Modeling returns to owner-occupied single-family residences

This paper expands previous models of the returns to owner-occupied single-family residences by modelling returns to a specific property of an individual homeowner instead of determining an average market return based on appraised values. Included in the model are transaction costs, degree of leverage, level of price appreciation, the implied rental cost in ownership, tax bracket, and duration of home ownership. Simulation results suggests that the level and timing of transaction costs are important to homeowners and rates of return to owner-occupied single-family residences increase to a point in time and thereafter decline.     

What is a strategic acquisition? Decision modeling in support of foreclosed housing redevelopment

This paper describes and develops a model for calculating location-based strategic values of foreclosed properties considered for acquisition and redevelopment by community development corporations (CDCs). A property’s strategic value refers to its proximity to site-specific neighborhood amenities and disamenities (e.g. schools, public transit, distressed properties), given the relative importance of that proximity to CDC organizational and community objectives. We operationalize the concept of strategic value, and apply this concept to a salient public sector decision problem. Using data and value assessments from a CDC engaged in foreclosed housing redevelopment, we compute measures of strategic value for a set of acquisition candidates. We show that strategic values can differ in systematic ways depending on the types of amenities and disamenities identified as relevant for CDC acquisition decisions, the relative importance assigned to those amenities and disamenities, and the utility maximization objectives of the CDC. We conclude by proposing a multi-criteria decision model for foreclosed housing acquisition and redevelopment which incorporates a theory of residential housing impacts for which strategic value measures are a special case.     

The impact of tax increment finance districts on localized real estate: Evidence from Chicago’s multifamily markets

Sales price indices for the Chicago multifamily real estate market are developed in order to examine the influence that designating an area a tax increment financing district (TIF) has on the real property appreciation rates. Chicago is a community with a long history of TIF investment and a patchwork of more than 130 established TIF districts, comprising over 29 percent of the city’s total acreage and approximately 19 percent of the total real property tax base. Municipal governments across the country have come under increased pressure to provide quantifiable evidence that the tools they employ in the name of economic development have the potential to increase private investment. The results indicate that properties located within a designated TIF district exhibit higher rates of appreciation after the area is designated a qualifying TIF district when compared to those properties selling outside TIF districts, and when compared to properties that sell within TIF district boundaries prior to designation. The findings provide support for the hypothesis that TIF policy impacts property values through increased investment.     

What Is ‘Just and Reasonable’ in Rent Control?Why Historic Cost Is More Rational Than Current Value

A bstract . Rent control legislation must allow landlords to earn a "just and reasonable return" on their property. If the law prevents a landlord from attaining such a result he is entitled to seek relief by administrative or judicial process. The customary measure of 'just and reasonable return' is the current interest rate applied to current, fair market value. During a period of inflation such a calculation results in too high a measure. Because both interest rates and the value of tangible property rise together, rentals must increase at twice the inflation rate to meet the standard. Recent legal opinions evidence no appreciation or awareness of this. Furthermore, in a rent-controlled situation it is impossible to establish a valid current market value for a property. Both difficulties are overcome if a 'just and reasonable return' is based on historic cost rather than current market value. Arguments in favor of historic cost are made employing capital market analysis and classical rent theory.     

Foreclosure,vacancy and crime

This paper examines the impact of residential foreclosures and vacancies on violent and property crime. To overcome confounding factors, a difference-in-difference research design is applied to a unique data set containing geocoded foreclosure and crime data from Pittsburgh, Pennsylvania. Results indicate that while foreclosure alone has no effect on crime, violent crime rates increase by roughly 19% once the foreclosed home becomes vacant – an effect that increases with length of vacancy. We find weak evidence suggesting a potential vacancy effect for property crime that is much lower in magnitude.     

Housing appreciation, mortgage interest rates, and homeowner mobility

This paper presents a model of the optimal timing of tradeup, which considers consumption and investment motives of homeownership. Households determine the optimal timing of trading up so as to maximize their intertemporal utility of both housing and nonhousing consumption. First we consider current homeowners, who already own a house and expect that they trade up to a more valuable house at some point in the future. Housing appreciation tends to induce an earlier optimal timing of trading up. Moreover, housing appreciation makes current homeowners better off in terms of welfare. However, current homeowners suffer from a rise in mortgage interest rates. Second, we consider first-time home buyers, who have decided to buy a house and expect to trade up to a more valuable house in the future. Their initial housing consumption is determined by an initial downpayment constraint. In this case, the effect of housing appreciation on the optimal timing of trading up is ambiguous and, unlike current homeowners, first-time home buyers suffer from housing appreciation. Moreover, as current homeowners, first-time home buyers suffer from a rise in mortgage interest rates. Most of the theoretical analytic results are ambiguous. Accordingly, we perform numerical simulations based on the theoretical model in order to determine the most likely comparative effects for a stylized set of parameters.As is apparent, the model captures the recent observations on homewner mobility and suggests that macroeconomic variables such as housing appreciation and mortgage interest rates effect the optimal timing of trading up and homeowner's welfare. Nevertheless, the model in this paper has several shortcomings, which should be the subject of future research. First, transaction costs are ignored. If transaction costs are incorporated, the lock-in effect from a rise in mortgage interest rates is well explained. However, the general analysis above is not altered in any essential way. Second, multiple moves are not considered in this model. Therefore, we concentrate on the timing of one tradeup as opposed to the timing and frequency of trading up. In a different vein, it would be interesting to test empirically the importance of the effects of macroeconomic variables on trading up by using microdata.     

