The effects of land price in the peri-urban fringe of Mexico City: Environmental amenities for informal land parcel purchasers

Abstract

In many developing countries, urban growth is characterised by the emergence of informal housing at the periphery. Nevertheless, there is little evidence based on data from informal land markets and, in general, studies focusing on such markets often neglect environmental factors. Therefore, to contribute to these research gaps, this article aims to enhance our understanding of land markets in informal land parcels and their relationship to environmental amenities, by providing empirical evidence from Mexico City. The article estimates a hedonic pricing model using robust ordinary least squares with a SHAC (Spatial Heteroskedasticity and Autocorrelation Consistent) inference, including structural, environmental, neighbourhood and accessibility features. Results provide empirical insights regarding the way this land market behaves in the peri-urban area. Our findings reveal that informal land parcel purchasers are willing to pay for basic services such as access to piped water, proximity to schools and accessibility features such as being close to city centre, motorways and underground stations. Although a positive relationship between land price and distance to the nearest forest or Protected Natural Area is highlighted, it is low, meaning that individuals are largely ambivalent about environmental amenities. Therefore, the problem of irregular settlements could be approached from two different angles. Firstly, informal land buyers will not desist from invading and modifying natural areas without a comprehensive urban and environmental policy, oriented towards changing the perception of green areas as potential urbanisation opportunities. Secondly, public policy needs to solve the housing supply crisis, considering the characteristics presented here.