Teardowns and the value of land
The teardown has an image problem. Neighbors are aghast when an older structure is demolished and replaced was something new and most often larger. The historic preservation movement doesn't take kindly to McMansions rising. But teardowns in established neighborhoods with good density can be a green concept -- better than building something new in a cornfield miles away, smart growth advocates would argue. Teardowns take advantage of existing urban infrastructure. And while embodied energy is lost, demolition materials can be recycled; if the new building is energy efficient, so much the greener. Municipalities tend to like the increased property tax revenues from more robust assessments.
Yet another interesting dimension is revealed in teardowns: the value of the land where the doomed house sits. It's very often the location of the parcel, after all, that is so desirable -- the improvements on the land is what's replaceable. Teardowns in this context have been studied in detail by Lincoln Institute visiting fellow Daniel P. McMillen, who presented a paper on the topic at the American Economic Association conference in Chicago earlier this month. He is also author of a 2008 working paper on teardowns and a 2006 Land Lines article Teardowns: Costs, Benefits, and Public Policy. Vicki Been, Ingrid Gould Ellen, and Michael Gedal also have a 2009 working paper, Teardowns and Land Values in New York City, that builds on McMillen's work.
McMillen was part of a significant Lincoln Institute presence at the American Economic Association, the largest meeting of economists each year, along with visiting fellows Daphne Kenyon and John Anderson, and former board member Chip Case. Jim Follain, who delivered a fall Lincoln Lecture on his research on predicting housing bubbles, presented on that topic as well.