Discussing the role of urban renewal incentive policies based on housing price effects

Abstract

Although policies to reward urban renewal are essential, their effects are difficult to measure. This paper takes Taipei City's “bulk reward policy” as an example to illustrate that the effectiveness of this type of incentive policy can be measured by changes in housing premiums of the properties that meet the policy. The policy is a floor area ratio reward policy, which is adopted to encourage people to renovate their old and dilapidated houses, solving the problem of buildings and infrastructure wearing out. This paper uses a theoretical model of real options to illustrate the possible impact of this rewarding policy, which states that if the policy is effective, the buildings that meet the reward type will increase the housing price due to the increase in the probability of redevelopment. This paper uses 16,865 transaction samples from 2019 to 2020 to verify the effect of the incentive policy revised by the Taipei City Government on December 19, 2019. The empirical tests also provide evidence showing that the increase in rewards can indeed boost housing prices. Through the analysis of this study, we can quantitatively measure the effectiveness of reward urban renewal policies based on changes in housing prices of old houses to be renovated. It will not only show the market's response to policies, but also capitalize the effects of urban renewal policies, providing a way to compare the benefits of urban renewal policies with their costs using monetary values. Urban renewal policies often involve the interests of many people and are complex. This paper contributes to this topic by providing a method for evaluating policies from a financial perspective.