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Land Use Policy 59 (2016) 580588

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Small town resilience: Housing market crisis and urban density in

Valentina Antoniucci (Postdoctoral research fellow) ,
Giuliano Marella (Assistant Professor)
Department of Civil, Environmental and Architectural Engineering (DICEA), University of Padua, Via Venezia 1, 30151 Padova (Pd), Italy

a r t i c l e i n f o a b s t r a c t

Article history: Since the 1990s, city development has been promoted through densication processes by both local
Received 29 April 2016 authorities and private investors in Europe and USA. This trend began in a boom phase of the real-estate
Received in revised form 29 July 2016 market, sustained by high market demand and high prices. The aim of the present study is to see how
Accepted 6 October 2016
the market has responded to six years of economic recession in Italy and whether urban form has a
relationship with housing market performance. Is urban density still preferable in terms of the economic
sustainability of investments? Or has the demand side of the market changed its behaviour? To elucidate
Housing market
this issue, we perform a multivariate regression and a cluster analysis on housing price variations from
Urban density
Multivariate regression
2008 to 2014 with a dataset of economic and urban structure variables concerning the 114 most important
Real estate Italian cities. The results suggest that housing market in less dense cities is more resilient and affordable
Resilience than in denser cities during a recession phase. This phenomenon should be taking into account by local
public authorities addressing and promoting urban development.
2016 Elsevier Ltd. All rights reserved.

1. Introduction interest in major cities; nowadays, the huge private investments in

megalopolises around the world are well known.
Nowadays, 53% of the worlds population lives in cities that This trend began in a boom phase of the real-estate market. Neo-
occupy only 2% of the Earths surface (Source: World Bank, 2015). classical economic theory clearly explains why investments are
For several reasons far beyond the scope of the present contribu- concentrated in central business districts: land and building unit
tion, high urban density seems to have been more successful than prices are higher in city centres and the most densely populated
any other urban planning pattern, on a global scale at least (Burdett metropolitan areas, due to the market demand from households
and Sudjic, 2011). and rms, which are concentrated in the larger cities.
Since the 1990s, city development has been promoted through This paper investigates the relationship between housing price
densication processes by both local authorities and private variation and urban density during a bust phase of the real-estate
investors in Italy as in the rest of Euro - Area. On the one hand, market, which spread worldwide from the US, starting in 2008
urban planners have encouraged the re-use and regeneration of (Aalbers, 2009). Is there a pattern of price variation related to urban
brownelds and abandoned urban areas to tackle the increasing density? Does it correlate with a slowing or a speeding up of the fall
urban sprawl in North America and Europe (Burchell and Listokin, in prices? If this relationship actually exists, is it relevant to urban
1995; Simmie et al., 1992; Nelson et al., 2004). Therefore, Even the development policies?
strictest urban containment policy, [. . .] may be viewed as encouraging We analyse the inuence of urban form on price trends in Italy
development in selective locations (Millward, 2006). On the other during a period of economic crisis (20082014) by means of a mul-
hand, nancial institutions and private funds have renewed their tivariate regression and a cluster analysis. Economic variables and
urban structural features are tested on a sample comprising Italys
114 provincial capitals. To develop the model, we design an original
urban density index using ofcial data on urban structure, instead
Issues such as these have more to do with the dynamics of uids than the mechanics of using proxy such as population gures.
of solids Alonso, 1971 The model generates some unexpected results on the present
Corresponding author. market trend vis--vis urban structure. The variation in housing
E-mail addresses: (V. Antoniucci), prices and its relationship with urban density provide an indica- (G. Marella).
0264-8377/ 2016 Elsevier Ltd. All rights reserved.
V. Antoniucci, G. Marella / Land Use Policy 59 (2016) 580588 581

