Land Ownership Risk and Urban Development

Under certainty, unlimited duration of private ownership of land provides landowners with efficient development incentives. However, in cases of ownership risk arising from title mistakes, fraud, boundary encroachment, or adverse possession, the statute of limitations sets a limit on how long agents have to establish or defend an ownership claim. This paper demonstrates that such restrictions speed the pace of land development and systematically affect the development density according to site location in the urban land market. It also offers an explanation of why land owners prefer a time limit on the ability to defend their ownership. It shows that the value–maximizing statute varies across sites in the spatial market.