Zoning Regimes, Official Land Values, and Housing Price Formation

This study examines how zoning regimes mediate the capitalization of officially assessed land values into housing prices in a high-density metropolitan housing market. Using transaction-level housing data from New Taipei City, Taiwan, we estimate a hedonic pricing model combined with a boundary-based spatial comparison that restricts observations to properties located near zoning borders. The results indicate that official land values are significantly associated with housing prices but are only partially capitalized, with an estimated elasticity of approximately β ≈ 0.37 in the baseline specification. Interaction models further reveal that capitalization elasticities vary systematically across zoning regimes, suggesting that planning regulations influence how administratively determined land values are translated into market prices. These heterogeneous capitalization patterns remain stable across alternative boundary bandwidths and model specifications. The findings highlight the institutional role of zoning systems in shaping the relationship between administratively assessed land values and housing market outcomes. More broadly, the study contributes to the literature on housing market regulation by demonstrating how land-use institutions mediate price formation processes in densely developed urban environments.