Tourism, Vacation Home Development and Residential Tax Burden:

Abstract . Differences in property tax rates among communities within a regional economy are a source of inefficiency and inequity. Less developed rural areas where natural amenities exist have often attempted to use the tourist industry as a means of importing economic development. Promoters of vacation home development argue that the impact on the local tax base is positive. However, the quantitative research in this paper indicates that under certain circumstances, vacation home development has the effect of increasing the tax burden on residential property.     

浙江宅基地和农房产权制度调查研究

基于2009-2010年组织的浙江10个县(市、区)农户和官员问卷调研,描述浙江宅基地与农房产权管理现状,论述各地宅基地与农房产权制度改革实践探索情况,并分析宅基地与农房产权制度改革需求和方向。调查分析表明,当前各地宅基地与产权管理现状差异较大,农户和官员对宅基地与产权制度改革需求较大。建议采取有力措施,推动宅基地与农房产权制度改革,保障农民的财产权益,提高农民的财产性收入。     

Market Values of Environmental Amenities: A Latent Variable Approach

This study presents a latent variable framework to provide consistent and efficient estimates of market values of amenities. A model for property values of residential housing using different indicators for neighborhood quality and property value is estimated using data from the U.S. American Housing Survey. The estimated effect of neighborhood quality on property values is positive and more significant compared to the estimates obtained by ordinary least squares and instrumental variable methods. Variances of errors of measurement and variances of the latent structures are shown to be positive and significant without imposing nonnegativity restrictions.     

(Under)Mining local residential property values: A semiparametric spatial quantile autoregression

Rock mining operations, including limestone and gravel production, have considerable adverse effects on residential quality of life due to elevated noise and dust levels resulting from dynamite blasting and increased truck traffic. This paper provides the first estimates of the effects of rock mining—an environmental disamenity—on local residential property values. We focus on the relationship between a house's price and its distance from a nearby rock mine. Our analysis studies Delaware County, Ohio, which, given its unique features, provides a natural environment for the valuation of property‐value‐suppressing effects of rock mines on nearby houses. We improve upon the conventional approach to evaluating adverse effects of environmental disamenities based on hedonic house price functions. Specifically, in the pursuit of robust estimates, we develop a novel (semiparametric) partially linear spatial quantile autoregressive model which accommodates unspecified nonlinearities, distributional heterogeneity, as well as spatial dependence in the data. We derive the consistency and normality limit results for our estimator as well as propose a consistent model specification test. We find statistically and economically significant property‐value‐suppressing effects of being located near an operational rock mine which gradually decline to insignificant near‐zero values at roughly a 10‐mile distance. Our estimates suggest that, all else equal, a house located a mile closer to a rock mine is priced, on average, at about 2.3–5.1% discount, with more expensive properties being subject to larger markdowns.     

Accessibility Changes and Urban House Price Appreciation: A Constrained Optimization Approach to Determining Distance Effects

Land use and location theory suggests that accessibility is an important determinant of residential land values, and of changes in those values. This study explores the construction of the Dames Point Bridge over the St. Johns River in Jacksonville, Florida, to examine the impact of changes in accessibility on housing values. Benefits to the north, from increased accessibility from the urban perimeter, are of primary interest. Additionally, dis-benefits to the south, (from increased traffic congestion and crime), are also investigated. A constrained optimization approach is used to determine the extent (distance from the bridge) to which changes in accessibility benefits or dis-benefits are reflected in urban house price appreciation.     

Neighborhood effects of concentrated mortgage foreclosures

As the national mortgage crisis has worsened, an increasing number of communities are facing declining housing prices and high rates of foreclosure. Central to the call for government intervention in this crisis is the claim that foreclosures not only hurt those who are losing their homes to foreclosure, but also harm neighbors by reducing the value of nearby properties and in turn, reducing local governments’ tax bases. The extent to which foreclosures do in fact drive down neighboring property values has become a crucial question for policy-makers. In this paper, we use a unique dataset on property sales and foreclosure filings in New York City from 2000 to 2005 to identify the effects of foreclosure starts on housing prices in the surrounding neighborhood. Regression results suggest that above some threshold, proximity to properties in foreclosure is associated with lower sales prices. The magnitude of the price discount increases with the number of properties in foreclosure, but not in a linear relationship.     

Open space, residential property values, and spatial context

We use hedonic analysis of home transaction data from the Minneapolis–St. Paul metropolitan area to estimate the effects of proximity to open space on sales price. We allow the effects of proximity to vary with demographic and location-specific characteristics and include fixed effects to control for observed and unobserved neighborhood characteristics. We find that the value of proximity to open space is higher in neighborhoods that are dense, near the central business district, high-income, high-crime, or home to many children. Using the metropolitan area's average value may substantially overestimate or underestimate the value of open space in particular neighborhoods.     

