Are profits from subdivision development higher in areas with more regulations? A case study of South Kingstown, Rhode Island and some implications for land use planning

• Published in: Housing policy debate 2010-06, Vol.20 (3), p.429-456
• Main Author: Mohamed, Rayman
• Format: Article
• Language: English
• Subjects: Case studies; Competition; construction/building; Correlation analysis; Development; Housing developments; Land use; Land use planning; Market; Profit; Profits; Real estate; Regulation; Social policy; Studies; U.S.A
• ISSN: 1051-1482; 2152-050X
• DOI: 10.1080/10511481003788703

Little is known about the relationship between land use regulations and profits from subdivision development. Using data from a heavily regulated market, this article presents analyses that for the first time determine actual profits from subdivision development. This study found an average profit, measured by internal rates of return, of 29%, which is statistically greater than what scholars consider normal. Profits decreased as time to complete the subdivision increased. Profits also decreased because of delays due to regulations and voluntary decisions by developers. The findings suggest that higher profits could be attainable in more-regulated areas because regulations may create amenities whose value exceeds the costs of providing them, while the same regulations may make it difficult for outside developers to enter the market thus limiting competition among developers. The findings suggest that policy makers should be cautious about regulations that create amenities when these regulations may inhibit competition among developers.