Preliminary, please dot not quote

The large variation in the share of land for open space across U.S. urban areas raises some interesting questions: a) what determines the amount of open space in an urban area? b) How does open space affect community characteristics such as housing prices and local property tax rates? and c) are existing amounts of open space across U.S. urban areas socially optimal? In this paper, we conduct theoretical and empirical analysis to address these issues. Our theoretical analysis reveals that price elasticities of housing demand and supply, economies of scale in providing public services, and values of environmental benefits from open space are key parameters affecting the optimal amount of open space in an urban area. Our empirical results confirm that the price elasticity of housing supply varies widely across U.S. urban areas and is a significant determinant of the amount of open space in an urban area. Urban areas with a larger share of land in open space tend to have lower property tax rates and lower per-capita spending on public services. A significant share of U.S. urban areas are found to have too little open space in the sense that even if additional open space would not provide any amenities, it would still increase total land values and social welfare. However, for more than 10% of U.S. urban areas, the total value of environmental benefits from open space must be at least as large as the total land value to justify for the amount of open space they have. Some of these urban areas likely have too much open space.