Assessing the Economic Spillover of HOPE VI

1. Assessing the Economic Spillover of HOPE VI Sean Zielenbach Dick Voith Michael Mariano

2. 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

3. 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)

4. 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)

5. 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

6. 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

7. 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

8. 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?

9. 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

10. Bos: Mission Main Prop Values

11. Bos: Orchard Property Values

12. Seattle: New Holly Prop Values

13. 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

14. 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

15. Public Welfare Cost / Benefit

16. 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

17. 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