Optimization of regulation and fiscal policies for urban residential land use and traffic network management

Residential land use density regulation is an important policy instrument for reducing the local external diseconomies caused by concentration of population and buildings in urban areas. But density regulation also affects the distribution of population across the whole urban space, which determines the travel demands hence traffic flows over the transportation network in the city. In this paper, we formulate a model integrating the residential location choice equilibrium, traffic network equilibrium and the housing market equilibrium, subject to floor area ratio (FAR) regulation, a representative practical strategy for density regulation. The restriction of FAR regulation on housing supply is formulated as a development coordination cost function dependent on the level of FAR that is actually realized under the designated upper FAR limit. Complementary location-specific tax/subsidy policies, and road pricing schemes, are also addressed in a unified manner. The mathematical structure of the model is explored, and efficient algorithms are developed for solving the equilibrium equations, and for the optimization of FAR regulations and the pecuniary strategies.