tor of the potentially diverse resilience of cities in the wake of a ning (Reis et al., 2015; Kasanko et al., 2006) and urban economics
downturn in the economic fundamentals. (Brueckner, 2000). It relates to the role of soil consumption, con-
The paper is organised as follows. Section 2 provides a literature gestion and transportation costs, and to the relevance of human
review and Section 3 outlines how our urban density index was capital concentration in the denser cities (Glaeser et al., 2001;
constructed. The data and the results of the model are contained Glaeser and Saiz, 2004; Glaeser, 2011). Property market trends vis-
in Sections 4 and 5. In Section 6 we discuss the meaning of the -vis urban density are the consequence of factors such as peoples
relationship between urban density and housing price variation. and rms agglomeration decisions. Analyses have usually relied
The paper concludes with a summary and some suggestions for on historical price series to investigate urban growth, even on an
future research. inter-metropolitan scale. This kind of monocentric city is the idea
of city on which most local urban policies are implicitly grounded
on. So it is relevant to test and discuss the adequacy of such a model,
2. Economic fundamentals of urban density facing a signicant change in the economic framework.
To our knowledge, this is the rst attempt to test whether hous-
The denition of density depends on the research focus and, ing markets have different trends associated with different urban
even within the same research eld, the literature provides multi- densities across cities during a period of severe economic down-
ple and contentious denitions. As Burton argues: On this matter turn.
the theorists are rarely specic and often differ (2002, p. 223).
Here we consider urban density as one of the main features of
urban form and city growth, while some scholars identify density 3. Measuring urban density
and its opposite, sprawl, with urban form per se (see among others
Reis et al., 2015). Specically, we take into account the net density, The aim of this analysis is to measure the relationship between
or the built-up area of a city (Burton, 2002), but it is worth briey urban density and housing price variation using variables drawn
outlining the other interpretations of urban density too. from cross-sectional data for the years from 2008 and 2014, derived
Urban density is a feature widely studied in urban economics, from both economic and urban structure datasets. According to the
and the reason why land and housing prices are higher in city literature, this method is preferable for describing and predicting
centres, where urban density is traditionally higher, has been the phenomena in a given period, and especially for boom and bust real-
focus of neoclassical economic theory and spatial analysis, giving estate market analyses (Fernndez-Kranz and Hon, 2006; Goodhart
rise to various theoretical models (Alonso, 1964; Capozza, 1989; and Hofmann, 2008; Mikhed and Zemck, 2009). It is well known
DiPasquale and Wheaton, 1996; Fujita, 2010). The core issue is that using cross-sectional data can pose problems with the tempo-
which economic factors affect urban growth (Harrison and Kain, ral and spatial properties of the data (Beck and Katz, 1995), but
1974; Fujita, 1982, 1989; Capozza et al., 1986) and city growth bias in ordinary least squares estimations is signicant for long
dynamics. These models are based on a monocentric city where periods across different countries. Here, we present a model that
labour, rms and essential infrastructure are concentrated, and describes variations over a short period of six years in just one coun-
with the same accessibility in all of its central areas. This type try. In addition, the phenomena analysed, such as prices, per capita
of city is generally used as a basis for models that formalise the income, and population variation, are liable to only modest varia-
density function (Holden and Parr, 2013), and for the optimal city tions over time, particularly in such a short period as the one taken
size theory, which claims that urban size is the fundamental deter- into account.
minant of urban location costs and benets (Capello and Camagni, In this research, we consider urban density as the built-up area
2000). The size of a city (not its form) is studied to ascertain the of a city, which is also known as net density (Burton, 2002). It is
threshold where negative externalities of agglomeration are com- well known that the most often supported interpretation of den-
pensated by the benets it affords (Arnott and Stiglitz, 1979; Fujita, sity is gross density (Burton, 2002), which is the number of people
1982, 1989). This stylised type of city has been criticised because occupying a given spatial unit. We judge net density to be more
the static framework on which it is based fails to consider differ- appropriate for the purposes of our research, however, for theo-
ences between cities in terms of their specialisations and functions retical reasons: the population per square kilometre is misleading
(Henderson, 1996). These models are also unable to recognise city because of potential differences between a citys administrative
hierarchies and networks in their spatial organisation (Camagni, boundaries and its actually populated, built-up area; so dening
1993). Such an approach underpins urban density as one of the density as the built-up area of a city is more appropriate for the
main features of urban size, but it is only taken into account in terms purpose of identifying the real-estate component of urban density.
of the collective costs (or negative externalities) and benets of The focus is on how to identify the right way to measure urban
agglomeration. It does not consider real-estate market fundamen- density in such a multivariate regression. As well as different
tals or the differences between them depending on a given citys denitions for density, there are also several possible indicators
density, or even its size. for interpreting each type of density. Whatever the denition of
The dynamics of real-estate prices, and housing prices in par- density adopted, the vast majority of indicators are based on pop-
ticular, are widely considered in terms of market equilibrium ulation, be it within a citys administrative area or its built-up area.
(DiPasquale and Wheaton, 1994) and disequilibrium (Riddel, 2004). This is true of most models of urban spatial structure, based on
The relevance of supply (Mayer and Tsuriel Somerville, 2000) and the Beckmann and Alonso framework (Alonso, 1964; Beekmann,
demand (Wheaton, 1977; Anas, 1978) is addressed to predict price 1969), including the theoretical works (Mills, 1970; Muth 1969;
trends (Case and Shiller, 1989), urban growth (Thompson, 1968), Capozza, 1989) and empirical tests stressing the assumption that
and noise factors in property markets. Such research rarely asso- urban growth is a matter of equilibrium/disequilibrium. Population
ciates cities actual urban density, in terms of built-up area, with is also used as an indicator for urban density in empirical analyses
their price dynamics, and the city structure adopted in the models on inter-metropolitan variations in housing prices (Potepan, 1996),
is sustained not by empirical evidence, but merely by a theoretical and to explain city growth in terms of agglomeration theories
framework. (Glaeser and Resseger, 2010) and territorial competition (Glaeser,
Comparing cities in terms of urban density is crucial in the 2011).
debate on density (Goodman, 2005; Tsai, 2005) versus sprawl We design a different variable for representing urban density,
(Ewing and Hamidi, 2014; Galster et al., 2001) in urban plan- which is expressed as the ratio of housing units per residential
582 V. Antoniucci, G. Marella / Land Use Policy 59 (2016) 580588

