Urban Growth & District Valuation

Chapter: Urban Growth & District Valuation

Introduction

Appraising real estate❓ requires a deep understanding of the forces that shape urban environments. Urban growth patterns significantly influence the value of properties within specific districts. This chapter examines the scientific principles underlying urban growth and explores how these principles impact❓ district valuation.

1. City Origins and Growth Patterns

1.1 Siting Factors and Urban Genesis

The initial location, or siting, of a city profoundly impacts its subsequent growth and land use patterns. Several factors contribute to the initial selection of a site:

• Transportation Hubs: Cities often originate at strategic transportation points, such as seaports, river crossings, or intersections of trade routes. These locations facilitate commerce and connectivity.
• Resource Availability: Proximity to power sources (e.g., coal deposits, hydroelectric potential) or other valuable resources (e.g., minerals, fertile land) drives urban development.
• Strategic Importance: Defensive, commercial, or political❓ considerations can dictate the location of a city. Fortified positions, trading posts, and administrative centers are examples.
• Amenity-Driven Growth: Favorable climate, scenic beauty, or other natural amenities can attract residents and businesses, fostering the growth of retirement communities, resorts, and specialized communities.

1.2 Expansion Dynamics

Once established, a city expands outward from its initial site. The direction and characteristics of this growth are influenced by:

• Land Availability and Topography: The presence of developable land (e.g., flat terrain, suitable soil) dictates the direction of expansion. Natural barriers (e.g., mountains, bodies of water) can constrain growth.
• Technological Advancements: Innovations in transportation, construction, and infrastructure enable cities to overcome physical limitations and expand into previously inaccessible areas. High-rise construction, for example, allows for denser development in areas with limited land.
• Government Policies and Public Services: Zoning regulations, infrastructure investments (e.g., roads, utilities), and provision of public services (e.g., schools, sanitation) significantly shape urban growth patterns.

1.3 Density and Development Corridors

As cities grow, land scarcity often leads to increased land use density. Development corridors emerge, channeling new construction along major transportation routes and areas with available infrastructure.

1.4 Transportation’s Role

Transportation networks are critical determinants of urban form and growth.

• Expansion Facilitation: Improved transportation (e.g., highways, public transit) allows cities to expand their reach and serve larger markets.
• Growth Patterns: City growth typically radiates outward from the central business district❓❓ (CBD) along major transportation routes. Freeway systems can trigger migration away from the city core.

2. Urban Growth Theories

Several conceptual models attempt to describe and explain land use patterns in urban areas. These models, often referred to as “social ecology” models, provide frameworks for understanding urban structure.

2.1 Concentric Zone Theory (Burgess Model)

This model, proposed by Ernest Burgess, suggests that cities grow outward in a series of concentric zones, each characterized by distinct land uses and socio-economic characteristics.

1. Central Business District (CBD): The city’s core, characterized by high-density commercial activity.
2. Transition Zone: A zone of mixed residential and industrial uses, often characterized by deterioration and social problems.
3. Working-Class Zone: Modest homes occupied by blue-collar workers.
4. Residential Zone: Higher-quality housing for middle-class residents.
5. Commuter Zone: Suburban areas with low-density residential development.

Limitations: The Concentric Zone Theory is a simplified model and does not account for all urban forms. It is most applicable to cities with relatively uniform topography and a strong central core.

2.2 Sector Theory (Hoyt Model)

Developed by Homer Hoyt, the Sector Theory proposes that cities grow in wedge-shaped sectors radiating outward from the CBD along major transportation routes.

• High-Rent Residential: Tends to develop along the fastest and most convenient transportation routes.
• Industrial Areas: Often located along rail lines or waterways.

Advantages: The Sector Theory accounts for the influence of transportation corridors on urban growth and the clustering of similar land uses.

2.3 Multiple Nuclei Theory❓❓ (Harris and Ullman Model)

This model, proposed by Chauncy Harris and Edward Ullman, suggests that cities develop around multiple nuclei, each with its own specialized functions. These nuclei may include:

• CBD: The traditional city center.
• Industrial Districts: Areas with heavy industry.
• Residential Suburbs: Self-contained residential areas.
• Retail Centers: Shopping malls and commercial areas.
• Universities: Centers of education and research.

Key Concept: This theory recognizes that cities are complex and decentralized, with multiple centers of activity.

