The effects of a FAR regulation in a model of durable building with redevelopment: The case of New York City

This paper investigates the partial equilibrium effects of a floor area ratio (“FAR”) regulation in a growing city with rising rents. We extend the standard urban land-use model with FAR regulation in the existing literature to a dynamic setting to provide additional insight into development patterns in a city with a regulation which restricts the maximum-allowed FAR. We show that a FAR regulation hastens construction and lowers the density of buildings, and we also find the effects of a FAR regulation on land value to be consistent with the existing literature. We then demonstrate the relationship between a FAR regulation and land value and the relationship between the regulation and development patterns in New York City. Our data shows that all else equal, a lower maximum-allowed FAR is correlated with lower land values, earlier demolition of buildings, and lower density of newly constructed buildings. • Demonstrate the relationship between a floor area ratio (“FAR”) regulation and land value and the relationship between the regulation and development patterns in New York City. • Show that a FAR regulation hastens construction and lowers the density of buildings. • Our data shows that all else equal, a lower maximum-allowed FAR is correlated with lower land values, earlier demolition of buildings, and lower density of newly constructed buildings.