Table 1 Table 3
Descriptive statistics for prices of existing buildings (euro/m2 ). Descriptive statistics for adjusted number of transactions.

2014 2008 deated Variation 2008-14 Mean 34.65%

Std. Dev. 11.77%
Mean 2210.01 2350.19 4.90%
Minimum 60.81%
Std. Dev. 834.738 951.176 7.83%
Maximum 3.58%
Minimum 933.333 1080.55 29.03%
Maximum 5708.33 6289.47 24.17%

Table 2 tral, semi-central and suburban areas, but we averaged them for
Descriptive statistics for prices of new buildings (euro/m2 ). each city.
The period taken into account is related to the rst year
2014 Mean 2008 deated Variation 20082014
2008of real estate market downturn, in terms of take-up and
Mean 2762.35 2954.28 5.87%
prices, and the last year 2014when these parameters have both
Std. Dev. 1040.45 1211.53 7.03%
Minimum 1233.33 1279.83 28.65%
negative sign. To compare these data over time, we use the ina-
Maximum 6800.0 8410.33 16.76% tion index provided by Italian National Statistics Institute (Source:
Istat, 2015). The same source is also used to obtain some of the eco-
nomic and all of the urban structure data. A rst dataset, collected
building. To our knowledge, this is the rst attempt to measure city by city, includes population, per capita income, number of rms,
density using a parameter other than population per built area. The employment rate, and construction cost index. The total amount of
latter is not helpful for our purposes because it is used primarily to debts and savings by city is obtained from the Italian Central Bank
measure land consumption and sprawl control, i.e. with GIS, in fast- (Source: Banca DItalia). The urban structure data include: city area
growing countries such as China and India (Sudhira et al., 2004). in square kilometres, number of buildings, number of residential
The method assumes a population growth driving a strong market buildings, number of uninhabited and/or uninhabitable buildings,
demand for housing, which is not the case of the Italian urban sce- total number of housing units, total surface area of residential units,
nario and does not describe the three-dimensional variable that we number of housing units built before 1945 and between 2001 and
want to capture. 2011. The data relating to urban structure are up-to-date as at 2011,
There are both empirical and theoretical reasons for our choice when the ISTAT conducted the last national survey on housing and
of the housing units per residential building ratio: most of Italys population (usually repeated every ten years).
main cities have a population of less than 100,000, even in cities The mismatch between the periods concerning the housing
with broad administrative boundaries; on the other hand, due to its price variations (20082014) and the urban structure (up to 2011)
territorial orography, the countrys cities with a high urban density undeniably introduces a bias in the model but its effect is relatively
are relatively small in terms of surface area and population, which small because the Italian building industry is far less dynamic than
consequently may not be appropriate parameters for measuring the British and US markets, especially in times of economic crisis.
the real urban density of Italian cities. From 1998 to 2008when a property boom was in full swing - the
In addition, the aim of this paper is to assess whether housing maximum incidence of the housing units traded was about 3% of
market trends differ for different urban densities specically during the whole stock of housing units in Italy (source: Osservatorio del
a bust period. Alonso clearly states that using density rather than Mercato Immobiliare, Agenzia delle Entrate [Italian Research Centre
size is a mistake because it is only a measure of the local agglom- on the Real Estate Market]). The Italian building industry has shrunk
