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The Impact of Gated Communities on Property Values: Evidence of Real Estate Market Changes in Los Angeles (1980-2000)

This paper examines the influence of gated communities on property values over two decades in Los Angeles. It delves into the cost of private governance in gated communities and analyzes whether they generate enough value to offset these costs. The study suggests that gated properties exhibit a stronger resistance to real estate market fluctuations, with values increasing faster after 1996 compared to neighboring areas. Discrepancies in price premiums based on the wealth of the community are discussed, along with the challenges faced by middle-class gated communities. The analysis highlights the evolving relationship between property values and the cost of private governance, emphasizing the importance of understanding market dynamics in these exclusive residential enclaves.

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The Impact of Gated Communities on Property Values: Evidence of Real Estate Market Changes in Los Angeles (1980-2000)

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  1. The impact of gated communitieson property valuesEvidences of changes in real estate markets(Los Angeles, 1980-2000)Pretoria, Feb 28 - Mar 3, 2005 Renaud LE GOIX Université Paris 1 Panthéon Sorbonne Canyon Lake, Riverside County. 15 000 inhabitants live behind this fence, in a privateand gated community, which is also an independentmunicipality.

  2. Introduction • Are gated communities and their private governance effort at risk because of market failures in the private provision of collective goods ?

  3. Introduction • GCs have a cost (infrastructure and collective goods building and maintenance) • Efficiency of a GC = satisfaction of residents • Unsatisfied owners -> turn-over -> risk of urban decayand progressive loss of property values.

  4. Introduction This paper aims at • assessing the impact of gates and walls on property values over time (1980-2000) • addressing if gated properties generate enough value to compensate the cost of private governance.

  5. 1 A systemic analysis:Property values as a key issue

  6. 1 A systemic analysis:Property values as a key issue

  7. 2 Inside the walls:price premium and homogeneity Property values trend inside gated communities, compared to the neighborhood. 1990 Constant US $. - are consistent with the global trend in L.A. : - gated communities prices show a better resistance to real estate market crisis than in regular residential neighborhoods, - After 1996, gated communities values increases faster than in their vicinities. • Protecting property values

  8. 2 Inside the walls:price premium and homogeneity Property values trend inside gated communities, compared to the neighborhood. 1990 Constant US $. - are consistent with the global trend in L.A. : - gated communities prices show a better resistance to real estate market crisis than in regular residential neighborhoods, - After 1996, gated communities values increases faster than in their vicinities. • Protecting property values

  9. 2 Inside the walls:price premium and homogeneity • Discrepancies: • not signif. : 75% • the richer the GC, the better the price premium; • Disadvantage for GCs in middle-class heterogeneous areas. • GCs more expensive than their neighbors ?

  10. 3 Price change vs. increasing costof private governance • 1980-1990: gated communities gain property values...just as the other do...

  11. 3 Price change vs. increasing costof private governance • 1990-2000: the Bubble has burst... And GCs are not as good as expected to make a difference in price.

  12. 3 Price change vs. increasing costof private governance • Price change and risks of market failure.

  13. 3 Price change vs. increasing costof private governance • Price change and risks of market failure.

  14. 3 Price change vs. increasing costof private governance • Leisure World:“Do not bother as long as we are happy”. 1980-1990 1990-2000

  15. 3 Price change vs. increasing costof private governance • Canyon Lake:A threatened “bit of paradise” 1980-1990 1990-2000

  16. Epilogue http://gated.parisgeo.cnrs.fr

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