Why Do Residential Developers Prefer Large Exurban Lots? Infrastructure Costs and Exurban Development

Abstract

It is not yet completely understood how on-site costs for infrastructures in residential developments vary with lot size and how developers respond to this relationship. Utilizing data from public records of costs for constructing twenty-eight subdivisions in South Kingstown, RI, this paper examines how developers' on-site costs per lot for sewer and water services and roads vary with lot size. Contrary to previous results, this study finds that these on-site costs per lot can decrease as lot sizes increase. The literature on decision making by developers suggests that this cost relationship can be advantageous to small satisficing developers, leading them to prefer larger lots. To encourage small developers to build denser developments on smaller lots, local governments should consider incurring the upfront costs of certain on-site infrastructures and be reimbursed by developers when the lots are sold.