Teardowns and land values in the Chicago metropolitan area

An empirical model of residential housing demolitions and the redevelopment process in the Chicago metropolitan area supports the theoretical prediction that the sales price of teardown property is approximately equal to its land value. We control for sample selection bias associated with non-random demolition permit applications using a probit model that accounts for misclassification of the dependent variable. The probit models provide statistically significant evidence of misclassification, and suggest that prime teardown candidates are small, older, homes near public transportation and traditional village centers. (c) 2006 Elsevier Inc. All rights reserved.