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Home » Library » The Market Acceptance of Single-Family Housing Units in Smart Growth Communities

The Market Acceptance of Single-Family Housing Units in Smart Growth Communities

The authors examined whether a price premium seen in conventional versus smart growth neighborhoods in Maryland would be sustained over time. They found that between 1997 and 2005, the houses in the smart growth neighborhoods sold for 16.1%, and 6.5% more than comparable houses in surrounding conventional developments. During this period, the price premium for both communities was sustained or increased, indicating a strong and sustained market acceptance of single-family housing units in smart growth communities.
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Study Conclusions:

This study analyzed whether the smart growth price premium embedded in single-family home prices established earlier in the literature is sustained over time. Prices of single-family homes in two smart growth developments were compared with comparable homes in surrounding conventional developments. Using the hedonic price methodology, approximately 30 control variables, and 4,744 actual single-family sale transactions in the years 1997 to 2005, a price premium  of 16.1% and 6.5%, respectively, was found for the two smart growth communities. The price premium for the two smart growth communities is sustained or increasing over time, indicating a strong and sustained market acceptance of single-family housing units in smart growth communities.

While the study finds that homebuyers are willing to pay a premium for houses located in smart growth communities, there are several caveats:

  • No conclusions regarding the profitability of developing smart growth communities can be drawn directly from the findings. To assess profitability, one also needs to take into account the possible differences in sales velocity, as well as development costs, between smart growth and conventional projects. However, data from sales premiums can offer production homebuilders pricing strategies for units in subsequent phases or new smart growth communities.
  • The analysis measures the combined effect of all smart growth features available in the Kentlands and Lakelands communities, but does not assess the impact of individual ones. Simply offering a subset of smart growth features does not necessarily generate the price premium proportionately.

Further research is necessary to address these issues.


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Last modified by Gayle Diehl

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