Rising Costs of Farmland Affecting Suburban Growth

As farmland prices skyrocketed, so did the cost of growing a suburb.
June 15, 2009, 8am PDT | Liyuan Huang
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Concerned with sprawl in in the 1980's, the Metropolitan Council in Minneapolis considered following the lead of Portland, Oregon by creating an Urban Growth Boundary. Framers owning land with sewer capacity outside the boundary knew that its value had just greatly increased. And when the supply of land is limited, they can name their own price.

"In the past, builders would look at the price of a finished lot, and assume that the house they built on it would cost a maximum of four times the finished lot price; a sort of "one-quarter" rule for land costs. If the lot cost $30,000, they would not build a home that ultimately cost more than $120,000.

The cost for the remaining buildable area would have been about $300,000 an acre. The numbers simply did not work out. Land prices had reached the breaking point. Since there was no possible way to profit, my 5% of zero would still be zero. I suggested that my client not do the deal, and saved him from financial ruin."

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Published on Friday, June 12, 2009 in New Geography
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