Exploring Coupled Housing and Land Market Interactions Through an Economic Agent-Based Model (CHALMS)

Abstract

Land markets are characterized by spatially distributed exchanges of ­heterogeneous goods and decision-making by heterogeneous, adaptive participants. Land market dynamics influence and are influenced by spatially varying demands for residential housing through housing markets. This chapter describes a spatially disaggregated, economic agent-based model for exploring ex-urban growth patterns emerging from coupled interactions between housing and land markets (CHALMS). CHALMS simulates the conversion of farmland to housing development over time, through the actions of the agents in the land and housing markets. Three types of agents—consumers, farmers and a developer—make decisions based on microeconomic principles, and use stylized expectation formation models to adapt to dynamic market conditions. The location, price, and density of housing are represented explicitly, as are the location, price, and productivity of individual farms. The possibility of many possible system states, due to agent and landscape heterogeneity, stochastic processes, and path-dependence, requires multiple model runs, as does the expression of the spatial distribution of housing types, overall housing density, and land prices over time in terms of the most likely, or ‘average’, patterns. CHALMS captures stylized facts of diminishing population density and land prices at greater distances from the center city, increasing land prices over time, and dispersed leapfrog patterns of development evident in most suburban areas of the U.S.