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Home , Land (economics), Land development, Rural economics

A publication of the Agricultural & Applied AAEA The magazine of , farm, and issues Agricultural & Applied Association Economics Association Use Changes: Economic, Social, and Environmental Impacts JunJie Wu JEL Classifications: Q24, Q28

Major land–use changes have occurred in the United change, however, does not come without States during the past 25 years. The total area of cropland, costs (see Table 1). Conversion of farmland and to pastureland and decreased by 76 million acres urban development reduces the amount of available in the lower 48 states from 1982 to 2003, while the to- for food and timber production. , salinization, tal area of developed land increased by 36 million acres or , and other soil degradations associated with 48%. What are the potential economic, social, and envi- intensive and reduce the qual- ronmental impacts of land use changes? How does land use ity of land and future agricultural change affect agriculture and rural communities? What are (Lubowski et al. 2006). the important economic and environmental implications presents many challenges for farmers for commodity production and trade, and soil con- on the urban fringe. Conflicts with nonfarm neighbors servation, open space preservation, and other policy issues? and vandalism, such as destruction of crops and damage This article addresses some of these issues and their policy to farm equipment, are major concerns of farmers at the implications. urban fringe (Lisansky, 1986). Neighboring farmers of- Socioeconomic Impacts ten cooperate in production activities, including equip- ment sharing, land renting, custom work, and Land is one of three major in classical system development. These benefits will disappear when economics (along with labor and ) and an essential neighboring farms are converted to development. Farmers input for housing and food production. Thus, land use is may no longer be able to benefit from information shar- the backbone of agricultural and it provides ing and formal and informal business relationships among substantial economic and social benefits. Land use change neighboring farms. Urbanization may also cause the “im- is necessary and essential for and permanence syndrome” (i.e., a lack of confidence in the social progress. Table 1. Socioeconomic Impacts of Land–Use Changes

• Conversion of farmland and forests to urban development reduces the amount of land available for food and timber production • , salinization, desertification, and other soil degradations associated with agricultural production and deforestation reduce land quality and agricultural productivity • Conversions of farmland and forests to urban development reduce the amount of open space and environmental amenities for local residents • Urban development reduces the “critical mass” of farmland necessary for the economic survival of local agricultural economies • Urban development patterns not only affect the of individuals, but also the ways in which society is organized • Urban development has encroached upon some rural communities to such an extent that the community’s identify has been lost • Suburbanization intensifies income segregation and economic disparities among communities • Excessive land use control, however, may hinder the function of���� mark�et��������� forces������ • Land use regulations that aim at curbing will raise housing , making housing less affordable to middle– and low–income - holds • Land use regulation must strike a balance between private rights and the public interest

