Housing construction in the Moscow agglomeration: Spatial equilibrium modeling

Abstract

In conditions of intense spatial transformation of the Moscow agglomeration (MA) driven by housing construction and migration from Russian regions, study of how these processes are interrelated has become an urgent task. In the article a new model of spatial equilibrium in MA is developed. Model includes three blocks: (1) a spatial equilibrium model for the labor and housing markets in the MA; (2) a model of dynamic equilibrium between migration and housing construction in the MA; (3) a model of housing construction distribution by zones of the MA. In block 1, for three zones of the MA (the central business district, urban zone, and zone of new construction) the equilibrium values of population, employment, and wages are determined with allowance for commuting. In block 2, equilibrium is determined between the migration level and housing construction in the MA, which replicates the gap in real incomes between the MA and other Russian regions. Deviation from equilibrium leads to an adjustment of incentives for migration and a change in its level restores equilibrium. In block 3, it is shown that the behavior of developers owing to land price adjustment determines the location of construction by the MA zones. Despite the generic nature of the model, it is able to reproduce a number of trends in the spatial evolution of the MA, including the transition from an extensive stage of development with sprawling construction and hyperdensity of the center to an intense stage with in-depth development of the main “body” of the city. The model stresses how tightly related the processes in the largest agglomeration of the country and the national settlement system are. The model shows how the political and economic processes, via changes in rent and agglomeration economies, change incentives for work, living, and housing construction in different zones of the agglomeration and determine the fate of urban territories. The model also describes the influence of the internal structure of the MA on interregional migration. By increasing construction, especially of affordable housing in greenfield projects at the periphery of the agglomeration, the city implicitly accepts a decision to increase migration affecting Russia’s national settlement system.