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«AmericAn neighborhoods: inclusion And exclusion Volume 16, Number 3 • 2014 U.S. Department of Housing and Urban Development | Office of Policy ...»

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Therefore, we view this section’s findings as being more illustrative than definitive.

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* significant at the 10-percent level. ** significant at the 5-percent level. *** significant at the 1-percent level.

Notes: All models are stratified by county. Only the coefficients, not the hazard ratios, are reported. Robust standard errors (in parentheses) are clustered at the census tract.

88 American Neighborhoods: Inclusion and Exclusion Why and Where Do Homeowners Associations Form?

as substitutes. Column (b), however, shows that no such interaction exists between local revenues and HOA formation. Perhaps with expenditures, a more obvious and visible substitutability exists between local governments and HOAs that is not present with revenues.

We then explore finer categories of local expenditures to see if any particular type of service provision affects the likelihood of HOA formation. We choose categories of public spending that can be viewed as most redundant with HOA services: roads, parks and recreation, police, and trash collection. Columns (c) through (f) report these results. We put each category separately into a specification to avoid problems of collinearity between categories. The results show that only road spending affects the likelihood of HOA formation, and its effect is negative. We posit that this result indicates that HOAs (or specifically the developers that build them) often pick up the tab for the road infrastructure (and even road maintenance), and so it makes sense that they would form in places that tend to spend less on these investments.

Conclusion The proliferation of homeowners associations can bring promising and challenging circumstances for municipalities. Empirical evidence shows that the presence of HOAs can provide fiscal relief for municipalities in the form of services and infrastructure and potentially localized oversight in times of housing distress. HOAs can also threaten a city’s prospects for integration, however. In this article, we take a step back and investigate the determinants of HOA formation in an attempt to better understand the uneven nature of their emergence. We think that this investigation has implications for analyzing HOA effects and implementing HOA-related policies.

Our findings suggest that race/ethnicity and income are important predictors of where HOAs form.

HOAs are more likely to form in predominantly White and relatively more affluent tracts. If HOAs tend to be homogeneous (racially/ethnically and economically) and they tend to locate in already homogeneous neighborhoods, the outcome is less likely to be more integrated residential communities.18 We also find that HOAs are more likely to form in tracts that are farther away from city centers and with lower shares of residents who use public transit. These findings suggest that HOAs are not conducive to smart growth or transit-oriented development. This proposition is also supported by higher probabilities of HOA formation being associated with lower public road infrastructure spending. Indeed, the local government often requires the developer to fill in road networks to access the new housing. We ask: Are local governments intentionally withdrawing from certain services to encourage the formation of HOAs? We also find that tracts located in cities that spend relatively less on public services overall are more likely to form HOAs, which is also suggestive of the substitutability between HOAs and local public services.

Although HOAs have largely been unencumbered by public oversight, their proliferation can affect the quality of life for members and nonmembers alike. They can also prove to be a useful partner for local municipalities in neighborhood maintenance and development. Perhaps in this postrecession adjustment of slower housing growth, we can take time to consider more fully the implications of HOAs and other similar private governments.

This outcome is consistent with Meltzer (2013), who found that HOAs exacerbate racial/ethnic segregation.

–  –  –

Authors Ron Cheung is an associate professor of economics at Oberlin College.

Rachel Meltzer is an assistant professor of urban policy at The Milano School of International Affairs, Management and Urban Policy, The New School.

References Advisory Commission on Intergovernmental Relations (ACIR). 1989. Residential Community Associations: Questions and Answers for Public Officials. Washington, DC: ACIR.

Barr, James L., and Otto A. Davis. 1966. “An Elementary Political and Economic Theory of the Expenditures of Local Governments,” Southern Economic Journal 33 (2): 149–165.

Bayer, Patrick, Robert McMillan, and Kim Rueben. 2004. “What Drives Racial Segregation? New Evidence Using Census Microdata,” Journal of Urban Economics 56 (3): 514–535.

Bergstrom, Theodore C., and Robert P. Goodman. 1973. “Private Demands for Public Goods,” American Economic Review 63 (3): 280–296.

Bible, Douglas S., and Chengho Hsieh. 2001. “Gated Communities and Residential Property Values,” The Appraisal Journal 69 (2): 140–145.

Blakely, Edward James, and Mary Gail Snyder. 1997. Fortress America: Gated Communities in the United States. Washington, DC: Brookings Institution Press.

