Neighborhood Housing Resilience: Examining Changes in Foreclosed Homes During the U.S. Housing Recovery

ABSTRACT

The surge in foreclosures in the United States that began in 2007 reached a peak in mid-2011, and since then, the rate of foreclosures has been decreasing, providing evidence of the housing market recovery. This study examines factors that affected changes in ZIP code-level foreclosure rates in more than 300 U.S. metropolitan areas during the national housing recovery. Using multivariate analyses of the long- and short-term effects of foreclosures simultaneously, this finding shows that certain characteristics of the mortgage and housing markets led to more rapid neighborhood recovery. Results also indicate, however, that most urban-form variables led to neighborhood resilience over the long term, that high shares of mixed land use were strongly associated with fewer foreclosures, and that high shares of auto dependency were associated with high foreclosure rates. Finally, findings suggest that low- and moderate-income neighborhoods, particularly in cities, were more vulnerable and less resilient to economic shock, and the accumulated effects of foreclosures worsened over the long term. However, low- and moderate-income neighborhoods surrounded by suburban affluent neighborhoods recovered more rapidly than those in cities did. Understanding such resilience to economic crises will provide policymakers with insights that they can leverage to establish housing policies for sustainable neighborhoods.     

Is Investor Purchasing of Foreclosures Related to Neighborhood Crime? Evidence From a Phoenix Suburb

Little is known about how investors purchasing foreclosures during the recent U.S. housing crisis are affecting neighborhood crime. While they may decrease crime by reducing vacancies or bettering neighborhood conditions, they may increase it by escalating neighborhood turnover. Combining local police department data on calls for service with foreclosure, home sales, and sociodemographic data, this research uses longitudinal modeling to assess the relation between the purchasing of foreclosures by investors and calls for service in neighborhoods in Chandler, Arizona, a Phoenix suburb where investors are renting former foreclosures. Neighborhoods where foreclosures were more often purchased by investors had more calls for service about violent crime the following year.     

Renting the Dream: The Rise of Single-Family Rentership in the Sunbelt Metropolis

In the aftermath of the foreclosure crisis, there has been a marked shift toward renting in the United States, with a large increase in households renting single-family homes. In the 50 largest metropolitan areas, the number of detached, single-family rental homes (SFRs) increased from 3.8 million to 5.8 million from 2006 to 2015. Single-family rentership rates increased in all 50 large metro areas, with the percentage of single-family units that are rented increasing from 11.3% to 16%. Notably, the nine metropolitan areas with the largest increases were all located in the Sunbelt. Given expected neighborhood sorting, it is important to consider neighborhood increases in SFRs. In one large Sunbelt metro area, Atlanta, increases in SFRs from 2010 to 2015 were particularly large in older, inner-county diverse suburbs. Regression results show that, controlling for other neighborhood characteristics, neighborhoods with larger Asian, Latino, and black populations saw larger increases in SFRs. The effects were particularly high in neighborhoods with larger Latino and, especially, Asian populations. Another key finding is that, in neighborhoods with lower property values, more foreclosures during the crisis were associated with sizeable increases in SFRs. However, more foreclosures in neighborhoods with high property values were not associated with increases in SFRs. This is possibly due to the exclusionary nature of high property-value suburbs and the strong demand in such neighborhoods for owner-occupied housing. Implications for policy and research are considered.     

Revitalizing inner‐city neighborhoods: New York city's Ten‐Year Plan

Abstract

This article examines the impact of New York City's Ten‐Year Plan on the sale prices of homes in surrounding neighborhoods. Beginning in the mid‐1980s, New York City invested $5.1 billion in constructing or rehabilitating over 180,000 units of housing in many of the city's most distressed neighborhoods. One of the main purposes was to spur neighborhood revitalization.

In this article, we describe the origins of the Ten‐Year Plan, as well as the various programs the city used to implement it, and estimate whether housing built or rehabilitated under the Ten‐Year Plan affected the prices of nearby homes. The prices of homes within 500 feet of Ten‐Year Plan units rose relative to those located beyond 500 feet, but still within the same census tract. These findings are consistent with the proposition that well‐planned project‐based housing programs can generate positive spillover effects and contribute to efforts to revitalize inner‐city neighborhoods.     

