Version 1.1 (Last Revised: April 21, 2009)

I’ve been developing a theory and some terminology that I find very helpful in explaining urbanism to developers, city officials, and others who “don’t get it.” This document is a working copy of my theory, which I’m slowly but surely refining and improving. I’ll be adding diagrams and pictures to this page as I have time, so if you check back in the future it may have changed. I’ll keep the “last revised” date at the top accurate so you’ll know how fresh the text you’re reading is. I’d love to hear thoughts and comments, but please read the entire theory before arguing with me about it Thanks!

Background

First a bit about me and how I’ve come up with this: I have a undergrad degree in Environmental Design and a Master’s in Land and Real Estate Development, and I currently work as a real estate consultant in Houston. I’m an ardent advocate for good urbanism, and have a real passion for place-making, and I’ve invested a lot of time studying it.

Many of the people I interact with don’t have a good idea in their heads of what urbanism is or why it matters. I’ve found that it helps a lot to connect a lot of form and design related concepts to property values and financial figures. This helps people to see the impact design has on daily life beyond aesthetics.

As I’ve talked with people about these things I’ve slowly developed a theory that connects a lot of separate ideas and gives me a way to describe how they relate. For lack of a more intriguing title, I call this my Property Value Theory. Here it is:

The Theory

Two kinds of land

From an economic point of view there are two kinds of land: rural, and urban. The difference between the two is the way in which they are used, which determines the way in which they are valued.

Rural land is valued for its resource-productivity. This land is valued based on what it produces (food, water, minerals, etc) and the market value of those resources.

Urban land is valued for its people-productivity. This land is valued based on the activities it houses, and the market value of those activities.

This means that at a fundamental level all non-rural land becomes valuable based on how effectively it attracts human activity. For instance: Houses are valuable if people want to live in them. Bigger residential structures are more valuable as more people live in them. The more people want to live in a specific spot, the more valuable it will be. Unit value is a function of the difference between how many people would like to live in a place (demand) versus how many residences are available in that place (supply). Thus, the mansions in places like Beverly Hills command enormous price premiums.

*an aside: Natural land (undeveloped) produces resources that we think of as “free,” such as clean air and water. These resources are fundamental to Human life and extremely valuable, thus this theory helps provide economic justification for higher dollar value for pristine land.

For more on this aspect of the theory, you can read: Property Value Theory, Part 1: People-Productivity

Structures, Interfaces, and Conduits

Now, we all can see that property values can vary significantly from lot to lot or block to block, even when the base level desirability of a location should be the same for these individual properties. The reasons for these micro-level property value differences is the presence of manipulators.

There are three major manipulators: structures, interfaces, and conduits

Structures are the buildings on a property. Structures are used to meet the specific needs of an end user.

The relationship between structures (“improvements”) and property values is already pretty well understood, but here’s a quick example: when comparing between two similar homes each individual buyer will have different preferences, and the details of the structure (how many bedrooms, bathrooms, the quality of the flooring etc. etc.) will influence each individual buyer to make a final decision.

Interfaces are places for interaction. They are public spaces and the public areas of private property. Interfaces are the connections between structures and the outside world.

The relationship of interfaces and property values is not widely understood, but it’s critical. Interfaces are the strongest attractant, and therefore the manipulator most able to create property value. The simplest example is the way a new neighborhood, if all other factors were stable, would be expected to gain in value over time. Why? Because trees are great additions to interfaces, and the bigger trees are the more value they add. As the trees grow and provide shade and structure to a neighborhood street, the properties along it should gain value. This is because the quality of their interface would be improving.

Conduits are infrastructure links not used directly by people. They are rail lines, freeways, phone lines and sewer systems.

The relationship between conduits and property values is somewhat widely understood. Generally, conduits are what we think of when we think of infrastructure. The key to understanding these is to understand that “machine” spaces (like subway lines) are strictly conduits, whereas “shared” spaces like streets and boulevards contain both a conduit and an interface. A great multiway boulevard would contain both an efficient transportation conduit in its center and a high-quality interface along it sides.

Structures, Interfaces, and Conduits can be either attractant or repellent. Trees and flower gardens are attractant. Razor-wire fences are repellent (on purpose). Attractance creates value, and repellence dimishes value.

