Inversion of the Land Gradient in the Inner City of Haifa, Israel, The

Journal of Real Estate Research, The, Oct-Dec 2003 by Plaut, Pnina O, Plaut, Steven E

Abstract While suburbanization and decentralization are familiar concepts in urban economics, there is a possibility that land gradients will not simply flatten over time, but actually invert themselves. This would mean that the traditional CBD or downtown ceases to act as the pinnacle or nucleus of the land/housing pricing function within the metropolitan area. Such a possibility has been noted in the theoretical literature and has been demonstrated empirically in a few cases. Such an urban "inversion" is shown to have occurred in Haifa, Israel. Beginning in the 1960s, the stock of privately-owned cars grew in Israel at one of the most rapid rates ever seen in any industrial country, with relatively little growth in transportation infrastructure.

Introduction

Urban economic theory is largely based on the classic theory of a monocentric circular urban or metropolitan area with a single central business district (CBD), built largely on the models first developed in the research of Alonso (1964), Beckmann (1969, 1974), Mills (1972a, b), Muth (1969, 1975), Solow (1973), and others. In these models, urban land and housing are priced as a downward (usually concave; often negative exponential) function of distance from this single urban center or CBD. In other words, "accessibility" to the CBD is the main argument in the locational demand function by households and other land users (commercial, industrial, etc.), who bid for land and housing. This generates the "land-rent" gradients, which describe prices at different distances from the CBD

While later urban models recognized the roles of secondary "centers" in the metropolitan area, the CBD generally plays a critical role even in such polycentric models. There is debate in the literature as to what actually "drives" the demand for accessibility or proximity to the CBD. In the earliest papers, the CBD was envisioned as a transportation terminal, such as a railhead or water port, and real goods had to be transported either to this terminal, or from it. Thus, transportation costs would increase with distance from the terminal and consequently bids for land would decrease. Accessibility would be "traded off" for higher prices for land and housing.

In later versions of the classic model, the CBD is an employment and commercial district, to which people must commute in order to engage in employment and/ or shopping. The CBD could also represent the nucleus of agglomeration economies (Calem and Carlino, 1991). Once again accessibility to the CBD is the major locational pricing factor for which people are willing to pay a premium through housing prices, and so distance from the CBD is associated with diminishing land and housing gradients. The CBD remains the pinnacle or nucleus of the land pricing gradient, with the highest prices for land in the metropolitan area. The "inner city" is then the area in proximity to the CBD.

While the "central location" model of urban economics continues to dominate much of the thinking about urban structure, there has also arisen a body of literature that shows that under certain circumstances it is possible for land gradients to "invert" themselves, and so for housing and land prices to increase with distance from the "downtown" or CBD instead of diminishing. In many cases this is presumed to stem from neighborhood effects, such as crime or socioeconomic traits of people in "inner city" neighborhoods, or from aging and deterioration of the housing stock in proximity to the downtown. Among those who have investigated the possibility of land gradient "inversions" have been McDonald and Bowman (1979), McDonald and McMillen (1990) and McMillen (1996). Much of the empirical investigation of land gradient inversion has been for the city of Chicago, where such an inversion appears to have occurred. There have been few investigations of inversions in other places.1

Discovery of inversions in other places is important for a number of reasons. Inversions imply the loss of locational comparative advantage for downtown areas, implying significant changes in urban structure, including changes in the nature of the "inner cities." The factors that create inversions are also of interest. Are these the same across those cities in which inversions occur? Are inversions more likely to occur due to ecological factors, socioeconomic factors, or transportation system factors? Would inversions outside the United States occur for reasons similar to those cases occurring in the U.S.?

In this article the occurrence of a land gradient inversion is documented for Haifa, Israel. The land gradient for the city appears to have been a "normal" one at least until the early 1970s and the "inner city" decidedly middle-class. But by the late 1980s the gradient appears to have inverted. The inversion occurred following a dramatic change in the transportation system and in particular a very rapid increase in private car ownership relative to road infrastructure and parking availability in traditional downtown areas. The documentation of the occurrence of an inversion outside the U.S. implies that such phenomena may not be as anomalous as has been thought.