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

Cost-benefit analysis

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)

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)

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

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

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

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?

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

Bos: Mission Main Prop Values

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

$500,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Mission Main

Mission Main No Hope VI

Bos: Orchard Property Values

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Orchard Gardens

Orchard Gardens No Hope VI

Seattle: New Holly Prop Values

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

New Holly No Hope VI

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

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

Public Welfare Cost / Benefit

Property Net Costs Total Bens Net Bens

First Ward $7.9 $73.3 $65.4

Guinotte $10.4 $13.4 $3.0

Mission Main $126.2 $140.0 $13.8

New Holly $58.6 $201.6 $143.0

N Beach $36.7 $22.1 -$14.5

Orchard $82.9 $68.3 -$14.7

Townhomes $23.4 $1.4 -$22.0

Villa del Sol $8.8 $25.4 $16.6

Wheeler $31.5 $24.0 -$7.6

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

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