Can Local Ordinances Prevent Neighborhood Destabilization?

This article assesses the ability of local housing ordinances to prevent neighborhood destabilization, specifically that arising as a consequence of the most recent housing crisis. We evaluate the degree to which vacancy registrations and point-of-sale inspection requirements influenced housing market outcomes during the housing crisis. With comprehensive real property data from Cuyahoga County, Ohio, we measure outcomes that characterize housing market distress including foreclosures, sales below the tax-assessed value, bulk sales, flipping, and property tax delinquency. We evaluate outcomes across properties in regulated and unregulated municipalities using matching procedures on linked data containing property, neighborhood, loan, and transaction characteristics. We find evidence that vacancy registrations substantially reduce foreclosures. In contrast, we find little evidence that point-of-sale inspections reduce undesirable transactions. Rather, properties in cities with inspection requirements displayed higher levels of foreclosure and tax delinquency relative to the control group during the study period.     

The Geography of the Recent Housing Crisis: The Role of Urban Form

This study maps the geography of the recent housing crisis within and across American metropolitan areas, and evaluates how it is related to a series of spatial and socioeconomic variables at neighborhood and metropolitan levels. It finds that the spatial patterns of housing recessions vary widely by region. In general, fast-growing metropolitan areas in the Southwest and Florida experienced not only deeper but also longer housing recessions. In contrast, metropolitan areas in the South (except in Florida) saw shallower and shorter housing recessions. Metropolitan areas in the Midwest and Northeast had fewer price declines in the crisis, but their housing recessions tended to be longer. Housing recessions tend to be deeper and longer in larger metropolitan areas. Neighborhoods located closer to city centers experienced shallower and shorter recessions compared with those in fringe areas. Even after controlling for many other variables, automobile dependency is still a strong and positive predictor of housing recession depth and duration. The effects of other urban form variables, such as land-use density and mixed use, are mixed and vary by region. The significance of the effects of neighborhood demographic variables on recession depth is highly dependent on the inclusion of high-risk loan in the model, suggesting that predatory and high-risk lending is one major reason why lower income and minority neighborhoods were hit harder by the recent housing crisis. The effects of high-risk loan and neighborhood demographic variables on housing recession duration, however, are rather weak.     

Restoring community through traditional neighborhood design: A case study of Diggs town public housing

Abstract

This article examines how traditional neighborhood design (TND) can restore a sense of community to distressed neighborhoods. Traditional neighborhoods, such as those found in many cities and inner suburbs, provide their residents numerous opportunities and venues for social interaction. We apply the principles of TND to the redesign of a public housing project. We call our approach an “architecture of engagement.”

Using a case study of Diggs Town, a public housing project in Norfolk, VA, we explore how the application of TND principles transformed a socially alienated and distressed neighborhood into a socially integrated and functional one. We find that TND techniques improve the quality of life by facilitating the social exchanges that create social capital.     

Assessing the property value impacts of the dispersed subsidy housing program in Denver

This study tests the hypothesis that the acquisition of existing property by the public housing authority and its subsequent rehabilitation and occupancy by subsidized tenants significantly reduced the property values of surrounding single‐family homes in Denver during the 1990s. This assessment examined pre‐ and post‐occupancy sales, while controlling for the idiosyncratic neighborhood, local public service, and zoning characteristics of the areas in order to identify which sorts of neighborhoods, if any, experienced declining property values as a result of proximity to dispersed housing tenants. The analyses revealed that proximity to a subsidized housing site generally had an independent, positive effect on single‐family home sales prices. The most notable exception to this pattern occurred in neighborhoods more than 20 percent of whose residents were black. Proximity to dispersed public housing sites in these neighborhoods resulted in slower growth in home sales prices in an other‐wise booming housing market and suggest a threshold within “vulnerable” neighborhoods whereby any potential gains associated with rehabilitating existing units are offset by the increased concentration of poor residents. © 2001 by the Association for Public Policy Analysis and Management.     

