External Benefits of Brownfield Redevelopment: An Applied Urban General Equilibrium Analysis

This paper models external benefits of the transformation of an inner city industrial site into a residential area in an urban general equilibrium framework Does brownfield redevelopment warrant government support? We model external benefits of the transformation of an inner city industrial site into a residential area in an urban general equilibrium framework, focussing on the removal of a local nuisance, the exploitation of agglomeration economies and preservation of open space at the urban fringe. These benefits are compared to the value of transformed land, which accrues to the developer. A numerical application indicates that local nuisance and agglomeration effects may push social returns significantly beyond these private returns. However, depending on the price elasticity of local housing demand, the amount of preserved greenfield land may be small and it only generates additional benefits to the extent that direct land use policies fail to internalize its value as open space.