Assessing economic instruments to steer urban residential sprawl, using a hedonic pricing simulation modelling approach

•Flat property taxes and public transport subsidies are efficient instruments to control urban residential sprawl.•Land taxes are not sufficient to discourage urban residential sprawl, failing to compete with low land prices and high development profits.•Assessed economic incentive instruments lead to a decrease in urban residential area and living space, and an increase in real estate values. Over the past centuries, cities have undergone major transformations that led to global urbanization. One of the phenomena emerging from urbanization is urban sprawl, defined as the uncontrolled spread of cities into undeveloped areas. The decrease in housing prices and commuting costs as well as the failure to internalize the real costs associated with natural land, led to households moving-out into the urban fringe – resulting in fragmented, low-density residential development patterns that has multiple negative impacts. Awareness for this problem has fed the need for the implementation of effective policies against urban residential sprawl – a subject that has received considerable attention in literature, albeit little attention has been given to economic incentive instruments. Hence, the objective of this paper is to assess the effectiveness of different economic instruments in steering urban residential sprawl – assessing property taxes, land taxes and public transport subsidies. To this end, the Sustainable Urbanizing Landscape Development (SULD) model is used and adapted, and a case study is provided for the medium-sized City of Aveiro in central Portugal. Results show that a flat property tax and a public transport subsidy for low and middle-income households are the most efficient instruments, leading to a decrease in urban residential area, living space and housing quantity as well as an increase in real estate values. On the other hand, a land tax results in insignificant changes in urban residential development patterns.