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«A Journal of Policy Development and Research HoPe VI Volume 12, Number 1 • 2010 U.S. Department of Housing and Urban Development Office of Policy ...»

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Abstract A major goal of the HOPE VI (Housing Opportunities for People Everywhere) Program is to improve surrounding communities by removing physically deteriorating public housing projects—a source of concentrated poverty and crime—and replacing them with mixedincome communities. This article uses a difference-in-differences approach to determine if Baltimore’s three completed HOPE VI redevelopments had positive neighborhood spillover effects on surrounding property values. The analysis compares property sales prices in the area immediately surrounding each site before and after redevelopment to sales prices of comparable properties farther away but in the same neighborhood and at the same time. Only one redevelopment showed convincing evidence of a positive effect on property values in its surrounding neighborhood. This redevelopment was located in a less distressed neighborhood than the other two sites, adhered more closely to the mixedincome model, and implemented the project’s social and community services component through a partnership between the private developer and the tenant organization. These findings suggest that adherence to HOPE VI’s main principles of implementation and preexisting neighborhood conditions make a difference in neighborhood spillover effects and raise the question of whether HOPE VI investment is best targeted to severely distressed neighborhoods or to stable or already improving neighborhoods.

Introduction Under the federal HOPE VI (Housing Opportunities for People Everywhere) Program, distressed public housing is redeveloped into mixed-income and mixed-tenure (that is, some occupants are renters and some are owners) communities with the goals of reducing the concentration of poverty, moving residents of public housing toward self-sufficiency, and revitalizing communities. It is the most ambitious U.S. urban initiative of the past few decades. Between fiscal year (FY) 1993 and FY 2005, the U.S. Department of Housing and Urban Development (HUD) awarded more than $6 billion in HOPE VI grants to 190 housing authorities across the country (HUD, 2006).

Cityscape 65 Cityscape: A Journal of Policy Development and Research • Volume 12, Number 1 • 2010 U.S. Department of Housing and Urban Development • Office of Policy Development and Research Castells HOPE VI represents a new vision of public housing policy. Historically, HUD’s primary role in public housing was to maintain and manage its properties. After most new construction of public housing ended in the early 1970s, the physical and social conditions of these projects deteriorated over time. By the 1980s, a subset of public housing projects—primarily highrises in large inner cities—along with the neighborhoods surrounding them had become notorious for their blight, social isolation, and high concentrations of poverty and crime. HOPE VI was created in 1992 as a way to deal with the structural deterioration of the most severely distressed of these projects, but over time it has evolved into a more ambitious revitalization effort that also addresses the problems associated with high concentrations of poverty. By combining subsidized and market-rate units (thus housing a range of income groups) and attracting private investment to the community, HOPE VI revitalization aims to transform neighborhoods.

The Quality Housing and Work Opportunity Reconciliation Act, which reauthorized HOPE VI in 1998, reflects this redefinition of public housing.

It outlined HOPE VI’s four main goals:

1. Improving the living environment for public housing residents.

2. Revitalizing public housing project sites and contributing to the improvement of the surrounding neighborhood.

3. Providing housing that will avoid or decrease the concentration of very low-income families.

4. Building sustainable communities.1 This article focuses on the second of these goals—which explicitly states the expectation that HOPE VI will have positive spillover effects (that is, indirect effects on the quality or desirability of its developments’ surrounding neighborhoods)—and uses a difference-in-differences2 approach to test this hypothesis for three HOPE VI sites in Baltimore, Maryland. Empirical estimates are supplemented with qualitative information from local newspapers and interviews with city and housing experts to better understand implementation strategies, the community response to HOPE VI redevelopment, and other neighborhood changes and investments that may have affected property prices in the HOPE VI neighborhoods during the study period. This article aims to contribute to existing knowledge of HOPE VI spillover effects in general and to provide insight into whether HOPE VI has contributed to neighborhood revitalization in Baltimore. The article refers to neighborhood revitalization and positive spillover effects as improvement in the neighborhood’s economic value to property owners,3 reflected by property sales prices.

