Moving to the country: Understanding the effects of Covid-19 on property values and farmland development risk

Abstract

As human populations grow, one strategy for meeting housing demand is through the development of agricultural land and other open space, which can generate negative externalities. This may be addressed at local, state, or federal levels with land-use planning, including farmland preservation policies. Efficient land-use planning in the presence of competing land uses requires knowledge of development risk, housing preferences, and the full costs of farmland loss. We conduct a national scale hedonic analysis using the ZTRAX program U.S. housing transaction data to investigate how COVID-19 has affected property prices in suburban and rural areas with farmland at high risk of development, for the purpose of understanding the effects of COVID-19 driven shifts in housing location preferences. Our analysis demonstrates that the pandemic caused differential price impacts across the 33 states that we analyzed. Furthermore, our estimates suggest heterogeneous price effects driven by the characteristics of nearby urban areas, with prices appreciating faster on land at risk located near smaller urban areas than those near larger urban areas. Our analysis finds that the spatial pattern of development pressure on agricultural lands, as measured through transaction prices, changed in the aftermath of the COVID-19 pandemic.