Rent Capitalization and Transportation Infrastructure Development in Jakarta

Using Jakarta, Indonesia as a case study, we evaluate the degree to which proximity to freeway interchanges gets capitalized into office rents, controlling for factors like regional accessibility. The research shows strong capitalization effects, with rent premiums decaying exponentially with distances from freeway access points. It also shows that office rents are a stronger function of distance to Jakarta's historical center, Monas, than a gravity-based measure of accessibility to upper-income households. Thus, a monocentric measure of location explained variation in office rents better than a polycentric measure of proximity to labor markets. While value capture principles are attractive in theory, implementation is particularly difficult in developing countries like Indonesia. Jakarta's own betterment tax program has been plagued by poor administration and enforcement. We argue that shifting betterment tax financing away from a focus on residential properties to high-end office and commercial land uses would likely yield higher rates of return and be far easier to implement.     

Optimal density of radial major roads in a two-dimensional monocentric city with endogenous residential distribution and housing prices

This paper proposes an analytical urban system equilibrium model for optimizing the density of radial major roads in a two-dimensional monocentric city. The proposed model involves four types of agents: local authorities, property developers, households and household workers (i.e. commuters). The local authorities aim to maximize the total social welfare of the urban system by determining the optimal density of radial major roads in the city. The property developers seek to determine the intensity of their capital investment in the land market to maximize the net profit generated from the housing supply. The households choose residential locations that maximize their utility within a budget constraint, and the commuters choose the radial major roads that minimize their individual costs of travel between home and workplace. A heuristic solution procedure is developed to find the urban system equilibrium solution. A system optimum model is also proposed to optimize the density of radial major roads that maximizes the social welfare of the urban system. The proposed model can endogenously determine household residential distribution and land values across the city, along with the housing market structure in terms of housing prices and space. Numerical comparative static analyses of congestion pricing and road infrastructure investment (adding a new radial major road) are carried out together with evaluation of the effects of the service level of radial major roads, urban population size, and household income level on the urban economy.     

The estimation of residential property values around transit station sites in Washington,D.C.

The author examines in this study the relationship between public investment in METRO and property values in several neighborhoods in Washington, D.C., in order to determine if public investment in heavy rail transit systems increases residential property values. In order to examine this relationship, a hedonic price equation which included a dummy independent variable was estimated. Analysis of the data revealed a significant direct relationship between the opening of METRO and residential property values. Therefore, it can be concluded that public investment in METRO caused property values to increase around station site areas.     

Mortgagor Motivations in Prepayments for Adjustable Rate Mortgages

This paper provides the first rigorous analysis of residential adjustable mortgage prepayment using individual ARM mortgage data in Singapore. The prepayment rate for residential mortgages is low and is dominated more by macroeconomic factors than mortgage–specific factors. Specifically, the prepayment rate is increasing in residential property prices, but decreasing in income as proxied by GDP and volatility in mortgage rates. There is weak evidence to suggest that prepayment is increasing in the borrower's age, mortgage rate hikes, cash–availability variables and sentiments of the stock market, and decreasing in the price premium over valuation, payment–to–income ratio, loan–to–value ratio, loan term and floor level of the property.     

Measuring the Importance of Location in House Price Appreciation

This paper examines the variation in the rates of price appreciation within an individual metropolitan market. A methodology is developed to examine the locational variation in house price changes in Dade County (Miami) Florida, from 1971 to 1992. House price appreciation appears to be somewhat spatially related; that is, it varies by municipality, with distance from the CBD, with local changes in population and housing units, and by ethnic mix. However, these relationships have minimal explanatory power. Controlling for the census tract group location of each home explains only around 12% of the (residual) variation in the appreciation of individual homes that is not explained by metropolitan-wide changes in house prices. The effect of tract group location appears to be dominated by the idiosyncratic influences of individual homes and their immediate environments.     

Housing submarkets and the impacts of foreclosures on property prices

The dramatic rise in the number of foreclosed properties since 2006 has come to assume the proportions of a national crisis. It is widely acknowledged that foreclosures hurt neighborhoods by devaluing the nearby properties through various channels. This paper offers a new way of conceptualizing and then estimating the potential effects of foreclosures on property values. Housing stock heterogeneity in the central city old neighborhood allows for the possibility that the impacts of nearby foreclosures may differ across types of housing. This study uses a dataset that covers twenty years of housing values from the City of Worcester (MA), and finds evidence that foreclosures of multi-family houses in close proximity influence the sales price of surrounding single-family properties after controlling for impact from foreclosure of nearby single-family houses. The most preferred estimate suggests that each multi-family foreclosure that occurs between 660 and 1320 feet away from the sale lowers the predicted sales price by approximately 3%. Nearby multi-family spillover impacts also persist over time. In addition, a new approach advocating for an alternative definition of housing submarket suggests that a distant foreclosure within the same submarket also lower sales price of a single-family home by 0.1%.