Teardowns and Land Values in New York City

A “teardown sale” occurs when a buyer purchases a property intending to demolish the existing structure and rebuild. In cities where vacant land is scarce, teardowns can play an important role in redevelopment. Furthermore, as Dye and McMillen (2007) show, teardowns represent a unique opportunity to estimate land values in dense urban areas. This report examines teardown sales in New York City occurring between 1994 and 2006, and the analysis proceeds in two steps. First, we describe teardown activity, answering such questions as: To what extent has teardown activity increased in recent years? In which neighborhoods has teardown activity been concentrated? What types of lots are selected for teardown? Second, we use information from teardown sales to estimate land values in different neighborhoods. We find strong growth in teardown activity over the study period and find that land values have increased considerably since the late 1990s.