Re-establishing the Rent Gap: An Alternative View of Capitalised Land Rent

Abstract

The debate between the proponents of the rent gap hypothesis and Steven Bourassa concerning its internal consistency centres on the role of land use in capitalised land rent. Bourassa argues that capitalised land rent is nonsensical because it is determined in part by land use which is in conflict with land rent theory. The paper explores the determinants of capitalised land rent by reviewing the rent gap hypothesis and related research, and argues that the issue of scale is implicit in the rent gap. Land rent can be determined at a minimum of two scales resulting in at least two different land rents. This argument rectifies Bourassa's contentions, and is consistent with the theoretical foundations of the rent gap.