Only one redevelopment showed convincing evidence of a positive effect on property values in its surrounding neighborhood. Local newspaper coverage and interviews with city and housing U.S. Housing Act of 1937, Section 24(a). Public Law 93-383 (42 U.S.C. 1437v), as amended by Section 535 of the Quality Housing and Work Responsibility Act of 1998. Public Law 105-276, October 21, 1998.

A difference-in-differences approach estimates a treatment effect by comparing the change in an outcome of one group before and after treatment with the change in the outcome over the same time period for a comparison group that was not exposed to the treatment.

Sean Zielenbach (2000) identifies two alternative interpretations of neighborhood revitalization: neighborhood improvement in terms of the social conditions of the residents and neighborhood improvement in terms of the economic development and viability of the neighborhood. This article focuses on the second interpretation.

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experts are consistent with empirical findings, showing that this redevelopment adhered more closely to the mixed-income implementation model than did the other two. Also, it was located in a less distressed neighborhood than were the other two sites, raising the question of whether HOPE VI investment is best targeted to severely disadvantaged neighborhoods or to stable or already improving neighborhoods.

Previous Research on Hope VI Spillover Effects Existing research that evaluates the neighborhood spillover effects of HOPE VI redevelopments generally finds improvements in the social and economic conditions of the surrounding neighborhoods, although the magnitude of effects is mixed, and some indicators of neighborhood health did not show improvement in some sites. Four major studies have looked at HOPE VI in different cities to examine these impacts: (1) a study by Sean Zielenbach (2002) for the Housing Research Foundation, (2) an assessment by Holin et al. (2003) for HUD, (3) a large-scale evaluation by the U.S. General Accounting Office (GAO) (2003), and (4) a series of case studies by the Brookings Institution (Turbov and Piper, 2005). Two studies have examined the effect of HOPE VI on surrounding neighborhoods in Baltimore: (1) a study of all 5 Baltimore sites by a class of public policy graduate students from Johns Hopkins University (JHU MPP, 2003) and (2) a case study of Pleasant View Gardens, Baltimore’s first HOPE VI redevelopment, which forms part of the 11-site interim assessment by Holin et al. (2003).

Zielenbach was the first to examine HOPE VI spillover effects. In his 2002 report for the Housing Research Foundation, he examined changes in economic conditions (such as unemployment, lending rates, and crime) in the neighborhoods of eight large HOPE VI projects across the country. Comparing the status of the projects’ surrounding neighborhoods in 1990, before any of the HOPE VI projects began, to that in 2000, when the eight projects were far along in their redevelopment, he found that the neighborhoods showed substantial improvement in socioeconomic and market indicators, including significant increases in per capita income and rates in commercial and residential lending rates, as well as substantial decreases in crime and unemployment rates relative to citywide indicators (Zielenbach, 2002). In a separate study (Zielenbach, 2003) he expanded this analysis to include comparison neighborhoods with poverty rates greater than 30 percent. HOPE VI neighborhoods were worse off economically and had higher crime rates than these comparison neighborhoods in 1990, before redevelopment, but by 2000 they had improved so much that they were better off than the high-poverty comparison neighborhoods.

Holin et al. (2003) examined changes in unemployment, poverty, crime, racial integration, vacancy rates, and residents’ education levels in the surrounding neighborhoods of 11 of the earliest HOPE VI sites between 1990 and 2000 and compared the changes to those for the city as a whole. Although nearly all the surrounding neighborhoods experienced some improvement relative to pre-HOPE VI conditions, the study found great variation in the levels of improvement among the 11 sites.

The large-scale evaluation of the HOPE VI Program by the GAO (2003) included an examination of the surrounding neighborhoods of the 20 sites that had received a revitalization grant in 1996.

