Financial credit drives urban land-use change in the United States

Land-use change in the United States is a significant factor in environmental degradation, and occurs at a faster rate than population growth. This paper develops the hypothesis that modern financial instruments and the creation of tools that increase reliance on debt have the undesirable consequences of run-away land-use change, particularly in residential home construction. After reviewing the factors leading to increased housing development and land use change, the paper elucidates the role of modern financial instruments in driving rapid land conversion. The theory is based upon accounting of sources and uses of capital. Financial innovations, especially in credit creation and trading through global capital markets, can help explain the link between land-use change and finance. Available data from a study of modern real estate development supports the role of financial debt as the primary driver for land use change in South Florida. The mechanisms behind development financing address key policies and practices that have led to unsustainable land cover change. We encourage work on land-use change that focuses on a better understanding of the mechanisms linking land developers to financial markets, and cross-disciplinary research that recognizes linkages between financial innovations and ecological health, and that leads to the development of better policies.