eration intensity ratio, which overlooks the interrelated elements considerably since 2008, with a drop in investments of around 32%,
affecting city growth (Alonso, 1971). But Alonsos goal was to deter- meaning a loss of around D 62 billion (Source: Ance, 2014). Given
mine the ideal size of a city, whereas here we aim to ascertain how the long-term stability of the Italian housing market and the losses
this agglomeration intensity ratio is related with housing markets on investments in construction, the model will assume that there
during a crisis. were no substantial variations in the numbers of new housing units
Promoting urban regeneration and zero land taking up to 2050 and residential buildings constructed from 2011 to 2014, and that
by means of a densication process is one of the goals on the the 2011 data are acceptable as a proxy of 2014.
EU Urban Agenda (Calafati, 2011) and the Seventh Environmen- Finally, data representing housing market vivacity are drawn
tal Action Programme, adopted with various interpretations in the from the Osservatorio del Mercato Immobiliare - Agenzia delle Entrate,
urban policies of most local administrations. which is a branch of the countrys Inland Revenue Department. In
The public authorities have to consider the market when they detail, these data concern: the IMI index (the ratio of the number
promote a certain type of urban development: are the proposed of housing units sold to the total housing stock), and the NTN index
urban transformations sustainable from an economic perspec- (the number of standardised transactions). The latter index is avail-
tive in a country with poor economic fundamentals? Could these able for all cities except Bolzano, Trento, Trieste and Gorizia, which
projects and strategies withstand the impact of a housing market are located in autonomous regions that do not make these data
crisis? publicly available.
The price trends on the housing market in Italy are consistent
4. Data with those of other European countries with boom-bust cycles
in real-estate markets, such as Ireland, Greece, Spain, France, and
Our analysis is based on various datasets obtained from of- the Netherlands. Compared with some other countries, Italy expe-
cial sources and concerns 114 Italian provincial capitals. Each citys rienced a property boom phase despite a low-growth economy
administrative boundaries are considered in order to collect data (Hartmann, 2015) due to numerous longstanding characteristics
properly from institutions and research centres, although these of its State structure and national economy.
boundaries could give rise to a bias (as discussed later on). Aver- The analysis of the housing prices during the years 20082014
age prices for new and existing homes in 114 major Italian cities reects the fundamental features of the Italian housing market:
are drawn from Consulente Immobiliare, an Italian real-estate jour- prices are higher, for both existing and new units, in Northern Italy,
nal that publishes average prices for large and middle-sized Italian and lower in the South and Islands (Sicily and Sardinia). This reects
cities every six months; these prices are given separately for cen- the longstanding dichotomy of the Italian economy (Felice, 2011).
V. Antoniucci, G. Marella / Land Use Policy 59 (2016) 580588 583

Table 4
Descriptive statistics for economic and demographic variation factors.

Variation in Variation in per Variation in Variation in Variation in bank Variation in bank

population capita income number of rms employment rate deposits loans

Mean 2,333.08 0.036 0.005 0.036 0.163 0.005

Std. Dev. 13,953.7 0.013 0.135 0.119 0.254 0.528
Minimum 14,213 0.069 0.091 0.215 0.574 0.629
Maximum 138,975 0.020 1.395 0.607 1.054 5.161

