Assessing Property Value Impacts of Dispersed Housing Subsidy Programs George Galster Anna M. Santiago Robin E. Smith Peter A. Tatian Assessing Property Value Impacts of Dispersed Housing Subsidy Programs March 1999 Prepared By: George Galster Anna M. Santiago Robin E. Smith Peter A. Tatian with Mary Cunningham Charlene Y. Wilson The Urban Institute Washington, DC 20037 Submitted To: U.S. Department of Housing and Urban Development Washington, DC 20410-3000 Contract No. C-OPC-5929, TO 09 UI No. 06542-009-00 The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or it funders. ACKNOWLEDGMENTS Peter A. Tatian served as Urban Institute project director and was responsible for overseeing all aspects of the conduct and management of this study. In addition, Mr. Tatian directed and supervised the preparation of the data files and wrote all of the programs for the property value impact analysis. Drs. George Galster and Anna M. Santiago of Wayne State University in Detroit were the lead researchers on the project. Dr. Galster developed the conceptual and theoretical foundations of the work, reviewed the statistical literature, and devised the econometric model. Dr. Santiago established the working relationship with the Housing Authority of the City and County of Denver and had primary responsibility for the policy reconnaissance there. Both Drs. Galster and Santiago played lead roles in conducting the policy reconnaissance, key informant interviews, and focus groups, and interpreting the results of the qualitative and quantitative analyses. Robin Smith of the Urban Institute was responsible for designing the focus group guides and protocols, conducting key informant interviews, and facilitating and analyzing the groups in Baltimore County. A study of this size and complexity can obviously not be accomplished without the support and participation of a number of people. The authors would like to recognize the contributions made by the following organizations and individuals. First, we are very grateful for the support given to us by Lois Cramer, Administrator of the Baltimore County Housing Office (BCHO), Ruth Crystal, Director of the Moving To Opportunity Program (Baltimore), David Fields, Director of the Baltimore County Office of Community Conservations, Gary Markowski, Director of Rental and Assisted Housing for the Housing Authority of Baltimore City, and Salvatore Carpio, Executive Director of the Housing Authority of the City and County of Denver (DHA). We would also like to recognize the invaluable assistance given by Bob Bromley and Jill Miller of BCHO and Stella Madrid and Karen Spruce of DHA in securing for us the data files on their agencies' programs that we needed for our analysis. Roe Davis and Harold Reid of BCHO provided helpful background information on the sites where we conducted focus groups in Baltimore County. Bobby Anderson at DHA provided data on maintenance expenditures for the dispersed housing program. Many people agreed to talk to us for our community and policy reconnaissance, providing us with valuable information on housing conditions and policy issues in Baltimore County and Denver. These participants are listed in Annex A of this report. For organizing and conducting the focus groups in Denver, the Urban Institute subcontracted with the Latin American Research and Service Agency (LARASA). LARASA not only gave crucial assistance in completing the focus groups, but also provided us with useful insights into the neighborhoods of Denver. The work at LARASA was directed by Dr. Susan Gallo, who was assisted by Jeff Garnas. Our thanks also goes to the many focus group participants in Denver and Baltimore County who openly shared their views and opinions with us on their neighborhoods and local communities. Professor Tom Thibodeaux of Southern Methodist University provided exceptionally helpful suggestions on a preliminary version of this report. Dr. Ayse Can of the Fannie Mae Foundation gave us important comments and guidance on the design of our econometric models and on the incorporation of corrections for spatial effects. Carol Wiseman developed the programs that we used to calculate the spatial lag variables. Several Urban Institute staff were involved in important roles in completing this study. Maris Mikelsons served as project director during the initial stages of the work. Mary K. Cunningham and Charlene Y. Wilson were responsible for assembling and processing the data files used for the quantitative analyses. Ms. Cunningham and Malcolm Drewery helped organize and conduct the focus groups in Baltimore County. Mark Rubin prepared the maps that appear in this report. Regina Madison was responsible for the report formatting and production. Dispersed Housing Impacts Study: Final Report TABLE OF CONTENTS ACKNOWLEDGMENTS EXECUTIVE SUMMARY . .. .. ... .