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 CHOICES 4th Quarter 2008 • 23(4) stability and long–run profitability other areas, the lack of opportunities support the linkage between land use of farming), leading to a reduction in has turned once–viable communities regulation and housing affordability. investment in new technology or ma- into ghost towns. in- Two recent Harvard University stud- chinery, or idling of farmland (Lopez, tensifies income segregation and eco- ies found that land use regulation Adelaja, and Andrews, 1988). nomic disparities between urban and reduces housing affordability in the As urbanization intensifies, agri- suburban communities (Wu, 2006). Greater Boston Area (Glaeser and cultural and nonagricultural land use tend to gain lower–income res- Ward 2006; Glaeser and Gyourko conflicts become more severe. This idents and lose upper–income popu- 2002). Cho, Wu and Boggess (2003) may lead to an increase in local or- lation. Between 1969 and 1998, the analyzed the causes and consequences dinances designed to force farmers to share of low–income families in cen- of land use regulations across coun- pay for some of the negative impacts tral cities grew from 21.9% to 25.5% ties in five western states and found generated by agriculture. As the near- compared with a decline from 18.3% that land use regulation increased av- est input suppliers close because of to 16.6% for high–income house- erage housing prices between 1.3 and insufficient demand for farm inputs, holds (U.S. Department of Housing 4.7%, depending on the intensity of a farmer may have to pay more for and Urban Development 2000). The land use regulations in a county. inputs or spend more time to obtain change in income mix led to a smaller Land use control must strike a equipment repairs (Lynch and Car- base and the need for more social balance between private property penter, 2003). Competition for labor services in urban communities. rights and the public interest. Oregon from nonagricultural sectors may Suburbanization brings urban and ballot measures 37 and 49 highlight raise farmers’ labor costs. When the rural people and problems together. the difficulty and controversy of the total amount of farmland falls below Most land areas are rural, most wa- balancing act. In an attempt to pro- a critical mass, the local agricultural tersheds are in rural places, and most tect private property rights from reg- may collapse as all agricul- of the atmosphere exists above rural ulatory taking, Oregon voters passed tural supporting sectors disappear. space. Urbanites and agencies have Measure 37 in 2004. Measure 37 Urbanization also presents impor- legitimate concerns about the use and provides that the government must tant opportunities to farmers. The condition of rural natural resources, compensate the owner of private real emergence of a new customer base just as rural populations have legiti- property when a land use regulation provides farmers new opportunities mate concerns about urban–based reduces its “fair ”. In lieu for selling higher value crops. For ex- pressures on the natural world. These of compensation, the government ample, Lopez, Adelaja, and Andrews shared interests in the natural envi- may choose to “remove, modify or (1988) found that vegetable produc- ronment have important economic, not apply” the regulation. Measure 37 ers tend to receive higher prices in social, and political implications, was ruled unconstitutional by a lower urbanized areas. The explosion of which may profoundly impact society court, but was upheld by the Oregon nurseries, vegetable farms, vineyards, in the future. State Supreme Court. By October and other high–value crop industries In response to the increasing ur- 19, 2007, 6,814 claims had been in many suburban areas illustrates banization, many local governments filed, requesting almost $20 billion in how quickly agricultural economies have imposed strict land use control. compensation (Oregon Department can evolve. Many farmers have shown Some of the efforts have been quite of Land Conservation and Develop- remarkable adaptability in adjust- successful in slowing down develop- ment 2007). In an effort to reverse ing their enterprises to take advan- ment. For example, Wu and Cho or modify Measure 37, Oregon vot- tage of new economic opportunities (2007) found that local land use reg- ers approved Measure 49 on Nov. at the urban fringe. They farm more ulations reduced land development 6, 2007 to “ensure that Oregon law intensively in areas with high popula- by 10% in the five western states provides just compensation for un- tion density (Lockeretz 1988). More between 1982 and 1997, with the fair burdens while retaining Oregon’s than half the value of total U.S. farm largest percent reduction occurring protection for farm and land production is derived from counties in Washington (13.0%), followed by uses and the state’s ” facing urbanization pressure (Larson, Oregon (12.6%), California (9.5%), (ODLCD, 2008). Measure 49 es- Findeis, and Smith 2001). Idaho (4.7%), and Nevada (2.8%). sentially modifies Measure 37 by re- placing “waivers” of regulations with Urbanization has changed ru- A potential consequence of land use regulation is higher housing prices, authorizations to establish a limited ral communities in many places. In number of sites. some rural areas, urban sprawl has which make housing less affordable encroached to such an extent that the to middle– and low–income house- In sum, land use change provides community itself has been lost. In holds. There is sufficient evidence to many economic and social benefits,

4th Quarter 2008 • 23(4) CHOICES  but comes at a substantial economic tion water diversions have brought , fragmentation, cost to society. Land conservation is many species to the verge of and alteration associated with urban a critical element in achieving long– extinction. development have been identified as term and sustain- Forests provide many ecosystem the leading causes of de- able development. Land use policy, services. They support biodiversity, cline and species extinctions (Czech, however, must strike a balance be- providing critical habitat for wildlife, Krausman and Devers 2000; Soulé tween private property rights and the remove carbon dioxide from the at- 1991). Urban development and in- public interest. mosphere, intercept precipitation, tensive agriculture in coastal areas and further inland are a major threat Environmental Impacts slow down , and reduce soil erosion and flooding. These im- to the health, productivity, and bio- Land–use change is arguably the portant ecosystem services will be diversity of the marine environment most pervasive socioeconomic force reduced or destroyed when forests throughout the world. driving changes and degradation of are converted to agriculture or urban Policy Implications ecosystems. Deforestation, urban development. For example, deforesta- development, agriculture, and other tion, along with urban sprawl, agricul- Land use provides many economic human activities have substantially ture, and other human activities, has and social benefits, but often comes altered the Earth’s . Such substantially altered and fragmented at a substantial cost to the environ- disturbance of the land affects impor- the Earth’s vegetative cover. Such dis- ment. Although most economic costs tant ecosystem processes and services, turbance can change the global atmo- are figured into land use decisions, which can have wide–ranging and spheric concentration of carbon diox- most environmental externalities are long–term consequences (Table 2). ide, the principal heat–trapping gas, not. These environmental “externali- Farmland provides open space as as affect local, regional, and ties” cause a divergence between pri- and valuable habitat for many wildlife global climate by changing the vate and social costs for some land species. However, intensive agricul- balance on Earth’s surface (Marland uses, leading to an inefficient land ture has potentially severe ecosystem et al. 2003). allocation. For example, developers may not bear all the environmental consequences. For example, it has Urban development has been and infrastructural costs generated long been recognized that agricultural linked to many environmental prob- by their projects. Farmland produces land use and practices can cause water lems, including air , wa- both agricultural commodities and pollution and the effect is influenced ter pollution, and loss of wildlife open space. Although farmers are paid by government policies. Runoff from habitat. often contains for the commodities they produce, agricultural lands is a leading source nutrients, sediment and toxic con- they may not be compensated for the of both in inland and taminants, and can cause not only open space they provide. Thus, mar- coastal . Conversions of wet- water pollution but also large varia- ket prices of farmlands may be below lands to crop production and irriga- tion in stream flow and temperatures. their social values. Such “market failures” provide a Table 2. Environmental Impacts of Land–Use Changes justification for private conservation • Land use and practices have a major impact on natural resources including efforts and public land use planning water, soil, air, nutrients, , and animals and regulation. Private trusts and non • Runoff from agriculture is a leading source of water pollution both in inland and coastal waters profit organizations play an impor- • Draining for crop production and irrigation water diversions has had a negative impact tant role in land conservation. For on many wildlife species example, the American Farmland • Irrigated agriculture has changed the water cycle and caused levels to decline in Trust claims that it has helped to pro- many parts of the world tect more than one million acres of • Intensive farming and deforestation may cause soil erosion, salinization, desertification, and America’s best farm and ranch land. other soil degradations The Conservancy has - pro • Deforestation adds to the greenhouse effect, destroys habitats that support biodiversity, affects tected more than 117 million acres of the hydrological cycle and increases soil erosion, runoff, flooding and . ecologically important lands. How- • Urban development causes , water pollution, and urban runoff and flooding ever, some have questioned whether • Habitat destruction, fragmentation, and alteration associated with urban development are a private conservation efforts crowd out leading cause of biodiversity decline and species extinctions or complement public efforts for land • Urban development and intensive agriculture in coastal areas and further inland is a major threat conservation. to the health, productivity, and biodiversity of the marine environment throughout the world