Price variations during the crisis years are fairly homogeneous all Table 5
Variables tested in the model.
over the country, however. Judging from the data collected, there
is a small downturn in housing market prices in the two market Dependent variable (y) Measure Unit
sub-segments - existing stock and new builds - but nationwide Housing price variation (existing and new units) D /sqm
the range of variation is signicantly wider for the former (see
Independent variables (x)
Tables 1 and 2).1
Population variation number
The slight decrease in prices is associated with a sharp fall in City area km2
the number of transactions, as shown in Table 3, suggesting that Income per capita variation D
prices are still adjusting to a weak and uncertain market demand. Firms variation number
Employment index variation %
The average reduction in the number of transactions is 35% since
Bank savings variation D
2008, but the decrease is above the mean for 46 cities where data Bank loans variation D
was collected. Standardised housing units transactions (NTN) number
The amount of price variation for new and existing housing units Housing units sold on total housing stock (IMI) number
is fairly similar. The phenomenon is therefore of national relevance, Buildings number
Residential buildings number
even taking the well-known disparity across Italian macro-regions
Housing units number
into account. Total housing unit surface area m2
The downturn in prices has had two peaks: the rst in 2008 Housing units built before 1945 number
during the US sub-prime crisis, the second in 2011 when Italy expe- Housing units built during 2001 - 2011 number
Urban density (housing units per residential building) number
rienced a severe sovereign debt crisis. By comparison with other
EU countries, Italy has seen a slower decline in prices, due mainly
to the particular features of its housing ownership: about 73% of
ings, total area of housing units, number of units built before 1945
all housing units are owned by families and individuals (Source:
and during the boom years from 2001 to 2011. The reason for
Istat, 2015), as opposed to 65% in the UK and France, and 53%
using these data is to test whether and how the other urban struc-
in Germany (Source: Statista, 2013). Where more properties are
ture components correlate with price trends, and to elucidate their
owned by institutional investors and funds, house price adjust-
relationship with the economic framework.
ments correlate more closely with investment decisions than with
The following Table 5 summarizes all the data tested in the
individual pReferences
model. As it is stated below, only some variables are included in
As in the literature (see, among others, Davidoff, 2006;
the nal model results.
Engelhardt, 1996; Ortalo-magn and Rady, 2006), we analysed
These data are far from homogeneous due to the huge diversity
the variation in population (given that population is one of the
of Italys main cities in terms of their territorial extension, orogra-
major drivers of prices), and the main economic features that may
phy, and so on. To give an example, the cities urban surface area for
affect housing price trends: the following parameters reect the
administrative purposes varies from 20.8 km2 for Sondrio (a small
downturn in the housing market and in the general economy coun-
town close to the Alps in the Piemonte region) to 1287 km2 for
trywide from 2008 to 2014 (see Table 4).
Rome (the largest city in Europe in terms of the area it covers).
The mean population increased slightly, while the 25th per-
In Italy, urban governance and planning focus more on single
centile represents a decrease of about 1000 inhabitants per city,
towns than on metropolitan areas incorporating the largest cities
and the 75th percentile is over 1500 population units. Only the
(as in Northern Europe), so our model is affected by a consider-
95th percentile describes an increase in the city population over
able data variability. This is necessary, however, in order for any
11,500 units.
national-scale housing market trends to emerge.
All the economic data apart from bank deposits have a nega-
tive sign: this may reect a prudential behaviour on the part of
households and rms, partly due to more restrictions on credit and 5. Urban density matters
loans, which reached a peak 63% decrease in 2014 by comparison
with 2008. During the property boom phase, a signicant allocation of pri-
The other variables included in the model are territorial (popu- vate and public investments went into urban regeneration and
lation variation, cities administrative areas) and representative of renewal across city centres, after 25 years of nationwide urban
the urban structure of the cities, i.e. number of buildings, number sprawl. How are these investments performing now, after six years
of residential buildings, number of unoccupied/abandoned build- of weak market demand and poor economic fundamentals? To test
whether housing price variation correlates somehow with urban
density, we perform a multivariate regression on the economic and
urban structure data for the 114 most important Italian provincial
The following Tables 1 and 2 represent descriptive statistics of housing prices capitals.
(existing and new buildings respectively) during 2014, 2008, and the variation of The greater the urban density of a city, the higher the abso-
prices between these years. It is worth to precise that the minimum and maximum lute housing values (Glaeser et al., 2006; Peiser, 1989; Dawkins
value in the last column do not represent the variation of other columns values,
while it is the lowest and highest prices variation of prices in the sample of data.
and Nelson, 2002), but our test reveals that cities with the great-
These variations do not coincide with the minimum and maximum price in 2014 est urban density have also experienced the most severe decline in
and 2008. housing prices. There is a signicant negative relationship between
584 V. Antoniucci, G. Marella / Land Use Policy 59 (2016) 580588

Table 6 Table 7
Estimation of price variations for new housing units from 2008 to 2014. Estimation of price variations for existing housing units from 2008 to 2014.

