Housing Externalities: Evidence from Spatially Concentrated Urban Revitalization Programs

FRB Richmond Working Paper No. 08-03

41 Pages Posted: 11 Dec 2012

See all articles by Esteban Rossi-Hansberg

Esteban Rossi-Hansberg

Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

Pierre-Daniel G. Sarte

Federal Reserve Bank of Richmond

Raymond E. Owens

Federal Reserve Bank of Richmond

Date Written: June 1, 2008

Abstract

Using data compiled from concentrated residential urban revitalization programs implemented in Richmond, VA, between 1999 and 2004, we study residential externalities. Specifically, we provide evidence that in neighborhoods targeted by the programs, sites that did not directly benefit from capital improvements nevertheless experienced considerable increases in land value relative to similar sites in a control neighborhood. Within the targeted neighborhoods, increases in land value are consistent with externalities that fall exponentially with distance. In particular, we estimate that housing externalities decrease by half approximately every 990 feet. On average, land prices in neighborhoods targeted for revitalization rose by 2 to 5 percent at an annual rate above those in the control neighborhood. These increases translate into land value gains of between $2 and $6 per dollar invested in the program over a six-year period. We provide a simple theory that helps us interpret and estimate these effects.

Suggested Citation

Rossi-Hansberg, Esteban Alejandro and Sarte, Pierre-Daniel and Owens, Raymond E., Housing Externalities: Evidence from Spatially Concentrated Urban Revitalization Programs (June 1, 2008). FRB Richmond Working Paper No. 08-03. Available at SSRN: https://ssrn.com/abstract=2187909 or http://dx.doi.org/10.2139/ssrn.2187909

Esteban Alejandro Rossi-Hansberg

Princeton University - Department of Economics ( email )

Princeton, NJ
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Pierre-Daniel Sarte (Contact Author)

Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

Raymond E. Owens

Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

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