 CHOICES 4th Quarter 2008 • 23(4) Land use regulation can take While federal spending on land– For More Information many different forms. The traditional related conservation programs has Cheshire, P., and Sheppard, S. (2002). command and control approach often increased substantially over the last The of land use involves zoning, density regulation, twenty five years, the federal gov- planning. Journal of Urban Eco- and other direct land use controls. Al- ernment has yet to articulate a clear nomics, 52, 242–69. though these policies can be quite ef- vision of how land use should be fective as regulatory tools, they could managed (Daniels, 1999). Most land Cho, Seong–Hoon, Wu, J., and lead to substantial social welfare loss use controls are in the hands of local Boggess, W.G. (2003). Measur- in the form of higher housing prices, governments in the United States, ing interactions among urbaniza- smaller , and inefficient land and the level of control varies con- tion, land use regulations, and use patterns (Cheshire and Sheppard siderably across counties and munici- public finance. American Jour- 2002; Walsh 2007). palities. Some local governments have nal of 85, 988–999. Incentive–based policies are in- few land use controls, while others are creasingly used to influence private actively involved in land use planning Czech, B., Krausman, P.R., and De- land use decisions. These policies may and regulation. vers, P.K. (2000). Economic as- include development impact fees, pur- Land use regulation is a conten- sociations among causes of spe- chases of development rights (PDRs), tious issue in many communities, cies endangerment in the United preferential property taxation, and particularly those facing rapid ur- States, BioScience 50, 593–601. direct conservation payments. From banization. Proponents argue that Daniels, T. (1999). When and 1998 to 2006, voters approved 1,197 land use planning protects farmland, country collide. Washington, DC: conservation initiatives in local and forests, , open space, Island Press. state referenda in the United States, and wildlife habitat and, at the same Glaeser, E.L., and Ward, B.A. (2006). providing a���������������������������� total $�������������������34����������������� ����������������billion��������� ��������for land time, increases property value and The causes and consequences of and open space preservation (Trust human health. Conversely, uncon- land use regulation: evidence from for Public Land 2007). The imple- trolled development will destroy the greater Boston. Harvard Institute mentation of locally based, long–term and long–term of Economic Research, Discus- conservation plans has been touted as economic growth. Critics of land use sion Paper Number 2140. http:// a critical element in achieving “smart regulation call those fears overblown. www.economics.harvard.edu/ growth” (U.S. Environmental Protec- They argue that urban development pub/hier/2006/HIER2124.pdf. tion Agency 2007). is an orderly market process that al- (accessed November 19, 2007) The incentive–based approach has locates land from agriculture to urban use, and that governments tend to Glaeser, E.L., and Gyourko, J. (2002). many advantages over direct land use The impact of zoning on housing af- control. For example, a development over regulate because they rarely bear the costs of regulation. The stakes are fordability. Harvard Institute of impact fee can be used to achieve Economic Research, Discussion both the optimal pace and pattern high in this debate. Any policy mea- sures that aim at curbing urban de- Paper Number 1948. http://www. of land development, a shortcoming economics.harvard.edu/pub/ of zoning regulations (Wu and Ir- velopment will ultimately affect a key element of the American way of , hier/2002/HIER1948.pdf. (ac- win, 2008). However, zoning may be cessed November 19, 2007) preferred from a practical viewpoint that is, the ability to consume a large as well as in cases where the environ- amount of living space at affordable Lisansky, J. (1986). Farming in an mental costs of land conversion are prices. Policymakers must resist the urbanizing environment: agricul- highly uncertain. In situations where temptation to attribute all “irregular” tural land use conflicts and rights the natural and human systems inter- land use patterns to market failures to farm, Human Organization, act in complex ways, thresholds and and impose stringent land use regu- 45, 363–71. nonlinear dynamics are likely to exist, lations that may hinder the function Larson, J., Findeis, J., and Smith, S. and the environmental costs could be of���������������������������������� market forces.�������������������������� They should try to (2001). Agricultural adaptation very high and sensitive to additional identify the sources of market failures to urbanization in southeastern development. In such cases, zoning that cause "excessive development" Pennsylvania. Agricultural and may be preferred. The policy chal- and address problems at their roots. Resource Economics Review, 30, lenge, however, is to know when the Land use regulation must strike a bal- 32–43. system is in the neighborhood of such ance between private property rights thresholds. and the public interest.