Dependent variable: price variation for new housing units Dependent variable: price variation for existing housing units

Coeff. T - Value Coeff. T

Constant 136.268b 2.00247 CONSTANT 137.212a 2.11555

Variation in per capita income 0.150951a 2.97328 Variation in population 0.00222b 1.78339
Variation in population 0.007082a 5.58659 Log (urban density) 248.068a 2.54814
Log (urban density) 251.533b 2.54937 Variation in per capita income 0.11713a 2.35893
Variation in number of rms 260.295b 1.98957 Variation in the employment rate 359.47a 2.4742
Variation in bank deposits 0.021616a 5.74219 Variation in the number of rms 218.741b 1.69511
N 114 N 114
R2 0.57 R2 25.7947
R2 adj. 0.55 R2 adj. 22.3592
a a
99%. 95%.
b b
95%. 90%.

The high variance in the data and the structural differences

urban density and price variation. As shown in Table 6, an increase amongst the major Italian cities warrants further analysis to see
in urban density coincides with a severe drop in prices. To con- if there is a territorial pattern of price variation and, if so, on what
rm the inadequacy of population as prevailing indicator for urban grounds.
density focusing on housing market, our model demonstrates that Two different hierarchical cluster analyses were used to iden-
- even if the population and density estimates have the same sign tify groups of cities around the country that behave differently.
- their magnitude is completely different. The increase in the pop- In the rst test, we applied the k-means cluster algorithm, as in
ulation has a slight negative effect on prices. The other economic Abraham et al. (1994) and Goetzmann and Wachter (2001), who
variables conrm the rational behaviour of households and rms applied this method to residential housing indices to identify mean-
during the crisis: an increase in per capita income correlates pos- ingful clusters of countries worldwide. The method used is the
itively with a price variation, just as a rise in bank deposits is squared Euclidean distance, commonly used to analyse ratio or
evidence of peoples prudential attitude to the housing market. The interval-scaled data. We tested our data in three clusters based on
negative correlation between the number of rms and the variation a geographical distinction between northern, central and southern
in prices is contentious. The data mainly describe a reduction in the Italy. All the above-mentioned dependent and independent vari-
number of rms from 2008 to 2014, and a variation in the number of ables were included, and the result shows that all cities t into one
rms is considered here as a proxy of the urban economys vitality. group. This conrms the robustness of the results of the regression
A stable presence of rms over the years is indicative of a limited indicating a country-wide pattern. The result was the same when
capacity for innovation (which is a process of continuous failures the data were analysed using the further neighbour method.
and improvements). This is easily represented by a high index for In a second step,2 we grouped the observations by urban den-
the variation in the number of a citys rms, which is the reason sity to identify any differences in the cities behaviour. Both the
why a higher value of this variation negatively affects house prices. k-means and the further neighbour methods generated the same
This correlation is robust for the sub-market of existing units too, result: using an urban density threshold of six housing units per
as shown in Table 7. While urban density has the same relevance for residential building enabled us to cluster the cities in two groups:
signicance and coefcient estimation in both models, the variation a smaller group includes the 18 denser cities, which are equally
in population is only signicant at 90%, like the variation in the distributed around the country and represent 16% of the data; the
number of rms. In this case, we also test the role of variations in other 96 cities all have a density below 6 units/building (See Annex
the employment rate, which has a strong positive correlation with 1).
prices. This is consistent with economic fundamentals concerning The further regressions conrm the previous results: urban den-
market demand and the sign of other economic variables. sity is strongly related to decreasing prices for both existing and
In both the regressions performed, the data relating to the sup- new housing units. But the negative relationship between urban
ply side of the housing market, such as the construction cost index, density and prices is stronger in the less dense cities. The estimates
are not statistically signicant. This may be due to the quality of of the other territorial variables city area and number of buildings
the data (aggregated by region, not by city). A greater inuence of strengthened the density effect on prices (Table 9).
the demand side on price variation nevertheless emerges, thanks The present weakness of the housing market in Italy is con-
to the robustness of the results for per capita income, number of rmed by the fact that population growth only inuences prices
rms, and employment rate. This observation is consistent with the in the new housing sub-market in the denser cities (see Table 8).
literature on the housing bubble that underscores the role of short- This means that the growth in potential demand is quantitatively
sighted expectations and how the fundamentals of market demand not sufcient to drive prices upwards, even in the largest Italian
are underestimated during boom phases by those involved on the cities. On the other hand, the effect of per capita income variation
supply side of the housing market (Case and Shiller, 2003; Case on prices is signicant in the other tests performed.
et al., 2012; Romero et al., 2012). Per capita income is not signicant only in the new housing
While the role of urban density emerges clearly from the market in the large cities, probably because the demand in this
regression, the other variables relating to urban structure are not particular type of market shows a greater diversity. The existing
statistically signicant; this conrms the efcacy of the urban den- units sub-market is therefore the only one in which urban variables
sity parameter among the spatial variables considered. prevail over economic ones. This might reveal a greater incidence
It is worth emphasising that the weaker R2adj of the regression of housing stock features in existing units than in new ones.
on existing housing units means that factors other than those con-
sidered also affect price variation. But the main purpose of our
model is to intercept the relevance of urban density, not to offer 2
The cluster analysis are briey here discuss for space saving. Tables and graphics
a full explanation for housing price variation. shall be provided on request.
V. Antoniucci, G. Marella / Land Use Policy 59 (2016) 580588 585