Bowen, Howard R. 1943. “The Interpretation of Voting in the Allocation of Economic Resources,” Quarterly Journal of Economics 58 (1): 27–48.





Brueckner, Jan K. 2003. “Strategic Interaction Among Governments: An Overview of Empirical Studies,” International Regional Science Review 26 (2): 175–188.

———. 1998. “Testing for Strategic Interaction Among Local Governments: The Case of Growth Controls,” Journal of Urban Economics 44 (3): 438–467.

Cheung, Ron. 2010. “Homeowners’ Associations and Their Impact on the Local Public Budget.” In The Changing Landscape of Local Public Revenues, edited by Yu-Hung Hong and Gregory K. Ingram.

Cambridge, MA: Lincoln Institute of Land Policy: 338–366.

———. 2008a. “The Effect of Property Tax Limitations on Residential Private Governments,” National Tax Journal 61 (1): 35–56.

———. 2008b. “The Interaction Between Public and Private Governments: An Empirical Analysis,” Journal of Urban Economics 63 (3): 885–901.

Cheung, Ron, Chris Cunningham, and Rachel Meltzer. 2014. “Do Homeowners Associations Mitigate or Aggravate Negative Spillovers From Neighboring Homeowner Distress?” Journal of Housing Economics 24: 75–88.

–  –  –

Cheung, Ron, and Rachel Meltzer. 2013. “Homeowners Associations and the Demand for Local Land Use Regulation,” Journal of Regional Science 53 (3): 511–534.

Ellen, Ingrid Gould. 2006. Understanding Segregation in the Year 2000. Unpublished paper. New York University.

Fisher, Lynn M., Lauren Lambie-Hanson, and Paul Willen. 2013. Foreclosure Externalities in Homeowner Associations: Evidence From Condominiums in Boston. Working paper.

Foundation for Community Association Research. 2012. “Statistical Review 2012.” http://www.cairf.org/foundationstatsbrochure.pdf.

Gordon, Tracy M. 2004. “Moving Up by Moving Out? Planned Developments and Residential Segregation in California,” Urban Studies 41 (2): 441–461.

———. 2003. “Crowd Out or Crowd In?: The Effects of Common Interest Developments on Political Participation in California,” The Annals of Regional Science 37 (2): 203–233.

Groves, Jeremy. 2008. “Finding the Missing Premium: An Explanation of Home Values Within Residential Community Associations,” Land Economics 84 (2): 188–208.

Helsley, Robert W., and William C. Strange. 2000a. “Potential Competition and Public Sector Performance,” Regional Science and Urban Economics 30 (4): 405–428.

———. 2000b. “Social Interactions and the Institutions of Local Government,” The American Economic Review 90 (5): 1477–1490.

———. 1998. “Private Government,” Journal of Public Economics 69 (2): 281–304.

LaCour-Little, Michael, and Stephen Malpezzi. 2009. “Gated Streets and Housing Prices,” Journal of Housing Research 18 (1): 19–44.

Le Goix, Renaud. 2005. “Gated Communities: Sprawl and Social Segregation in Southern California,” Housing Studies 20 (2): 323–343.

Low, Setha M. 2003. Behind the Gates: Life, Security, and the Pursuit of Happiness in Fortress America.

New York: Routledge.

Manzi, Tony, and Bill Smith-Bowers. 2005. “Gated Communities As Club Goods: Segregation or Social Cohesion?” Housing Studies 20 (2): 345–359.

McKenzie, Evan. 2003. “Common-Interest Housing in the Communities of Tomorrow,” Housing Policy Debate 14 (1–2): 203–234.

———. 1994. Privatopia: Homeowner Associations and the Rise of Residential Private Government.

New Haven, CT: Yale University Press.

Meltzer, Rachel. 2013. “Do Homeowners Associations Affect Citywide Segregation? Evidence From Florida Municipalities,” Housing Policy Debate 23 (4): 688–714.

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Meltzer, Rachel, and Ron Cheung. 2014. “How Are Homeowners Associations Capitalized Into Property Values?” Regional Science and Urban Economics 46: 93–102.

Reichman, Uri. 1976. “Residential Private Governments: An Introductory Survey,” The University of Chicago Law Review 43 (2): 253–306.

