IDEAS home Printed from https://ideas.repec.org/a/eee/regeco/v63y2017icp38-56.html
   My bibliography  Save this article

Measuring foreclosure impact mitigation: Evidence from the Neighborhood Stabilization Program in Chicago

Author

Listed:
  • Bak, Xian F.
  • Hewings, Geoffrey J.D.

Abstract

The Neighborhood Stabilization Program (NSP) is a $7 billion nationwide government program that was established to reduce the negative impacts of the housing crisis in foreclosure-concentrated neighborhoods. NSP rehabilitations aim to bring foreclosed and abandoned properties back to productive use. Very few quantitative studies have evaluated NSP and provided policy suggestions for future stabilization. Furthermore, there is some ambiguity about the channels through which foreclosures influence neighboring properties. This study fills the gap in the literature by evaluating the effects of NSP acquisition and rehabilitation in terms of the impact on elevating neighboring property values. In addition, it provides evidence that disamenity effects are a source of the negative impacts of foreclosures on their neighbors. Using a 2008–2014 repeated cross-section dataset for housing sales in the city of Chicago, the difference-in-differences estimates reveal that the average sales prices of homes within 0.1 miles of the NSP projects increased by 14.3% and these effects do not appear until the completion of the rehabilitation. Furthermore, large program effects are found for normal homes but not for foreclosure-related homes. The results vary under different contexts of NSP implementation, but the analytical approach presented in this study is reproducible for NSP studies in other regions.

