On the possibility of positive rent gradients

The negative rent gradient is a virtually unanimous prediction of urban residential land rent models and a condition of locational equilibrium. This is the result of treating urban rents solely as location rents, where location is defined in terms of accessibility to the CBD. Urban rent may include another component, “externality rent,” which could, for instance, reflect neighborhood externalities in the form of area amenities and pleasant living environments. Introducing externality rent as an element in urban rent makes a positive rent gradient possible, provided that the externality is internalized in the land market. Conditions for a positive rent gradient are determined for both the identical and unequal incomes cases.