Abstract
Estimating the non-market monetary values of urban amenities has become commonplace in urban planning research, particularly following Rosen’s seminal article on hedonic theory in 1974. As a revealed preference method, the hedonic approach decouples the market price of a house into price components that are attributable to housing characteristics. Despite the potential contribution of this theory in a planning context, three main limitations exist in the conventional applications: (1) variable measurement issues, (2) model misspecification, and (3) the problematic common use of global regression. These flaws problematically skew our understanding of the urban structure and spatial distribution of amenities, leading to misinformed policy interventions and poor amenity planning decisions. In this article, we propose a coherent conceptual framework that addresses measurement, specification, and scale challenges to generate consistent economic estimates of local amenities. Finally, we argue that, by paying greater attention to the spatial equity of amenity values, governments can provide greater equality of opportunities in cities.
Highlights
The world is rapidly becoming urbanized, and it is forecast that by 2050, 68% of people on earth will live in towns and metropolitan areas [1]
Work over the last few decades has scrutinized the non-market monetary values of urban amenities using the hedonic price method (HPM), including research with significant planning implications
This research falls short of establishing the theoretical interconnections between house prices, the amenity preferences of residents, and urban planning
Summary
The world is rapidly becoming urbanized, and it is forecast that by 2050, 68% of people on earth will live in towns and metropolitan areas [1] In both the developing and developed world, city growth is putting unprecedented pressure on governments already struggling to accommodate the demand for housing and to service residents with essential amenities. By establishing the theoretical interconnections between house prices, the amenity preferences of residents, and urban planning, and building on innovative econometric techniques, we develop a framework consisting of new analytical models capable of reliably identifying the values of high-demand amenities in cities and, can serve as planning tools.
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