The Land Value Gradient in a (Nearly) Collapsed Urban Real Estate Market

This paper uses data on thousands of vacant land sales to explore the pattern of land values in the City of Detroit. The analysis provides several insights, first of which is the documentation of a U-shaped land value gradient. Land values are relatively high in and near the central city (CBD), but the land value gradient is very steep; estimated land values drop precipitously to less than $1,000 for typical sized lot in vast the “donut” area surrounding the CBD. However, land values begin to rise near the city’s border; higher land values there are associated with better access to suburban amenities such as shopping (largely unavailable in the city), and employment. The estimates highlight the importance of the peripheral neighborhoods to the property tax base; policymakers would do well to implement policies that help sustain these neighborhoods as well as continue efforts to revitalize highly valued CBD.