4th Quarter 2008 • 23(4) CHOICES  Lockeretz, W. (1988). Urban influ- Oregon Department of Land Con- Walsh, R. (2007). Endogenous open ences on the amount and structure servation and Development space amenities in a locational of agriculture in the North–East- (ODLCD). (2008). Measure 49 equilibrium. Journal of Urban ern United States. Landscape and Guide. http://www.oregon.gov/ Economics, 61, 319–44. ,16, 229–244. LCD/MEASURE49/docs/gen- Wu, J. (2006). Environmental ame- Lopez, R.A., Adelaja, A.O., and An- eral/m49_guide.pdf (accessed Au- nities, urban sprawl, and com- drews, M.S. (1988). The effects of gust 4, 2008). munity characteristics. Journal suburbanization on agriculture. Oregon Department of Land Conser- of and American Journal of Agricultural vation and Development. (2007). Management, 52, 527–547. Economics,70, 346–358. Measure 37. http://www.oregon. Wu, J., and Cho, S. (2007). The ef- Lubowski, R.N., Vesterby, M., Bu- gov/LCD/MEASURE37/about_ fect of local land use regulations choltz, S., Baez, A., and Roberts, us.shtml (accessed November 7, on urban development in the M.J. (2006). Major uses of land 2007). western United States. Regional in the United States, 2002. Eco- Soulé, M.E. (1991). Conservation: Science and , 37, nomic Information Bulletin No. tactics for a constant crisis. Sci- 69–86. (EIB–14). ence, 253, 744–50. Wu, J., and Irwin, E. (2008). Optimal Lynch, L., and Carpenter, J. (2003). Trust for Public Land. (2007). land development with endog- Is there evidence of a critical mass LandVote® http://www.tpl.org/ enous environmental amenities. in the mid–Atlantic agricultural tier3_cd.cfm?content_item_ American Journal of Agricultural sector between 1949 and 1997? id=12010&folder_id=2386 (ac- Economics, 90, 232–248. Agricultural and Resource Econom- cessed October 31, 2007) JunJie Wu ([email protected]) ics Review, 32, 116–128. U.S. Department of Housing and is the Emery N. Castle Professor of Re- Marland G., R.A. Pielke Sr., M. Apps, Urban Development. (2000). The source and Rural Economics in the De- R. Avissar, R.A. Betts, K.J. Davis, state of the cities 2000. Washing- partment of Agricultural and Resource P.C. Frumhoff, S.T. Jackson, L. ton, D.C.: U.S. Department of Economics at Oregon State University. Joyce, P. Kauppi, J. Katzenberger, Housing and Urban Develop- K.G. MacDicken, R. Neilson, ment. J.O. Niles, D.D.S. Niyogi, R.J. U.S. Environmental Protection Agen- Norby, N. Pena, N. Sampson and cy. (2007). and open Y. Xue. ( 2003). The climatic im- space conservation. http://www. pacts of land surface change and epa.gov/smartgrowth/opens- carbon management, and the pace.htm (accessed November 8, implications for climate-change 2007). mitigation policy. Climate Policy 3:149-157.

Figure 1. Changes in Major Land Cover/Use in the Contiguous United States 1982–2003

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