The Effect of Urban Climate Shifts on Land Values in the Chesapeake Bay Area

What Is the Issue?

This study examines how urbanization changes local climates and what that means for nearby farmland. Cities don’t just bring more people and buildings—they also change the environment. Hard surfaces like pavement and roofs trap heat and water, creating hotter temperatures, more flooding, and shifts in rainfall and soil moisture. This is often called the “urban climate.” These changes spill over into surrounding farmland, altering crop growth, soil conditions, and ultimately the value of agricultural land.

While scientists have studied how climate affects farming in rural areas, much less is known about what happens in places where farms sit close to cities. This gap matters because many U.S. farms are in areas under pressure from urban growth. If climate impacts are different in urban-adjacent regions, then we need to understand those differences to protect farms and guide land use policy.

In short, the problem is that farmland near cities faces a “double challenge”: it must adapt not only to long-term climate change, but also to the unique local climate effects created by urbanization. This study looks at how those two forces combine to influence farmland values, giving insight into how agriculture can remain viable in increasingly urbanized landscapes.

What Did We Find?

We find that climate affects farmland values in different ways depending on whether the land is near a city or in a rural area. In general, farmland is worth more when summers and falls are wetter, but heavy winter rain lowers land value. Figure 2 shows how urbanization changes these effects for spring precipitation (Figure 1a) and winter precipitation (Figure 1b).

Explanation of the Figures

The figures show how a one-millimeter increase in rainfall impacts the price per acre of farmland (x axis) based on the extent of urban density around the farm. In Figure 1a, urbanization ranges from 60% urban cover on the left to ~0% on the right; for Figure 1b the range is the same but varies from high density on the right to low density on left. The vertical dashed lines highlight the urban density at which prices go from positive to negative; the break-point values are listed in the figures.

Figure 1a shows that in rural areas with very little urban land, one extra millimeter of spring rainfall raises farmland value by nearly $80 per acre. But, in areas with average levels of urbanization (around 9%), the same rainfall only adds about $18 per acre. Figure 1b shows that winter precipitation is usually harmful, cutting land value by about $88 per acre in rural settings, whereas in more urbanized areas, this negative effect is cut by more than half, to about $40 per acre. These results show that urban development can either weaken or soften the impacts of rainfall on farmland, depending on the season.

Figure 1: Moderating Impact of Urban Density on Land Prices (per acre)

What Did We Do?

To study how climate and urbanization together affect farmland values, we focused on the Chesapeake Bay Watershed, which covers parts of Pennsylvania, Maryland, Virginia, West Virginia, and Delaware (Figure 2). This region is ideal because it has both large cities, like Baltimore, and extensive high-quality farmland located right next to urban areas. We divided the region into 721 grid cells, each about 8 kilometers across, and tracked farmland prices, climate patterns, and land cover from 2006 to 2020. By combining land sales data with detailed climate and urbanization information, we built an economic model to measure how long-term temperature and rainfall patterns—and their interaction with nearby urban development—affect the value of farmland.

Figure 2: Chesapeake Bay Watershed Study Area

Publication completed for this work

Hua, J., Klaiber, A., & Wrenn, D. H. (2024). The impacts of agricultural land markets, climate, and weather on urban development. SSRN. https://doi.org/10.2139/ssrn.4760450

Contact: Douglas Wrenn, dhw121@psu.edu