Working Paper: NBER ID: w25699
Authors: H. Spencer Banzhaf; Kyle Mangum
Abstract: This paper shows that the capitalization of local amenities is effectively priced into land via a two-part pricing formula: a “ticket” price paid regardless of the amount of housing service consumed and a “slope” price paid per unit of services. We first show theoretically how tickets arise as an extensive margin price when there are binding constraints on the number of households admitted to a neighborhood. We use a large national dataset of housing transactions, property characteristics, and neighborhood attributes to measure the extent to which local amenities are capitalized in ticket prices vis-a-vis slopes. We find that in most U.S. cities, the majority of neighborhood variation in pricing occurs via tickets, although the importance of tickets rises sharply in the stringency of land development regulations, as predicted by theory. We discuss implications of two-part pricing for efficiency and equity in neighborhood sorting equilibria and for empirical estimates of willingness to pay for non marketed amenities, which generally assume proportional pricing only.
Keywords: capitalization; zoning; housing prices; two-part tariff; local amenities
JEL Codes: D45; H41; H73; Q51; R31; R52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| local amenities (R53) | housing prices (R31) |
| ticket price (D44) | housing prices (R31) |
| zoning regulations (R52) | ticket price (D44) |
| zoning regulations (R52) | housing prices (R31) |
| ticket price (D44) | neighborhood amenities (R20) |
| land use restrictions (R52) | ticket price (D44) |