Different types of properties are more sensitive to different manipulators. For example, quality interface is the most important factor for residential properties. This is true even in rural areas. Imagine in your head an average family farm: despite being surrounded by acres and acres of open land, you’ll almost certainly find the area immediately surrounding the farm house is surrounded by a fence and has a landscaped and maintained yard. The connection between the structure and the outside world is always valued by residents.

Consider the chart below for some examples of different property types and their sensitivity. Remember, these indicate only the degree to which one factor is more important than the others, they are all relevant for every property type.

Manipulator Attributes

All manipulators have two critical attributes: radiance and displacement. The biggest most important difference is that radiance is the general impact on all end users, and displacement is the impact on a specific group of end users

Radiance is the degree of influence and area of influence a manipulator has on surrounding properties.

Structures have very low radiance, they will often have little or no impact on surrounding properties at all. For instance, an “ugly” house might slightly affect the purchasing decision of someone looking at the property next-door or across the street, but is unlikely to impact properties much farther away.

Interfaces are highly radiant, they have a significant impact on the values of surrounding properties, and this value has a tendency to spread. If a street is truly beautiful, every adjacent property is likely to be highly valued. If a street is very ugly, every adjacent property is likely to be somewhat undervalued, even if some individual structures on that street are highly valued.

Conduits have an inverse logarithm of radiance. They have a very high impact directly near them, and a slight impact on properties very far away. For instance, the presence of a major airport has a huge impact on properties nearby, and a slight impact on properties through the metro region it serves.

Displacement is the degree to which a manipulator attracts or repels a specific user-group. These are directly tied to specific elements of a structure, interface, or conduit and form a spectrum from VITAL to NOXIOUS.

Conduits tend to have the most noticeable occurrence of displacement, and comparing a freeway exit to a train station is perhaps the best example. Both freeways and train stations deliver people to a place. People are the most VITAL element, because nothing attracts people more than other people.

Freeways create a significant amount of noise, which is repellent in general, but specifically NOXIOUS to residential users (who need to sleep). Train stations are less NOXIOUS because they take up less space and generate less noise. Therefore if a freeway ramp and a train station could deliver the same number of people (VITALITY) to a place, the train station would generate more value because it is less NOXIOUS.

NOXIOUS elements displace specific users away from a site by repelling them. On the other hand, VITAL elements can displace specific users by “outbidding” them. Thus, as an area becomes more and more full of people you would expect to see certain uses get ‘pushed out’ by others, such as residences being replaced with shops.

The biggest most important difference between the two manipulator attributes is that radiance is the general impact on all end users, and displacement is the impact on a specific group of end users. Also, displacement impact can be mitigated, whereas radiance cannot.

For more on this, you can read: Property Value Theory, Part 2: Interfaces and Conduits

Putting the Theory into Practice

Good urban design is about building strong interfaces to stitch together structures and conduits. Any designer or architect can benefit from understanding the function of each, and how to communicate the value created by design to clients who may not ‘get it’ at first.

The New Urbanism movement is mainly about building strong communities that are supported by strong interfaces. This is often seen as a subjective art, but we’re fortunate that many leading thinkers have invested significant time and energy in observing and reporting what works and what doesn’t when it comes to urban space.

In Part 3 of my intial look at Property Value Theory, I looked at some of the lessons from Jane Jacobs and William Whyte, and combined those together into a list of characteristics for attractant places. These are: mixed-use; small blocks; sitting space; sun and shade; motion, color and texture; sound; food; niche facilities; layers and vistas.

If you’d like to read more about that, try: Property Value Theory, Part 3: Places that Attract People.

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Now, this is my own theory of how property values are created. It’s a living, breathing, work-in-progress, and I’d really love to discuss it with anyone who finds it interesting.
If you find this idea helpful I’d love for you to use it, but if you don’t mind I’d appreciate your attribution of the idea, as well as a link to my blog at http://www.neohouston.com.

Speaking of attribution: Where an idea that inspired my thinking came directly from another source I’ve attempted to give credit. I think I’ve covered everything, but I don’t want to be seen as claiming credit for any portion of the idea that came from somewhere else. That said, I read a lot and have been influenced by many people, and if you read this and think: “that part is exactly the same as what _______ said in his book,” and I haven’t given sufficient credit, please let me know.

Thanks for reading, and I appreciate your feedback!

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Change Log:

April 21, 2009: Added charts to illustrate radiance and property type sensitivity. Updated formatting a bit.