Applying Research to Policy Issues in Distressed Housing Markets: Data-Driven Decision Making
A compilation of research published by the Federal Reserve Bank of Cleveland on housing markets experiencing foreclosure and/or a large number of vacant properties which sheds light on a wide range of housing markets. It provides possible policy solutions applicable to both regional and national policy discussions.
AUTHORS: Fitzpatrick, Thomas J.; Ergungor, O. Emre; Whitaker, Stephan; Zenker, Mary; Fee, Kyle; Hartley, Daniel; Richter, Francisca; Seo, Youngme; Firschein, Joseph
The long-term employment impacts of gentrification in the 1990s
In the ongoing debate over the social benefi ts and costs of gentrification, one of the key questions left largely unaddressed by the empirical literature is the degree to which gentrification impacts local labor markets. This paper begins by exploring the nature of employment change in one archetypical gentrifying neighborhood?Chicago?s Wicker Park?to motivate the central hypothesis that gentrification is associated with industrial restructuring. Next, a detailed analysis is presented on the long-term employment changes in neighborhoods that have experienced gentrification during the 1990s across a sample of 20 large central cities. Specifically, this paper uses Freeman?s (2005) definition to define tracts that experienced gentrification and compares employment outcomes in such tracts and those within a mile buffer to comparable nongentrified tracts. This analysis shows that employment grew slightly faster in gentrifying neighborhoods than other portions of the central city. However, jobs in restaurants and retail services tended to replace those lost in goods-producing industries. This process of industrial restructuring occurred at a faster rate in gentrifying areas. Thus gentrification can be considered a contributory and catalytic factor in accelerating the shift away from manufacturing with urban labor markets.
AUTHORS: Lester, T. William; Hartley, Daniel
Are America's Inner Cities Competitive? Evidence from the 2000s
In the years since Michael Porter?s paper about the potential competitiveness of inner cities there has been growing evidence of a residential resurgence in urban neighborhoods. Yet, there is less evidence on the competitiveness of inner cities for employment. We document the trends in net employment growth and find that inner cities gained over 1.8 million jobs between 2002 and 2011 at a rate comparable to suburban areas. We also find a significant number of inner cities are competitive over this period?increasing their share of metropolitan employment in 120 out of 281 MSAs. We also describe the pattern of job growth within the inner city, finding that tracts that grew faster tended to be closer to downtown, with access to transit, and adjacent to areas with higher population growth. However, tracts with higher poverty rates experienced less job growth, indicating that barriers still exist in the inner city.
AUTHORS: Hartley, Daniel; Lester, T. William; Kaza, Nikhil
Household Finance after a Natural Disaster: The Case of Hurricane Katrina
Little is known about how affected residents are able to cope with the fi nancial shock of a natural disaster. We investigate the impact that flooding from a major US hurricane had on household finance. Spikes in credit card borrowing and overall delinquency rates for the most flooded residents are modest in size and short-lived. Greater flooding results in larger reductions in total debt. Lower debt levels appear to be driven by homeowners using flood insurance to repay their mortgages rather than to rebuild. Debt reductions are larger in census tracts where mortgages were likely to be originated by nonlocal lenders.
AUTHORS: Hartley, Daniel; Gallagher, Justin
Within-city variation in urban decline: the case of Detroit
When a city experiences a decline in income or population, do all neighborhoods within the city decline equally? Or do some neighborhoods decline more than others? What are the characteristics of the neighborhoods that decline the most? We answer these questions by looking at what happened to neighborhoods within Detroit as the city experienced a sharp decline in income and population from the 1980s to the late 2000s. We find patterns of changes in income and population that are consistent with the model and empirical patterns of gentrification presented in Guerrieri, Hartley, and Hurst (2011), only playing out in reverse.
AUTHORS: Hurst, Erik; Guerrieri, Veronica; Hartley, Daniel
The effect of foreclosures on nearby housing prices: supply or disamenity?
A number of studies have measured the negative price effects of foreclosed residential properties on nearby property sales. However, only one study beside this one addresses the mechanism responsible for these effects. I measure separate effects for different types of foreclosed properties and use the estimates to decompose he effects of foreclosures on nearby home prices into two components. One component is due to the additional available housing supply and the other is due to a disamenity stemming from deferred maintenance or vacancy. I estimate that each extra unit of supply decreases prices within 0.05 miles by about 1.2% while the disamenity stemming from a foreclosed property is near zero.
AUTHORS: Hartley, Daniel
The relationship between city center density and urban growth or decline
In this paper we contrast the spatial patterns of population density and other demographic changes in growing versus shrinking MSAs from 1980 to 2010. We fi nd that, on average, shrinking MSAs show the steepest drop in population density near the Central Business District (CBD). Motivated by this fact, we explore the connection between changes in population density at the core of the MSA and MSA productivity. We find that changes in near-CBD population density are positively associated with per capita income growth at the MSA-level.
AUTHORS: Hartley, Daniel; Fee, Kyle
Endogenous gentrification and housing price dynamics
Using a unique dataset of interest rates offered by a large sample of U.S. banks on various retail deposit and loan products, we explore the rigidity of bank retail interest rates. We study periods over which retail interest rates remain fixed ("spells") and document a large degree of lumpiness of retail interest rate adjustments as well as substantial variation in the duration of these spells, both across and within different products. To explore the sources of this variation we apply duration analysis and calculate the probability that a bank will change a given deposit or loan rate under various conditions. Consistent with a nonconvex adjustment costs theory, we find that the probability of a bank changing its retail rate is initially increasing with time. Then as heterogeneity of the sample overwhelms this effect, the hazard rate decreases with time. The duration of the spells is significantly affected by the accumulated change in money market interest rates since the last retail rate change, the size of the bank and its geographical scope.
AUTHORS: Guerrieri, Veronica; Hartley, Daniel; Hurst, Erik
Blowing it up and knocking it down: the effect of demolishing high concentration public housing on crime
Despite popular accounts that link public housing demolitions to spatial redistribution of crime, and possible increases in crime, little systematic research has analyzed the neighborhood or citywide impact of demolitions on crime. In Chicago, which has conducted the largest public housing demolition program in the United States, I find that public housing demolitions are associated with a 10 percent to 20 percent reduction in murder, assault, and robbery in neighborhoods where the demolitions occurred. Furthermore, violent crime rates fell by about the same amount in neighborhoods that received the most displaced public housing households relative to neighborhoods that received fewer displaced public housing households, during the period when these developments were being demolished. This suggests violent crime was not simply displaced from the neighborhoods where demolitions occurred to neighborhoods that received the former public housing residents. However, it is impossible to know what would have happened to violent crime in the receiving neighborhoods had the demolitions not occurred. Finally, using a panel of cities that demolished public housing, I find that the mean public housing demolition is associated with a drop of about 3 percent in a city?s murder rate and about 2 percent in a city?s assault rate. I interpret these findings as evidence that while public housing demolitions may push crime into other parts of a city, crime reductions in neighborhoods where public housing is demolished are larger than crime increases in other neighborhoods. A caveat is that while the citywide reduction in the assault rate appears to be permanent, the citywide reduction in murder rate seems to last for only a few years.
AUTHORS: Hartley, Daniel
Housing recovery: how far have we come?
Four years into the economic recovery, housing markets have finally started to improve. While many indicators of activity indicate recent growth, comparing over time and across the United States suggests that many regional housing markets are looking better now only in comparison to where they were during the recession. The recovery in housing markets does appear to be gaining steam, but it remains a work in progress in many places.
AUTHORS: Hartley, Daniel; Fee, Kyle