The What,Where, and When of Place-Based Housing Policy’s Neighborhood Effects

Ever-scarce affordable housing production resources, in addition to their primary function of providing housing for those in need, are increasingly enlisted for the dual goals of strengthening distressed communities and increasing access to higher opportunity neighborhoods. Information on spillovers can inform investment decisions over time and across communities. We leverage recent, high-quality research on neighborhood effects of Low-Income Housing Tax Credit (LIHTC) production, synthesizing evidence according to neighborhood context. We also summarize the evidence on project features moderating impacts of publicly subsidized, place-based rental housing, in general. We conclude that context matters. Producing LIHTC housing in distressed neighborhoods positively impacts the surrounding neighborhood—in terms of modest property value gains and increased safety. By contrast, higher opportunity neighborhoods experience small property value reductions, and no impacts on crime. Big questions remain, however, about impact heterogeneity—via tenant mix, property design, and ongoing property management, as examples—with the scarcity of systematic data representing one of the field’s largest constraints.     

Single-Family Housing Market Segmentation,Post-Foreclosure Resale Duration,and Neighborhood Attributes

During the recent economic recession, the foreclosure crisis drew vast attention from scholars and policymakers. Numerous studies focused on factors resulting in foreclosures, the impact of foreclosures, and the relationship between neighborhood attributes and foreclosures. Fewer studies investigated the foreclosure resale mechanism by focusing on buyer characteristics and the market duration of foreclosed properties. This research uses foreclosed residential properties in Broward County, Florida, between 2007 and 2011 to explore how market segmentation by assessed value relates to time on market of foreclosed properties. This research finds that extremely low-value properties and very high-value properties generally take longer to sell. Mid-value properties take a shorter time to sell. After controlling for housing attributes and market segmentation, certain neighborhood characteristics, such as lower percentage black population, lower percentage Hispanic population, lower educational attainment, and higher homeownership rate, are associated with increased likelihood of a real estate owned property being sold. These results will help policymakers determine better strategies for the foreclosure resale process. Special attention should focus on properties taking longer to sell or not able to sell during certain time frames to alleviate the negative effects of these properties on neighborhoods.     

The external costs of foreclosure: The impact of single‐family mortgage foreclosures on property values

Abstract

To measure the impact of foreclosures on nearby property values, we use a database that combines data on 1997 and 1998 foreclosures with data on neighborhood characteristics and more than 9,600 single‐family property transactions in Chicago in 1999. After controlling for some 40 characteristics of properties and their respective neighborhoods, we find that foreclosures of conventional single‐family (one‐ to four‐unit) loans have a significant impact on nearby property values. Our most conservative estimates indicate that each conventional foreclosure within an eighth of a mile of a single‐family home results in a decline of 0.9 percent in value.

Cumulatively, this means that, for the entire city of Chicago, the 3,750 foreclosures that occurred in 1997 and 1998 are estimated to have reduced nearby property values by more than $598 million, for an average of $159,000 per foreclosure. This does not include effects on the value of condominiums, multifamily rental properties, and commercial buildings.     

Preserving Neighborhood Opportunity: Where Federal Housing Subsidies Expire

Abstract

Rent burdens are increasing in U.S. metropolitan areas while subsidies on privately owned, publicly subsidized rental units are expiring. As a result, some of the few remaining affordable units in opportunity neighborhoods are at risk of being converted to market rate. Policy makers face a decision about whether to devote their efforts and scarce resources toward developing new affordable housing, recapitalizing existing subsidized housing, and/or preserving properties with expiring subsidies. There are several reasons to preserve these subsidies, one being that properties may be located in neighborhoods with greater opportunity. In this article, we use several sources of data at the census tract level to learn how subsidy expirations affect neighborhood opportunity for low-income households. Our analysis presents several key findings. First, we find that units that left the project-based Section 8 program were – on average – in lower opportunity neighborhoods, but these neighborhoods were improving. In addition, properties due to expiry from the Section 8 program between 2011 and 2020 are in higher opportunity neighborhoods than any other subsidy program. On the contrary, new Low-Income Housing Tax Credit (LIHTC) units were developed in tracts similar to those where LIHTC units are currently active, which tend to be lower opportunity neighborhoods.     

Comment on Kerry D. Vandell's “FHA restructuring proposals: Alternatives and implications”

Abstract

New Orleans, a highly segregated city with low homeownership, experienced a tremendous number of housing foreclosures between 1985 and 1990. This study highlights the process and impact of foreclosure in the urban housing market, which contributes to an understanding of their impact on the spatial structure of the city. Two aspects of foreclosure are examined: the differential impacts of foreclosure on low‐income and African‐American householders and changes in socioeconomic conditions (neighborhood change and the spatial structure of the city) resulting from foreclosure.

