Restrictions didn't hurt land values

The premise of Measure 37 is that Oregon's land-use regulations have reduced property values. This, in the view of its supporters, entitles landowner to just compensation or waivers of regulations. Oregonians in Action, the chief opponent of Measure 49, asserts that "the planning system lowers the value of private property in Oregon by $5.4 billion a year."

We decided to look for evidence. Impacts of this magnitude should be easy to find considering that the annual value from all farmland in Oregon is, according to the U.S. Department of Agriculture, about $1 billion.

We gathered data on property values for hundreds of land parcels at three sites in Oregon (Lane, Jackson, and Baker Counties) and two in Washington (Lewis and Kittitas Counties). Our data stretch back over 40 years to include the period before statewide planning was adopted in Oregon. With this information, we can answer three basic questions:

1) Did the value of parcels with development restrictions, such as exclusive farm use zoning, go down? No. Except for during the recession in the early 1980s, inflation-adjusted values went up for all properties studied since the mid-1960s. For example, we examined fifty-five agricultural parcels outside of Eugene. In 1965, the average value of these parcels was $504 per acre (in 2005 dollars). By 2002, these parcels had been zoned for exclusive farm use. Their average per-acre value (in 2005 dollars) had increased to about $7,300.

2) Did parcels without such restrictions appreciate at a much faster rate? No. On average, parcels inside of urban growth boundaries (UGB) appreciated at about the same rate as those outside the UGB. For the parcels we examined inside the Eugene-Springfield UGB, there was, on average, a sixfold increase in their real (inflation-adjusted) per-acre value between the late 1960s and 2002. For parcels outside the UGB, there was a sevenfold increase, on average. While property values are higher inside of UGBs, our data indicate that this was also true in the 1960s before the planning system was adopted. The upshot based on our data is that a $1,000 investment back in the 1960s left you with about the same wealth today regardless of whether your land was ultimately incorporated into the UGB.

What about different types of zoning? Parcels with the least restrictive zoning are worth more than lands subject to more stringent zoning but, again, those differences existed before land-use regulations went into effect according to our data. Average rates of increase in property values were about the same for lands zoned for farm or forest use compared to lands zoned for residential development. Outside of Medford, the real value of the parcels we examined with exclusive farm use zoning had increased at an average annual rate of 4.27 percent over the preceding forty years. Parcels that are currently zoned rural residential had grown in value at a rate of 4.25 percent per year over the same period.

3) Did property values in Washington, which has much less stringent growth controls, appreciate more than similar parcels in Oregon? No. Our comparison of property values in Oregon and Washington revealed similar rates of increase (actually a bit higher for Oregon). For the parcels we examined near Medford, the average annual growth rate in real value was 4.55 percent. For a sample of parcels near Centralia and Chehalis, Washington, the average annual rate of increase in real value was 3.49 percent. On the east side of the Cascades, farmland prices in Kittitas County, WA and Baker County, OR have been about the same for the past several decades (currently, about $3,000 per acre). This is in spite of the fact that Kittitas County has higher population growth and much less restrictive controls on development.

How can this evidence be squared with anecdotes about reductions in value? Because of the complex ways that land markets work, it is easy to confuse the effects of land-use regulations with "after-the-fact" opportunities created by those same regulations. For example, regulations that limit the supply of developable lands may give the impression that lucrative development opportunities abound for property owners. However, as we have demonstrated elsewhere, this perceived increase in property value is not the same thing as a reduction in value due to the regulation.

What's the bottom line? Opponents of Measure 49 claim that Oregon's land use planning system is broken because it has caused widespread reductions in land value, but no data is provided to support this claim. When we went looking for the evidence, we found none.

William K. Jaeger and Andrew J. Plantinga are professor and associate professor, respectively, in the Department of Agricultural and Resource Economics at Oregon State University. Funding for this research was provided by the Oregon Community Foundation.

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