Land rent theory revisited

In explaining the causes of the global economic crisis that was ignited by the bubble bust in the housing market in 2008, mainstream economics hardly provides any fundamental explanation for the fluctuation of house prices, other than criticizing the operation of the financial markets. Although land rent lies at the center of the fundamental mechanisms underlying the movement of house prices, little attention has been paid to it. Land rent theory was in the limelight as an alternative to mainstream urban economics in the 1970s-80s. However, it has completely lost its status as an alternative in housing market analysis. The reasons for this decline may be found by reviewing the contributions of land rent theory. The revival of the theory is urgently required as a convincing alternative in the understanding of housing markets.