Public Investment and Housing Price Appreciation: Evidence from the Neighborhood Stabilization Program
Stanford University, Graduate School of Business, Students
January 3, 2017
This study assesses impact of the Neighborhood Stabilization Program (NSP), a federal program designed to convert foreclosed properties into renovated affordable housing through public investment. To identify the impact, I exploit a discontinuity in how neighborhoods were selected with respect to a critical threshold. The program caused non-foreclosure housing prices in targeted neighborhoods to appreciate 6.5% between 2009 and 2011. These pricing gains remained stable through the end of my sample in 2014. Furthermore, the program caused changes in neither the supply of foreclosures nor neighborhood income. This suggests quality improvement externalities were behind the price appreciation. Lastly, low market liquidity and asymmetric information in targeted neighborhoods may justify the NSP public initiative, despite foreclosure resale proﬁtability after 2009.
Number of Pages in PDF File: 59
Keywords: Public Investment, Foreclosure Renovation, Quality externalities
JEL Classification: G01, G18, R38
Date posted: January 6, 2017