Conventional wisdom holds that urban neighborhood transformation is driven largely by white flight. The data presented in this article suggest a counterhypoth‐esis. Middle‐income professional whites employed in businesses impacted by recession who had recently bought housing with high loan‐to‐value ratios were forced to sell or have their houses foreclosed upon. The depressed market, in turn, made such housing affordable to middle‐class blacks interested in homeownership. Thus, black economic opportunity, rather than white flight, dramatically transformed the racial composition of many New Orleans East neighborhoods.     

Housing Programs Fail to Deliver on Neighborhood Quality,Reexamined

This article revisits the relative performance of housing programs in terms of delivering on neighborhood quality. Newman and Schnare examined this issue in 1997, and this article updates their work more than a decade later. Both efforts examine the neighborhood characteristics surrounding assisted rental housing and assess the direction of assisted-housing policy. The analysis is performed by exploring census data at the tract level for the tenant-based Housing Choice Voucher program plus a set of project-based programs, including public housing, the Low-Income Housing Tax Credit program, and other HUD multifamily programs. We conclude that Newman and Schnare remain correct that rental housing assistance does little to improve the quality of the recipients' neighborhoods relative to those of welfare households and can make things worse. However, things have improved. The Housing Choice Voucher and Low-Income Housing Tax Credit programs have grown in importance over the intervening years and have improved their performance by moving more households into low-poverty, less distressed areas. Importantly, these active programs for assisted housing are beginning to find ways to overcome the barriers preventing entry into the suburbs, although more needs to be done.     

Subsidized Housing and Residential Trajectories: An Application of Matched Sequence Analysis

Scholars have long debated the relative merits of site-based, subsidized housing owned and operated by a public entity or by the private sector. This is the first study to classify long-term residential trajectories of nationally representative low-income households in the United States by their initial assisted housing status. We employ a matched sequence analysis of neighborhood poverty and racial trajectories of low-income households in the Panel Study of Income Dynamics who formed during 1988–1992. Among households carefully matched by their demographic and economic attributes, we find that those first forming households in public housing spend much longer durations over the subsequent 20 years in poorer, minority dominant neighborhoods than similar households first forming in market-rate housing do. In contrast, forming a household in private site-based subsidized housing is associated with superior neighborhood socioeconomic (but not desegregated racial composition) trajectories compared with starting in market-rate housing. Implications for housing policy are discussed.     

Comment on Sandra J. Newman and Ann B. Schnare's “'… And a suitable living environment’: The failure of housing programs to deliver on neighborhood quality”

Abstract

Newman and Schnare provide a useful portrait of where housing assistance ends up geographically. The evidence that certificate and voucher holders are less likely than public housing residents to live in the poorest neighborhoods is encouraging, as well as important for policy decisions. Unresolved in the article, and unresolvable with the data, as the authors themselves note, is the matter of how neighborhood quality is affected by housing assistance. The least popular housing developments have long been relegated to neighborhoods of least political resistance, a fact that constrains most local efforts to deconcentrate poverty. Futhermore, through the tax code, America spends about three times as much on housing assistance for middle‐ and upper‐income households as it does on assistance to low‐ and moderate‐income households. Thus far, we have not applied “fair share” principles either to the location of housing assistance or to its allocation across the income spectrum.     

Desire for Smart Growth: A Survey of Residential Preferences in the Salt Lake Region of Utah

As an alternative to sprawling development, smart growth combines proximity to work, proximity to shopping and other destinations, neighborhood housing mix, shared and paid parking, complete street designs, and proximity to public transit. This article uses a stated-choice experiment to determine residents' attitudes toward these various aspects of smart growth in the Salt Lake region of Utah. Utah is a conservative state, where attitudes toward auto-oriented suburbia may be more positive than in other parts of the United States. So, one might wonder whether changing national attitudes toward smart growth, documented in several surveys, apply to residents of the Salt Lake region. In this stated-choice experiment, respondents were asked to choose between pairs of housing scenarios with different attributes and different prices. Mixed logit (random parameters logit) was used to relate individuals' choices to attributes, prices, and sociodemographic characteristics of respondents. The results show that, generally, respondents have positive attitudes toward most aspects of smart growth but still express preferences for single-family neighborhoods with free parking in their own driveways or garages. Different life cycle cohorts have different preferences. Proximity to work is more important for childless young adults. Young families with children place higher value on living in a neighborhood with only single-family homes and transit access. Retired empty nesters favor a mix of housing types over single-family housing on one-acre-plus lots. The results suggest that while residents of the Salt Lake region like suburban neighborhoods with primarily single-family houses, they would also like to have improved accessibility to amenities in the suburbs.     

