ABSTRACT
Urban areas evolve over time through firms, households and other economic entities deciding to locate due to their economic interests. This chapter focuses on understanding the models of location choice and how housing consideration are key to formation and development of urban areas. In developing a theory for urban land, economists have to simplify the reality to be able to observe changes in determinants as real inputs are brought into the model. The monocentric city model is a standard urban spatial model. Economists focused on modelling land rent to examine the location choice and evolution of urban areas. The basic location theory based on central business district assumptions predicts that a rent gradient will form with the highest rent per unit in the centre and the lowest on the edge of the urban area. Land-use planning involves specifying which developments are permissible at specific locations leading to active ‘spatial planning’.