Rogers, William H. 2006. “A Market for Institutions: Assessing the Impact of Restrictive Covenants on Housing,” Land Economics 82 (4): 500–512.

Strahilevitz, Lior J. 2005. Exclusionary Amenities in Residential Communities. The University of Chicago, John M. Olin Law & Economics Working Paper No. 250 and Public Law and Legal Theory Working Paper No. 98.

Vesselinov, Elena. 2008. “Members Only: Gated Communities and Residential Segregation in Metropolitan U.S.,” Sociological Forum 23 (3): 536–555.

Yinger, John. 1995. Closed Doors, Opportunities Lost: The Continuing Costs of Housing Discrimination.

New York: Russell Sage Foundation.

Additional Reading Helsley, Robert W., and William C. Strange. 1999. “Gated Communities and the Economic Geography of Crime,” Journal of Urban Economics 46 (1) 80–105.

MacCabe, Barbara Coyle, and Jill Tao. 2006. “Private Governments and Private Services: Homeowners Associations in the City and Behind the Gate,” Review of Policy Research 23 (6): 1143–1157.

92 American Neighborhoods: Inclusion and Exclusion Race, Segregation, and Choice: Race and Ethnicity in Choice Neighborhoods Initiative Applicant Neighborhoods, 2010–2012 Matthew F. Gebhardt Portland State University Abstract During the past two decades, concern about spatial concentrations of poverty and disadvantage has become an ascendant scholarly and policy issue, and research on the effect of neighborhoods on individual and family life chances has grown substantially. The Choice Neighborhoods Initiative (hereafter, Choice), introduced in 2009, is a new federal program designed to address concentrated poverty. Choice, which is functionally the successor to the Housing Opportunities for People Everywhere, or HOPE VI, Program, provides competitive grants to fund redevelopment and revitalization in neighborhoods that have concentrations of poverty and publicly subsidized housing, with the goal of transforming them into neighborhoods of choice, thereby improving neighborhood outcomes. For the types of neighborhoods being targeted, little information beyond their having high rates of poverty is so far available. Drawing from the results of U.S. Department of Housing and Urban Development-funded research on the characteristics of Choice Planning Grant applicants, this article presents findings related to race and ethnicity in these targeted neighborhoods. The findings show that Choice Planning Grant applicant neighborhoods are highly segregated by race and ethnicity and that this segregation is linked to differences in educational attainment, labor force participation, unemployment rates, and income levels. These demographics suggest that Choice, like its predecessor, is likely to have a disproportionate effect on minority racial and ethnic groups.

Cityscape 93 Cityscape: A Journal of Policy Development and Research • Volume 16, Number 3 • 2014 U.S. Department of Housing and Urban Development • Office of Policy Development and Research Gebhardt Introduction In 2009, the Obama Administration proposed a new program aimed at revitalizing neighborhoods marked by high poverty and severely distressed housing. Named the Choice Neighborhoods Initiative (hereafter, Choice), this program would act as a successor to the long-running Housing Opportunities for People Everywhere (HOPE VI) Program. Choice is part of the Obama Administration’s Neighborhood Revitalization Initiative (NRI), a series of coordinated, place-based neighborhood revitalization programs extending across multiple federal agencies, including the U.S.

Department of Housing and Urban Development (HUD), the U.S. Department of Education, and the U.S. Department of Justice. Choice is administered by HUD and addresses the housing and built environment component of the NRI. Although the U.S. Congress has yet to authorize Choice, it has appropriated funds for the program each year since fiscal year (FY) 2010.

Like funding for HOPE VI, Choice funds are distributed through competitive grants. This investment is intended to leverage additional public and private resources and investment to plan for and subsequently reshape these areas into sustainable, mixed-income neighborhoods in which individuals and families will choose to live. Employing an approach used during the first 3 years of HOPE VI, Choice provides two types of grants: Planning Grants and Implementation Grants.1 Planning Grants provide comparatively modest funds for developing Transformation Plans to guide neighborhood revitalization, and Implementation Grants provide larger sums to facilitate implementation of a Transformation Plan. This article focuses on neighborhoods for which Planning Grant applications have been made. Drawing from a more comprehensive report on the demographic, economic, and housing characteristics of the first three Planning Grant applicant cohorts (FYs 2010, 2011, and 2012), this article highlights one vital characteristic of applicant neighborhoods: their racial and ethnic composition.



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