Race and Assisted Housing

This article explores racial disparities between assisted housing outcomes of black and white and white households with children. We compare the assisted housing occupied by black and white households with children, and examine whether young adult education, employment, and earnings outcomes in 2011 differ between blacks and whites who spent part of their childhood in assisted housing in the 2000s. We use a special version of the Panel Study of Income Dynamics (PSID) that has been address-matched to federally assisted housing, and the PSID’s Transition to Adulthood supplement, along with geocode-matched data from the U.S. Census Bureau, American Community Survey (ACS), CoreLogic real estate data, and U.S. Department of Housing and Urban Development (HUD). Statistical methods include difference in means, logit and general linear models. We find no evidence of racial disparities in the type of assisted housing program, the physical quality of project-based developments, or the management of public housing developments in the 2000 decade. But black households with children are more likely to live in assisted housing that is located in poorer quality neighborhoods. Multivariate tests reveal that the worse outcomes of black young adults compared with whites disappear once socioeconomic differences are taken into account. The discrepancy in assisted housing neighborhood quality experienced by black and white children makes no additional contribution to predicting young adult outcomes. Nonetheless, black children living in relatively better assisted housing neighborhoods tend to have better outcomes in young adulthood than those who live in poorer quality assisted housing neighborhoods. We discuss sources of racial disparity in neighborhood quality, and the policies enacted and proposed to address it.     

“Living Here has Changed My Whole Perspective”: How Escaping Inner‐City Poverty Shapes Neighborhood and Housing Choice

Research on the housing choice voucher program and housing mobility interventions shows that even with assistance, it is difficult for poor minority families to relocate to, and remain in, low‐poverty neighborhoods. Scholars suggest that both structural forces and individual preferences help explain these residential patterns. However, less attention is paid to where preferences come from, and how they respond to policies and social structure to shape residential decisionmaking. In this paper, we use data from fieldwork with 110 participants in the Baltimore Mobility Program (BMP), an assisted mobility voucher program, to demonstrate how residential preferences can shift over time as a function of living in higher opportunity neighborhoods. Since 2003, BMP has helped over 2,000 low‐income African American families move from high‐poverty, highly segregated neighborhoods in Baltimore City to low‐poverty, racially mixed neighborhoods throughout the Baltimore region. Along with intensive counseling and unique program administration, these new neighborhood contexts helped many women to shift what we term residential choice frameworks: the criteria that families use to assess housing and neighborhoods. Parents who participated in the mobility program raised their expectations for what neighborhoods, homes, and schools can provide for their children and themselves. Parents report new preferences for the “quiet” of suburban locations, and strong consideration of school quality and neighborhood diversity when thinking about where to live. Our findings suggest that housing policies should employ counseling to ensure relocation to and sustained residence in low‐poverty communities. Our work also underscores how social structure, experience, and policy opportunities influence preferences, and how these preferences, in turn, affect policy outcomes.     

Declining foreclosure neighborhood effects over time

According to previous studies, residential foreclosures reduce the value of neighboring residential units and the initial negative effects decay over time and space. This study attempts to investigate the temporal path of the initial effects by following cohorts of single-family housing distressed sales (foreclosures and real estate owned sales) over time. A hedonic model estimation of single-family housing sales in Saint Louis County, Missouri, produced larger marginal impacts for new distressed sales in the year 2000 compared with the marginal impact of new distressed sales in 2007, that is, the marginal impact of new distressed sales is declining in at least one housing market. This result holds true for the distressed sale neighborhood impact, the effect of distress on the same unit's future sales price, and the discount on a distressed unit's current “liquidation sale” price.