Does Large-Scale Neighborhood Reinvestment Work? Effects of Public-Private Real Estate Investment on Local Sales Prices, Rental Prices, and Crime Rates

Abstract

During the 1990s, the U.S. Department of Housing and Urban Development awarded more than $6 billion in competitive grants called HOPE VI to spur neighborhood redevelopment. We add to HOPE VI research by examining the impacts of a large set of public-private real estate investments, including HOPE VI, made over a 16-year period in a distressed Pittsburgh neighborhood called the Hill District. Specifically, we estimate the effects of the $468 million additional public-private investments that Hill District received compared to a demographically similar neighborhood on sale prices, rental prices, and crime. We find large and statistically significant impacts of the public-private investments on residential sales prices, commercial sales prices, and on rental prices, but only a marginally significant yet meaningful decline in non-violent arrests. For each additional $10 million of public-private investment, we find a 0.95 percent increase in residential sales prices, 2.7 percent increase in commercial sales prices, and 0.55 percent increase in rental prices. Because there was an accumulated difference over 16 years of $468 million in the amount of public-private investment across the two neighborhoods we examine, these percentage increases amount to large changes in real estate prices over that time. Commercial real estate investors and homeowners benefited the most, followed by residential landlords. Our analyses imply cities should anticipate the potential impacts of major neighborhood investment on low-income households, especially unsubsidized renters that most directly experience the brunt of rising rents.

Keywords: HOPE VI; community development; public housing; real estate.

Figure A.1:. Event studies, difference in residual price of Hill District over Homewood

Sources: Authors’ analyses of sales data purchased from RealStats, Inc. Notes: Each cell is from a separate regression. Standard errors in parentheses clustered at the neighborhood by year level. *** p<0.01; ** p<0.05; * p<0.1. All regressions additionally control for year dummies and city neighborhood dummies. Regressions with controls additionally control use (see footnote 7) and for missing indicators where certain variables (square footage, number of bathrooms, number of bedrooms, and year built) are at times missing (and set to zero in those cases).

Figure 1:

Cumulative investments by neighborhood and year Sources: Data collected by authors from Housing Authority of City of Pittsburgh, Urban Redevelopment Agency, and Pennsylvania Housing Finance Agency. Notes: Total Development Cost includes all public and private sources of funds for the project. Costs are normalized to 2015. There were no HOPE VI investments in Homewood across these years.

Figure 2.

Average log sales prices over time in each neighborhood Sources: Authors’ analyses of sales data purchased from RealStats Inc.

Figure 3.

Average log rental prices over time in each neighborhood Source: Authors’ analyses of American Community Survey data.

Figure 4.

Overall crime rates (per 1,000 people) over time Sources: Authors’ analyses of Pittsburgh Police Department.