The study found significant improvements between 1990 and 2000 in levels of education, average household income, poverty rates, and average housing values in neighborhoods surrounding

Cityscape 67Castells

HOPE VI sites but found mixed or insignificant changes in mortgage lending activity, unemployment rates, percentage of units built within the past 10 years, occupancy rates, average gross rent, and total population. The authors also looked more closely at four of these sites, comparing them with four public housing neighborhoods in the same city that had not had HOPE VI developments, and found that the HOPE VI neighborhoods had greater improvements in mortgage lending activity and crime compared with the four non-HOPE VI neighborhoods, but that other indicators—such as poverty rates and average housing values and rents—did not demonstrate significant improvement (GAO, 2003).

The most recent study of HOPE VI spillovers, by Turbov and Piper (2005), used census data and administrative data4 on crime, housing values, non-HOPE VI investment, and school performance along with interviews to examine the effects of four HOPE VI projects on surrounding neighborhoods and assess the program’s ability to attract new investments and encourage revitalization.

They found a surge in new investments and property value increases in HOPE VI neighborhoods— as well as significant improvements in socioeconomic indicators such as income, crime, and unemployment—and concluded that HOPE VI was successful as a catalyst for neighborhood investment and revitalization.

The JHU MPP 2003 study is the only comprehensive analysis to date of spillover effects of all five HOPE VI projects in Baltimore. The study used census and administrative data to examine socioeconomic and demographic changes in surrounding neighborhoods, as well as interviews with experts and neighborhood residents to assess any changes in the public image of HOPE VI’s ability to attract investment to these neighborhoods. They did not find strong evidence of positive spillover effects for the three HOPE VI redevelopments included in the present analysis. Spillover effects in Townes at the Terraces and Heritage Crossing were very limited and short lived. Broadway Overlook was not completed at the time of the study, but the authors did not find evidence of positive spillovers from announcements of the redevelopment.

Neighborhood Context of Hope VI in Baltimore Five HOPE VI sites are currently in Baltimore: Pleasant View Gardens, Townes at the Terraces, Heritage Crossing, Broadway Overlook, and Flag House Courts. This analysis focuses on three of these sites: Townes at the Terraces, Heritage Crossing, and Broadway Overlook. Flag House Courts and Pleasant View Gardens are excluded because the former was not completed at the time of this study and the latter’s surrounding neighborhood has only a small residential area and thus has too few residential property sales to detect the effects of redevelopment. The three HOPE VI sites in this study differ greatly from each other in implementation and neighborhood conditions, as shown in exhibit 1.

The following descriptions of the HOPE VI sites and neighborhoods, based on expert interviews and local newspaper coverage, provide important context for interpreting the empirical findings.

The limited public investments—outside of HOPE VI—that are narrowly targeted to the study neighborhoods (and the limited effectiveness of the public investments that did occur, such as the Organizations or government agencies collect administrative data for their own administrative purposes.

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homeownership units.” For instance, the HABC website refers to for-sale units that were constructed with LIHTC or other public funds and sold to homebuyers with incomes under 60 or 80 percent (depending on the development) of the Area Median Income as “market-rate homeownership units.” In this article, these units are referred to as subsidized homeownership units.

Sources: HABC (2006); Shea (2006) Empowerment Zone [EZ] discussed later in the article) reinforce the assumption that observed differences in the changes in property values of the immediate surrounding neighborhood and properties in the same neighborhood farther away are likely attributable to HOPE VI redevelopment. Also, expert and public opinion is consistent with the differential spillover effects estimated in the empirical analysis and provides insight into why differences in spillover effects may exist.

In summary, general impressions of HOPE VI’s effect on surrounding neighborhoods from media coverage and experts were that Townes at the Terraces would have a limited effect on its surrounding neighborhood despite major investment in the area, Heritage Crossing could possibly affect its surrounding neighborhood because of its ability to attract homebuyers and investment interest, and Broadway Overlook would have a large effect on its neighborhood because of its strong management and design decisions and the nature of the neighborhood’s housing market.

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