75 8 Urban commercial real estate markets 77 Objectives 77 Tenure 77 Occupation demand 78 Investment 79 Supply constraints 80 Development activity 81 Real estate cycles 83 Summary 85 Learning outcomes 86 PART II Spatial change and public policy 89 9 Growth, decline and revival of cities 91 Objectives 91 Industrialisation 91 Deindustrialisation 92 Contents vii Manufacturing decentralisation 93 Decongestion 94 Suburbanisation 95 Growth of services 96 Inner-city donut 97 Re-urbanisation and revival 98 Summary 99 Learning outcomes 101 10 Explaining intra-urban economic change 103 Objectives 103 Intra-/interurban transport costs 103 Changing real incomes 105 Changing commercial rent gradients 106 Changing house price gradient 109 Re-urbanisation and the changing donut 110 Summary 111 Learning outcomes 113 11 The changing urban system 116 Objectives 116 Stages model of urban change 116 Stage 1 Pre-urban or pre-modern stage 117 Stage 2 Urban specialisation stage 117 Stage 3 Urban transformation stage 118 Stage 4 Urban dispersal stage 118 Facets of urban dispersal 119 Individual influences on localities 122 Regional growth poles 123 Summary 125 Learning outcomes 127 12 Real estate impacts of urban and technological change 129 Objectives 129 Diversification of office centres 129 New forms of retailing 133 Changing retail hierarchy and the decline of high/main streets 133 Evolution of warehousing 136 Cities in the information age 139 Summary 140 Learning outcomes 142 13 Real estate investment, planning and urban economic change 145 Objectives 145 Land market and urban development 145 Planning policy responses to urban change 147 viii Contents Investment, urban change and new real estate forms 148 The emergence of new investment classes 150 The longer-term implications for real estate investment in retailing 152 Financial institutions and other real estate innovations 152 Wider implications for the real estate market 156 Summary 156 Learning outcomes 160 14 Urban public finance 162 Objectives 162 Urban public services 162 Structure of local government 164 Financing of public services 165 Influence of local taxes on property market 166 Urban fiscal problem 167 Central government equalisation 168 Impact of urban change 169 Multiplier effects 171 Summary 171 Learning outcomes 173 15 Transport policies 175 Objectives 175 Scale of the problem 175 Congestion road pricing 176 Investment in roads 180 Traffic management 181 Enhancement of public transport 183 Low emission zones and car bans 183 Investment in cycling 185 Implications for land use patterns and real estate market impacts 185 A future postscript 187 Summary 188 Learning outcomes 190 16 Urban sustainability 192 Objectives 192 Nature of urban sustainability 192 Global policy context 194 The compact city, smart growth and new urbanism 195 Decentralised eco-settlements 197 Polycentric sustainable model 198 Walkable neighbourhoods 199 Reformulation of urban sustainability problem 199 Contents ix Economic viability of adapting cities 201 Summary 202 Learning outcomes 204 17 Neighbourhood and housing market dynamics 206 Neighbourhood decay and revitalisation 206 Neighbourhood succession 209 Policy questions 212 Summary 213 Learning outcomes 215 PART III Regeneration and urban growth policies 217 18 Urban regeneration policies 219 Objectives 219 Historical context 219 Traditional approaches to urban renewal 220 Urban social policies of 1960s and 1970s 222 Economic regeneration of 1970s and 1980s 223 Broadening out of the urban policy 227 Urban policy under a Labour Government 1997–2010 228 Urban regeneration in the UK post 2010 230 Summary 232 Learning outcomes 235 19 Urban competitiveness and the real estate market 237 Objectives 237 Building of landmark buildings 237 Agglomeration economies, cities and competitiveness 238 Competitiveness and real estate constraints 242 Offices dispersal policies 245 Logic of real estate−led local economic development strategies 246 Summary 247 Learning outcomes 249 20 Physical and housing-led urban regeneration 251 Objectives 251 New social infrastructure and physical renewal 251 Tourist-led regeneration 252 Retail-led regeneration 253 Housing-led regeneration 255 Experience of Barcelona 257