Table 8
Estimation of price variation from 2008 to 2014 in cities with a density greater than 6 housing units per residential building.

Dependent variable: price variation for Dependent variable: price variation for
existing housing units new housing units

Coeff. T - Statistic Coeff. T - Statistic

CONSTANT 165.226 2.04059 232.805 0.912628
Variation in per capita income 0.133918b 2.41168
(Log) Urban density 355.594b 2.5197 64.9942 b
Variation in number of rms 274.417b 2.05136
Variation in population 0.00776217 a
N 18 18
R2 15.981 56.6435
R2 adj. 13.2707 50.8626

Table 9
Estimation of price variation from 2008 to 2014 in cities with an urban density below 6 housing units per residential building.

Dependent variable: price variation for Dependent variable: price variation for
existing housing units new housing units

Coeff T Coeff T
CONSTANT 854.005 2.98587 1102.89 3.68656a
City area (km2 ) 0.332757b 2.3334 0.383879 2.58133b
(Log) Urban density 311.646b 2.41611 355.273 2.53441b
(Log) Number of buildings 208.461a 2.98139 248.661 3.44266a
Variation in number of rms 214.464c 1.78695 293.246 2.29669b
Variation in per capita income 0.116928 2.17871b
N. 96 96
R2 17.8755 27.9853
R2 adj. 14.3048 23.8936

6. Small towns vs metropolitan cities not exclude the possibility of this phenomenon having at least a
partial inuence. From this perspective, there are three facets to
The results obtained with our model suggest that a struc- consider. Though not statistically signicant in all tests, our data
tural downsizing of the real-estate markets and a downturn of show that economic factors on the demand side are statistically
the national economic fundamentals coincide with a shift in the more signicant, along with the other economic variables, than
behaviour of home-owners and businesses. The chances of social demographics. In addition, the Italian population does not move
and economic betterment makes it rational for households and from one city to another as readily as in Britain or the USA, both for
rms to accept higher collective costs in order to live in denser cultural reasons and because of the way the housing market works.
rather than sprawl cities. The previously-mentioned high proportion of home-owners vis--
The classic price equilibrium model relies on the assumption vis tenants also contributes to a modest mobility of the population
that employment opportunities and income are unlimited. But within and across cities.
empirical evidence suggests that, when there is a decline in income Finally, Italys national urban structure already has a prevalence
and employment opportunities, living in denser cities is less afford- of low-density cities irrespective of the population gures, so vari-
able. Like Alonso (1971), our ndings lead us to surmise that a ations in the population cannot serve as an effective indicator of
less dense city is economically more sustainable when the differ- home-owners and rms behaviour.
ence between marginal income and marginal costs equates to the Since the relationship between population and prices is incon-
opportunity cost of living in a sprawl city, where collective costs clusive in suggesting a substitution of the denser by the less dense
are lower. Even in a state of general recession, it is more costly cities, the results of the model may point to another interpretation:
to live in a denser, and often larger city than in a small one, and housing markets in denser cities experience a greater setback than
this extra cost does not decrease proportionally with reductions in in less dense cities, while the rental market remains substantially
wages and employment opportunities. The key issue is to under- stable, or even grows. This impression needs to be conrmed by
stand the nature of this greater resilience of the less dense cities. further analyses.
There are two possible interpretations: the results of the model
may either represent a phenomenon of substitution between cities,
7. Conclusion
or they may simply describe a lower affordability of the housing
on sale, with a preference consequently being given to the rental
This paper investigates the relationship between how the hous-
housing market.
ing market has evolved in a time of economic recession (from 2008
Concerning the former interpretation, it could be argued that
to 2014) and urban density in Italy. Private and public investments
our results ought to show a signicant relationship between price,
had focused on urban regeneration through densication since the
urban density and population variation. The weak relevance of pop-
early 1990s, during a phase of real-estate market expansion. The
ulation data in the model is not enough to support a migration of
aim of our study was to see whether urban density correlates with
the population from denser to less dense cities, though we can-
price variation and, if so, how. An original index was designed to
586 V. Antoniucci, G. Marella / Land Use Policy 59 (2016) 580588

identify urban density instead of considering population as a proxy Acknowledgement

