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Assessing the Economic Spillover of HOPE VI

Assessing the Economic Spillover of HOPE VI. Sean Zielenbach Dick Voith Michael Mariano. Purpose of the Study. Determine extent of HOPE VI developments’ spillover economic effects on surrounding neighborhoods additional economic activity in region changes in tax revenues

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Assessing the Economic Spillover of HOPE VI

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  1. Assessing the Economic Spillover of HOPE VI Sean Zielenbach Dick Voith Michael Mariano

  2. Purpose of the Study • Determine extent of HOPE VI developments’ spillover economic effects • on surrounding neighborhoods • additional economic activity in region • changes in tax revenues • Cost-benefit analysis

  3. Sampled Sites • Boston (Mission Main & Orchard Gardens) • Charlotte (First Ward Place) • Kansas City (Guinotte Manor & Villa del Sol) • Seattle (New Holly) • San Francisco (North Beach) • Washington (Townhomes on Capitol Hill & Wheeler Creek)

  4. Determining Costs • Net public costs of redeveloping & operating HOPE VI property • Public redevelopment subsidies (direct & indirect) + • Proceeds of any unit / lot sales - • Developer profit + • NPV of operating costs (30 years) - • NPV of Section 8 voucher costs (30 years)

  5. Public Welfare Benefits • Changes in surrounding residential property values (relative to prior trends) • Controlling for various locational & property factors • Value of new HOPE VI units • Changes in implied rental subsidies • Difference between market rate & what tenants pay • Changes in violent crime rates in area • Cost savings to society

  6. Economic Impacts • Multiplier effect of spending on redevelopment & operation of HOPE VI property • Less costs of operating traditional property • Changes in local resident incomes & expenditures • Changes in small business lending patterns • Changes in residential lending patterns • Benefits not necessarily net economic gains to society • Wealth transfer issues, opportunity cost of funds

  7. Fiscal Benefits • One-time impacts • Spending resulting from redevelopment supports jobs & salaries / wages • Local income tax • Sales tax on consumption • Ongoing impacts • Property taxes from increased home values • Income tax / sales tax from higher local incomes • Taxes paid by workers supported by add’l spending

  8. Qualitative Case Studies • In-depth interviews with key actors to understand local economic dynamics & relative importance of HOPE VI / other factors • Comparison of HOPE VI sites with traditional public housing sites • What difference would a HOPE VI award make?

  9. Increases in Property Values • First Ward (Cha) $53.4 million • Mission Main (Bos) $107.1 million $366K/unit • New Holly (Sea) $53.7 million $48K/unit • Orchard Gardens (Bos) $57.9 million $198K/unit • Villa del Sol (KC) $8.1 million • Wheeler Creek (DC) $14.0 million $30K/unit • Inconclusive / insignificant results for the others

  10. Bos: Mission Main Prop Values

  11. Bos: Orchard Property Values

  12. Seattle: New Holly Prop Values

  13. Increases in Implied Rental Subsidies (NPV over 30 years) • First Ward (Cha) $9.5 million $345/mo • Mission Main (Bos) $108.8 million $1,117/mo • New Holly (Sea) $2.9 million $56/mo • Orchard Gardens (Bos) $16.8 million $670/mo • Villa del Sol (KC) $2.9 million $223/mo • Wheeler Creek (DC) $5.1 million $142/mo • Inconclusive / insignificant results for the others

  14. Savings from Reduced Crime • First Ward (Cha) $17.5 million • Guinotte Manor (KC) $13.4 million • Mission Main (Bos) $5.8 million • New Holly (Sea) $2.6 million • North Beach (SF) $22.2 million • Orchard Gardens (Bos) $4.9 million • Townhomes (DC) $1.4 million • Villa del Sol (KC) $16.3 million • Wheeler Creek (DC) none apparent

  15. Public Welfare Cost / Benefit

  16. Conclusions • Significant, widespread gains in property values • Notable declines in violent crime • Rising property values increase value of implied rental subsidy • Considerable regional economic activity • Redevelopment, maintenance / operation • Higher incomes -> more consumer spending • Positive fiscal impacts on local governments • Property, Income, Sales Taxes

  17. Conclusions (cont.) • Impact shaped by local market context • Presence of other economic activity, commitment of public & private sector • HOPE VI itself unlikely to spark significant neighborhood change single-handedly

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