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. i CHAPTER 1 - INTRODUCTION . .. .. ... .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 1-1 Policy Background . .. .. ... .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 1-2 Two Examples of Dispersed Housing Programs . 1-3 Overview of Research Strategy .... .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 1-5 Key Findings .... .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 1-6 A Guide to this Report .... .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 1-12 CHAPTER 2 - DENVER AND THE DISPERSED HOUSING PROGRAM . 2-1 Methodology for Community and Policy Reconnaissance . 2-1 Policy History of Scattered-Site Public Housing . 2-3 A Profile of Denver .... .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 2-9 The Geopolitical Context of Reactions to the DHA Dispersed Housing Program . 2-27 Perceived Impacts of the DHA Dispersed Housing Program on Neighborhood Change . .. .. ... .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 2-31 CHAPTER 3 - BALTIMORE AND THE SECTION 8/MTO MOBILITY PROGRAMS . 3-1 Policy History of Encouraging Dispersal of Tenant-Based Subsidy Recipients . 3-1 A Profile of Baltimore County .... .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 3-9 The Geopolitical Context of Reactions to Section 8/MTO Policy in Baltimore . 3-24 Perceived Relationships Between Housing Policy and Neighborhood Changes . 3-29 CHAPTER 4 - QUANTITATIVE AND QUALITATIVE METHODS . 4-1 A Non-Technical Overview . .. .. ... .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 4-1 Previous Studies: Results and Methodological Shortcomings . 4-4 A Conceptual Framework for Analyzing the Determinants of House Prices . 4-9 Econometric and Data Issues .... .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 4-17 Focus Group Sites and Methods .... .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 4-19 CHAPTER 5 - DESCRIPTION OF DATA SOURCES . 5-1 Home Sales . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 5-1 Denver Dispersed Public Housing .... .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 5-5 Baltimore County Section 8 .... .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 5-14 Dispersed Housing Impacts Study: Final Report Analysis Subsamples of Subsidized Sites and Home Sales . 5-23 CHAPTER 6 - DENVER RESULTS AND POLICY IMPLICATIONS . 6-1 Property Value Impacts in Denver .. .. ... .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 6-1 Suggestions from the Denver Experience . 6-11 CHAPTER 7 - BALTIMORE COUNTY RESULTS AND POLICY IMPLICATIONS . 7-1 Quantitative Estimates of Property Value Impacts of Section 8 . 7-1 Mechanisms of Neighborhood Impacts of Section 8 . 7-16 Suggestions from the Baltimore County Experience . 7-18 CHAPTER 8 - CONCLUSIONS AND POLICY RECOMMENDATIONS . 8-1 REFERENCES ANNEX A - INTERVIEW PARTICIPANTS AND INTERVIEW DISCUSSION GUIDE ANNEX B - CODING SCHEME FOR PROPERTY VALUE MODEL IMPACT VARIABLES ANNEX C - DESCRIPTIVE STATISTICS ANNEX D - REGRESSION RESULTS ANNEX E - FOCUS GROUP PROTOCOLS AND MATERIALS ANNEX F - DEMOGRAPHIC CHARACTERISTICS OF FOCUS GROUP PARTICIPANTS ANNEX G - SUMMARIES OF FOCUS GROUP FINDINGS EXECUTIVE SUMMARY In 1996, the U.S. Department of Housing and Urban Development (HUD) requested that the Urban Institute of Washington, DC conduct an analysis of the impacts of dispersed housing subsidy programs on neighborhood property values. “Dispersed housing subsidy programs” are programs that are designed to provide greater locational opportunities to households receiving housing assistance. Many policy makers believe that these programs will have beneficial effects both for society, by avoiding problems associated with the clustering of low-income households, and for the households receiving assistance, by giving them more opportunities to live in better neighborhoods. Such programs are not without controversy, however. In commissioning this study, HUD was responding to a number of concerns that have been raised about possible negative effects of dispersed housing programs in various recipient communities. These fears manifested themselves in the form of local resident protest in the two areas that are the subject of this report. The first was in Denver, Colorado, where the housing authority’s plans to acquire single-family and small multi-family properties for use as public housing produced repercussions in the form of new City Council mandates. The second was in Baltimore