ECONOMICS UNIQUENESS

218 ■ THE ECONOMICS OF UNIQUENESS
FIGURE 8.2
Brownfi eld Classifi cation
Source: Authors.
private benefits
Site C
Site B
public benefits
Site A
have begun to impose informal “rules of thumb” as specifi c conditions for urban
brownfi eld redevelopment; for instance, developers must have a minimum of
25 percent equity in the project to guarantee suffi cient capital risk (Bartsch 2002).
Other fi nancial risks, such as collateral risk, are in general associated with the
characteristics and size of the project; in this case small loans may have proportionally
higher fi xed costs of foreclosure and resale than large loans, and thus the
associated exposure to these risks has a greater impact on projects in developing
countries where size of project and size of investment are oft en limited to under
US$2 million (Yount and Meyer 1997). In these circumstances, private developers
may undervalue their own commercial returns and overvalue the related costs of
the brownfi eld project, and this will determine the market failure eff ect; that is,
brownfi eld redevelopment may be undersupplied.
Urban brownfi elds and therefore historic urban areas also experience the
impact of negative and positive externalities. In general, site development
can have negative externalities because the project may cause considerable
disturbance for the surrounding area and its inhabitants. Most signifi cantly,
urban brownfi eld redevelopment relates to substantial positive externalities for
the city and society at large (De Sousa 2000). Renewal of the historic area, thereby
reducing the pressure for new development, can help to contain urban sprawl,
and as a consequence of the intervention there may be a reduction of commuting,