The impact of urban redevelopment for mitigating earthquake damage risk on land values

We examine the impact of urban redevelopment for mitigating earthquake damage risk on land values using a spatial regression discontinuity (RD) design. Our analysis exploits the risk discontinuity at the boundaries of dense urban districts with extremely high earthquake damage risk (high-risk DUDs) in Tokyo, using data on high-risk DUDs in 2012, 2017, and 2020. The cross-sectional RD estimates demonstrate that land values are consistently higher just outside than just inside the boundaries of high-risk DUDs that existed in 2012 but were removed by 2017 under urban redevelopment initiatives. The RD estimates further reveal that the discontinuous gap in land values at the boundaries of the former high-risk DUDs diminished over time. The differences in the RD estimates before and after the removal of high-risk DUDs between 2012 and 2017 indicate that this removal reduced the discontinuity at the former high-risk DUD boundaries, leading to a relative increase in land values of 1.5% by 2017 and 2.0% by 2020. These findings suggest that mitigating earthquake damage risk through urban redevelopment contributes to a progressive appreciation in land values. • Examined the impact of earthquake damage risk mitigation on land values. • Utilized a spatial regression discontinuity (RD)design. • Evaluated RD estimate changes before and after risk mitigation. • Urban redevelopment for risk mitigation progressively increased land values.