ANALYSIS OF “THE POLITICAL ECONOMY OF RENT AND LAND USE” BY DOUGLAS KORITZ

ANALYSIS OF “THE POLITICAL ECONOMY OF RENT AND LAND USE” BY DOUGLAS KORITZ

            In chapter five of Douglas Koritz’s article “The political economy of rent and land use” much has been scrutinized and which deserves the due credit. Right from the word go, Douglas has given facts, one after the other, and which is a clear evidence that he had thoroughly done research before he started his work. One of the facts which he presents to the audience is the relationship between the intensity of land use and its value. That the value of land tends to increase when the intensity of its usage increases. And that’s a fact which will hold not only on land but also on other capital assets. I mean, you cannot equate the value of a hundred bus seater to that of a fourteen seater mini-bus. It’s obvious that the value of the bus will cost higher than that of the minibus, because the bus will definitely return the investment much faster than the minibus. And the same case applies to land.

Douglas has also given the reason behind the fluctuating land value, facts which I also find to have a thorough base support. He outlines that land will sometimes tend to decline in value while at some other time increase. He associates decline in land value to depreciation of structures in the land, and that has a support base because nobody will be willing to purchase a certain structure on a piece of land at high costs whereas its condition is wanting. On the other hand, new constructions as well as renovations on an already existing structure on a piece of land have been associated with an increase in the value of such a land. This is also true because the cost of the renovations becomes part of the aggregate value of such a land at the latter.

Renovations on an existing land have been presented to have different impacts on people under such locations. Some usually find it hard to coup with increasing rent and eventually quit for other affordable localities. Those with their own homes have been pointed out to be the fateful ones. Increasing taxes have been considered as one of the reasons behind the increasing house values

An equal important point highlighted by Douglas is the fact that the price of land will highly depend on what can be realized on utilizing the land. This is true especially from what is evident on big towns and cities, land prices usually increase as the town is approached and decreases as the distance increase from the town center. This is because of many business opportunities in those cities and towns which can be carried out by people to realize huge profits as compared to the rural areas.

On looking at the changes in the value of land which are evident from time to time, Douglas expressed a very important point on the matter, and that was the neighborhood effects. This is a point with weight because of the truth inside it first and how he puts it forward. I mean this point holds even up to date despite of this article having some time since it was written. A parcel of land neighboring a commercial center will definitely have a higher value compared to another with no border lines to any intensive business activities taking place. This effect eventually connects to the other point he had outlined before, that the value of land will depend on the intensity of activities which take in such a locality where it is located.

Connecting this to the theory of external economies and diseconomies of land utilization, Douglas highlighted another very important aspect of people and firms preferences when choosing a rental ground. He outlined that people and firms will be more willing to rent grounds which have easy access to some other land uses which they value. The list of the access services include but not limited to proximity to schools, parks and transportation services. These services have remained determinants up to date and thus a piece of land which has easy access to such will definitely be more valuable compared to some other which is in a remote locality where they can’t be easily accessed. Just on the same note, Douglas went ahead to clarify his point on the neighborhood aspect in relation to when a certain piece of land is faced with pollution defect. The neighborhood land loses just the same way as the land which has been faced with the challenge.

Also, Douglas used several theories to drive his point of relationship between the value of land and the locality home. Through the David Ricardo’s theory, we witness the point which he had made earlier on the value of land being influenced by the proximity of it to what people value getting support. Specifically, factors such as transport and market when considering firm location have been presented as important and therefore, a person who wishes to have a land with easy access to such will be more willing to pay more on it. And same is the case with other access services.

However, despite all the efforts Douglas made to drive his point home, there is an issue of contradiction in his research. The issue lies on the appraisal process of land valuation where he mentions that searching for its highest and best use was the way forward to determine land value. Clearly, this could be a misleading approach because what may be seen as the highest and best usage of land will definitely differ from one person to another. For that case, relying on this approach may definitely produce misleading results.