Theories of rent and urban economics Essay Example | Topics and Well Written Essays - 2500 words

Theories of rent and urban economics - Essay Example The essay further outlines Smith’s rent gap theory and the agricultural land theory. The analysis is followed by an outline of the agent based land market model, and the microeconomic theory. The paper winds up with the central place theory and a conclusive remark on the varied rental patterns in an urban setting. The Collier Map show that there are different rent patterns for urban areas in UK and London in particular. The Western part of London records a mixture of rent patterns with a lower level of 10 pounds, and a higher level of 34pounds. The South East London has a rental pattern that way near similar with the difference between the highest and the lowest; levels being minimal (16-24 pounds). The same scenario applies to the North West and Yorkshire which has one of the lowest/cheapest rental rates. The outskirts of London and the hinterland towns have a low level of rent rates compared with the metropolitan. However, there are some urban areas outside the London Metrop olitan which have higher rental patterns. A good example is Dublin with a high of 35 pounds. Urban economics is the study of economies that are organized as urban areas (Harvey and Jowsey, 2003). It also studies the cities which are the modern centre of culture, innovation and education. It is in the urban centers where major commercial activities takes place hence the aspect of many offices being located in the urban areas (MacDonald & McMillen, 2007). Urban economics is closely related to the field of real estate and rental properties. Rent is the amount paid by a tenant to a landlord on a rented or leased space. Many theories exist in the field of urban economics and real estate. They are outlined below; The Neighborhood Theory The first theory is based on the housing prices, neighborhood characteristics, and racial segregation. This theory stipulates that the price of an office premise is determined by the characteristics of the neighborhood as well as the characteristics of the house. These neighborhood factors directly influences the patterns of office rent in given urban areas. Neighborhood variable affect the pattern of office rent either positively or in a negative way. These two factors combine to determine the pattern of rent in a given section of an urban area. They include; crime rate in an area, property tax rate, economic strength of the neighborhood, air pollution, accessibility from nearest train/ bus stations, extent of traffic on the street as well as quality of education/ number of institutions of learning (McDonald & McMillen, 2007). This explains the different office rent patterns in an area like Cambridge which is an educational centre and Nottingham. There has been an increase in the quality of office buildings in some sections of urban areas. This results in changes in office rent patterns. Areas with good quality buildings have different office rent patterns with areas with low quality office buildings. The same case applies to areas with different races. There is a tendency for rental patterns to be high in areas populated by the whites, as opposed to areas with a mixture of races (King and Mieszkoski, 1973). This theory explains the difference rental patterns in the London Metropolitan. Areas such as Wimbledon (?30) and Heathrow (?28) with good quality houses have higher rental patterns as compared with those with low quality such as Norwich (?15). Natural Evolution Theory Natural evolution theory is a model which was advanced by Mieszkowski and Mills (1993). They argue that the filtering model provides a primary reason for the movement and relocation of offices in the suburbs. The result is the emergence of suburbs which acts as commercial centers, characterize by high and