2.4 Radial (Axial) Corridor Theory

This theory combines elements of the Sector and Multiple Nuclei theories. It suggests that growth occurs along radial corridors emanating from the city center, with specialized districts developing at various points along these corridors.

3. District Valuation Principles

A district is a smaller, more homogenous area within a larger market area. Evaluating properties within a specific district requires considering the unique characteristics and influences that shape its value.

3.1 Influences on District Value

The same fundamental forces that influence real estate values in larger market areas (utility, scarcity, desire, and effective purchasing power) also apply to districts. However, the emphasis and relative importance of these factors can vary significantly depending on the district’s type (e.g., residential, commercial, industrial).

3.2 Key Factors Affecting District Valuation

• Accessibility: Proximity to employment centers, transportation networks, shopping, and amenities is a key driver of value, particularly in residential districts. See 3.5
• Infrastructure: The availability of public utilities (e.g., water, sewer, electricity) and essential services (e.g., schools, police, fire protection) is crucial for district development and value.
• Environmental Quality: Factors such as air and water quality, noise levels, and the presence of green spaces affect the desirability of a district.
• Zoning and Land Use Regulations: Zoning ordinances dictate permissible land uses and development densities, influencing property values.
• Neighborhood Characteristics: Factors such as the quality of housing stock, the presence of community amenities, and the level of crime influence residential property values.
• Economic Conditions: The overall health of the local economy, including employment rates and income levels, affects the demand for real estate in all types of districts.
• Tax Rates: Real estate and personal property tax rates can influence the desirability of a district.

3.3 Analyzing Comparable Sales

Analyzing comparable sales in the district is critical for understanding market perceptions of value. By comparing the sale prices of similar properties in different locations within the district, appraisers can identify factors that contribute to value differences.

Formula:

Value Adjustment = Sale Price of Comparable - Indicated Value of Subject

Percentage Adjustment = ( Value Adjustment / Sale Price of Comparable ) * 100%

3.4 Anticipated Land Use

Appraisers must consider the potential for changes in land use within the district. If zoning regulations allow for changes or if there is evidence of shifting land use patterns, appraisers should analyze linkages in terms of both current and anticipated uses.

3.5 District-Specific Considerations

The following provides additional information for valuing the three main district types.

3. One-Unit Residential Districts:
   • Homeownership symbolizes economic prosperity and owner-occupied homes typically foster value maintenance.
   • Homeowner associations and community organizations promote conformity in land use and safeguard property values.
   • “Value Influences” such as Access to workplaces, transportation service, Shopping centers, Quality of schools, Reputation of area, Residential atmosphere, Protection from commercial intrusion, and Proximity to green space.
4. Multifamily Residential Districts:
   • Influences may be more important in multifamily districts due to higher density.
   • Statistics on supply of apartments, vacancy rates, and rent levels can be publicly available in larger cities.
   • Zoning requirements and building codes are important for appraisers to be familiar with.
5. Commercial Districts:
   • Depends on the health of the trade area, so property values are affected by land use and other property-value factors.

4. Case Studies and Practical Applications

4.1 The Impact of a New Transportation Hub

A new subway station is constructed in a previously underserved area. This leads to increased accessibility, attracting new businesses and residents. Property values in the surrounding residential and commercial districts increase significantly.

Appraisal Application: Appraisers must consider the impact of the new subway station on accessibility and demand when valuing properties in the area. They should analyze comparable sales data to quantify the value impact of proximity to the station.

4.2 The Effects of Zoning Changes

A residential district is rezoned to allow for higher-density development. This leads to the construction of new apartment buildings and townhouses.

Appraisal Application: Appraisers must analyze the potential impact of the zoning change on property values. The increased density may increase demand for services and amenities, but it could also lead to congestion and reduced privacy, potentially affecting single-family home values.

4.3 Industrial Expansion near a Residential District

The expansion of an industrial park near a residential area leads to increased noise and air pollution.

Appraisal Application: Appraisers must assess the negative impact of the industrial expansion on the residential district’s value. They should consider the potential for mitigation measures (e.g., noise barriers, buffer zones) and analyze comparable sales data to quantify the impact of proximity to the industrial area.

5. Conclusion

Understanding urban growth dynamics and the unique characteristics of different districts is essential for accurate real estate appraisal. By applying the scientific principles and analytical techniques discussed in this chapter, appraisers can effectively assess the value of properties within urban environments.