Housing Externalities

Esteban Rossi‐Hansberg, Pierre‐Daniel Sarte, Raymond Owens
2010 Journal of Political Economy  
Using data compiled from concentrated residential urban revitalization programs implemented in Richmond, VA, between 1999 and 2004, we study residential externalities. Speci...cally, we provide evidence that in neighborhoods targeted by the programs, sites that did not directly bene...t from capital improvements nevertheless experienced considerable increases in land value relative to similar sites in a control neighborhood. Within the targeted neighborhoods, increases in land value are
more » ... d value are consistent with externalities that fall exponentially with distance. In particular, we estimate that housing externalities decrease by half approximately every 990 feet. On average, land prices in neighborhoods targeted for revitalization rose by 2 to 5 percent at an annual rate above those in the control neighborhood. These increases translate into land value gains of between $2 and $6 per dollar invested in the program over a six-year period. We provide a simple theory that helps us interpret and estimate these e¤ects. We thank Miklos Koren, Dan Tatar, and David Sacks for many helpful discussions. We also thank Marco Gonzales-Navarro, Gilles Duranton, and numerous seminar participants for their comments. Finally, we thank Brian Minton and Kevin Bryan for outstanding research assistance. y The views expressed in this paper are those of the authors and do not necessarily re ‡ect those of the Federal Reserve Bank of Richmond or the Federal Reserve System. R K(u)du, and n is the number of observations in each panel. 16 The north-eastern end of Blackwell consists mainly of an industrial park with some scattered residences. No sales were recorded in that area over our sample period.
doi:10.1086/653138 fatcat:sg7ry6sdazcjhldlnhrb62qxm4