Neighborhood Renewal: The Decision to Renovate or Tear Down

Abstract

Renewal at the neighborhood level is the culmination of redevelopment decisions made at the property level. This study examines the decisions of whether to partially redevelop (renovate) or fully redevelop (tear down) existing improvements. Results from the study reveal the primary determinants of the decision, particularly highlighting the importance structural attributes for renovations, land for tear downs, and location and prior redevelopment activity for both. Additionally, as a test of a proposition from prior studies, major renovations are found to be equivalent to teardown sales, where the property is valued only for the underlying land. The level of expected renovations is also shown to decrease the selling price of properties requiring renovations.

Keywords: neighborhood renewal, gentrification, redevelopment, renovation, teardown

JEL Classification: R31, R11, R14, R52, R33