(as is usually the case). In the specic Italian scenario, population
is not an adequate indicator of urban density. Using a multivariate This research did not receive any specic grant from funding
regression on economic and urban structure data concerning the agencies in the public, commercial, or not-for-prot sectors.
114 Italian provincial capitals, our model reveals a strong negative
relationship between urban density and house price variation in ANNEX 1
the markets for both existing and new housing units. Using a dou-
ble cluster analysis to test for territorial patterns, distinguishing Above 6 housing units per Below 6 housing units per
between two groups of cities (those above and below the thresh- residential building residential building
old of six housing units per residential building), we nd a greater Torino Vercelli
price drop in denser cities, where it is associated with a downturn Savona Novara
in income and the number of rms. This result may have two differ- Genova Cuneo
Milano Asti
ent explanations: it may represent a partial migration from denser Brescia Alessandria
to less dense (and sometimes smaller) cities; or the more severe Monza Biella
slowdown of the housing sales market in the denser cities may be Bolzano Verbania
indicative of people opting for the rental housing market because Modena Aosta
Bologna Imperia
it is more affordable.
Livorno La Spezia
The explanation for the latter interpretation may emerge from Roma Varese
economic fundamentals: the marginal cost of living in a denser city Napoli Como
(a factor that also depends on the local authorities) does not drop Salerno Sondrio
proportionally with income and employment opportunities. So it Foggia Bergamo
Bari Pavia
makes sense for individuals and rms to move to less dense cities Taranto Cremona
when the difference between marginal income (as a function of the Mantova
opportunities afforded by living in a denser city) and marginal costs Lecco
equal or fall below the opportunity cost of living in a less dense, Lodi
and often smaller city. But for us to be able to make this claim
conclusively, on a national scale at least, the statistical relevance Vicenza
of population variation in the model would need to be greater, so Belluno
the latter explanation is consistent with economic fundamentals Treviso
whereby the rental market grows at the expense of the housing Venezia
sales market in denser cities. Rovigo
The evidence emerging from our model warrants more in-depth Udine
study. To check the robustness of our ndings, a further analysis Gorizia
should be performed to compare prices and population variation Trieste
within metropolitan areas too. An ex post test on recent major
investments in the bigger cities should help us to see if a polarisa- Parma
tion of the housing market (and the real-estate market in general) Reggio nellEmilia
is underway in Italy, as in other countries like the United Kingdom Modena
and the USA. Ferrara
Finally, a similar analysis should be performed on the rental Forl
housing market to see whether the transactions and prices rise Cesena
more than on the housing sales market. Rimini
Besides the possible phenomenon explanations, the results arise Massa
few policy implications: densication developments are certainly a
protable investment opportunity during a boom phase of the real- Pistoia
estate market and they have also an environmental involvement in Firenze
reducing land-take. But the results demonstrate that density also Pisa
reveals less resilience during bust phases, and this phenomenon Arezzo
may be exacerbated by the timeline of urban plans. For instance,
the approval of plans to redevelop brownelds through densica- Prato
tion can take some time, and this increases the risk of running into Perugia
a negative change in the trend of housing prices (Antoniucci and Terni
Marella, 2014; DAlpaos and Marella, 2014). It is worth mentioning
that the approval of an urban plan in Italy can take up to ten years. Ancona
So, while densication processes are environmentally more sus- Macerata
tainable, they carry structural risk factors economically that may Ascoli Piceno
also affect public decision-making. Fermo
Finally, in years of economic recession, there are calls for policies
to assist and increase private and public investments in Italy, but Latina
research demonstrates that we are facing a housing surplus with Frosinone
dropping prices, so subsidising policies on the supply side (in terms LAquila
of private housing investments, at least) would not be effective in
reversing the downturn of the private housing market. Chieti
V. Antoniucci, G. Marella / Land Use Policy 59 (2016) 580588 587

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