Abstract
Under a strict no-takings rule governments can regulate development timing only after evidence of an externality arises. Regulation remains a threat until (or if) such evidence arises, thereby hastening optimal development plans for all land in the spatial market. On the other hand, the effect on capital density varies systematically following demand growth conditions at different locations. Further, vacant land that does not generate the externality is developed more rapidly than is efficient ex post and its capital density systematically affected. The efficiency gap is greater both for land with a greater risk of being associated with the externality when vacant and the longer the threatened moratorium.
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