Suggested Citation

  • Bak, Xian F. & Hewings, Geoffrey J.D., 2017. "Measuring foreclosure impact mitigation: Evidence from the Neighborhood Stabilization Program in Chicago," Regional Science and Urban Economics, Elsevier, vol. 63(C), pages 38-56.
    • Handle: RePEc:eee:regeco:v:63:y:2017:i:c:p:38-56
    DOI: 10.1016/j.regsciurbeco.2016.12.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0166046216301387
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.regsciurbeco.2016.12.002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Sourafel Girma & Holger Görg, 2016. "Evaluating the foreign ownership wage premium using a difference-in-differences matching approach," World Scientific Book Chapters, in: MULTINATIONAL ENTERPRISES AND HOST COUNTRY DEVELOPMENT Volume 53: World Scientific Studies in International Economics, chapter 2, pages 17-32, World Scientific Publishing Co. Pte. Ltd..
    2. Esteban Rossi-Hansberg & Pierre-Daniel Sarte & Raymond Owens, 2010. "Housing Externalities," Journal of Political Economy, University of Chicago Press, vol. 118(3), pages 485-535, June.
    3. L. Rachel Ngai & Silvana Tenreyro, 2014. "Hot and Cold Seasons in the Housing Market," American Economic Review, American Economic Association, vol. 104(12), pages 3991-4026, December.
    4. Elliot Anenberg & Edward Kung, 2014. "Estimates of the Size and Source of Price Declines Due to Nearby Foreclosures," American Economic Review, American Economic Association, vol. 104(8), pages 2527-2551, August.
    5. Lynn M. Fisher & Lauren Lambie-Hanson & Paul Willen, 2015. "The Role of Proximity in Foreclosure Externalities: Evidence from Condominiums," American Economic Journal: Economic Policy, American Economic Association, vol. 7(1), pages 119-140, February.
    6. Schuetz, Jenny & Spader, Jonathan & Cortes, Alvaro, 2016. "Have distressed neighborhoods recovered? Evidence from the neighborhood stabilization program," Journal of Housing Economics, Elsevier, vol. 34(C), pages 30-48.
    7. Hartley, Daniel, 2014. "The effect of foreclosures on nearby housing prices: Supply or dis-amenity?," Regional Science and Urban Economics, Elsevier, vol. 49(C), pages 108-117.
    8. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 249-275.
    9. Gerardi, Kristopher & Rosenblatt, Eric & Willen, Paul S. & Yao, Vincent, 2015. "Foreclosure externalities: New evidence," Journal of Urban Economics, Elsevier, vol. 87(C), pages 42-56.
    10. Spader, Jonathan & Schuetz, Jenny & Cortes, Alvaro, 2016. "Fewer vacants, fewer crimes? Impacts of neighborhood revitalization policies on crime," Regional Science and Urban Economics, Elsevier, vol. 60(C), pages 73-84.
    11. Bondonio, Daniele & Greenbaum, Robert T., 2007. "Do local tax incentives affect economic growth? What mean impacts miss in the analysis of enterprise zone policies," Regional Science and Urban Economics, Elsevier, vol. 37(1), pages 121-136, January.
    12. Lambie-Hanson, Lauren, 2015. "When does delinquency result in neglect? Mortgage distress and property maintenance," Journal of Urban Economics, Elsevier, vol. 90(C), pages 1-16.
    13. Leigh Linden & Jonah E. Rockoff, 2008. "Estimates of the Impact of Crime Risk on Property Values from Megan's Laws," American Economic Review, American Economic Association, vol. 98(3), pages 1103-1127, June.
    14. John P. Harding & John R. Knight & C.F. Sirmans, 2003. "Estimating Bargaining Effects in Hedonic Models: Evidence from the Housing Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 31(4), pages 601-622, December.
    15. John Y. Campbell & Stefano Giglio & Parag Pathak, 2011. "Forced Sales and House Prices," American Economic Review, American Economic Association, vol. 101(5), pages 2108-2131, August.
    16. Schwartz, Amy Ellen & Ellen, Ingrid Gould & Voicu, Ioan & Schill, Michael H., 2006. "The external effects of place-based subsidized housing," Regional Science and Urban Economics, Elsevier, vol. 36(6), pages 679-707, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lopez, Esteban & Hewings, Geoffrey J.D., 2018. "Housing price indices for small spatial units," Regional Science and Urban Economics, Elsevier, vol. 70(C), pages 57-71.
    2. Sadayuki, Taisuke, 2018. "Measuring the spatial effect of multiple sites: An application to housing rent and public transportation in Tokyo, Japan," Regional Science and Urban Economics, Elsevier, vol. 70(C), pages 155-173.
    3. Kanayama, Yuki & Sadayuki, Taisuke, 2021. "What types of houses remain vacant? Evidence from a municipality in Tokyo, Japan," Journal of the Japanese and International Economies, Elsevier, vol. 62(C).
    4. Xian F. Bak & Geoffrey J. D. Hewings, 2019. "The heterogeneous spatial impact of foreclosures on nearby property values," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 62(3), pages 439-466, June.
    5. Suzuki, Masatomo & Hino, Kimihiro & Muto, Sachio, 2022. "Negative externalities of long-term vacant homes: Evidence from Japan," Journal of Housing Economics, Elsevier, vol. 57(C).
    6. Hu, Lirong & He, Shenjing & Han, Zixuan & Xiao, He & Su, Shiliang & Weng, Min & Cai, Zhongliang, 2019. "Monitoring housing rental prices based on social media:An integrated approach of machine-learning algorithms and hedonic modeling to inform equitable housing policies," Land Use Policy, Elsevier, vol. 82(C), pages 657-673.
    7. Taisuke Sadayuki, 2020. "The externality of a mortality incident within an apartment building: cases of homicide, suicide and fire deaths," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 22(1), pages 21-38, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Biswas, Arnab & Cunningham, Chris & Gerardi, Kristopher & Sexton, Daniel, 2021. "Foreclosure externalities and Vacant Property Registration Ordinances," Journal of Urban Economics, Elsevier, vol. 123(C).
    2. Michele Loberto, 2023. "Foreclosures and House Prices," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 9(1), pages 397-424, March.
    3. Lerbs, Oliver & Teske, Markus, 2016. "The house price-vacancy curve," ZEW Discussion Papers 16-082, ZEW - Leibniz Centre for European Economic Research.
    4. Stuart Gabriel & Matteo Iacoviello & Chandler Lutz, 2021. "A Crisis of Missed Opportunities? Foreclosure Costs and Mortgage Modification During the Great Recession [Synthetic control methods for comparative case studies: Estimating the effect of California," The Review of Financial Studies, Society for Financial Studies, vol. 34(2), pages 864-906.
    5. Suzuki, Masatomo & Hino, Kimihiro & Muto, Sachio, 2022. "Negative externalities of long-term vacant homes: Evidence from Japan," Journal of Housing Economics, Elsevier, vol. 57(C).
    6. Kristopher Gerardi & Eric Rosenblatt & Paul S. Willen & Vincent W. Yao, 2012. "Foreclosure externalities: some new evidence," Public Policy Discussion Paper 12-5, Federal Reserve Bank of Boston.
    7. Geoffrey K. Turnbull & Arno J. van der Vlist, 2023. "After the Boom: Transitory and Legacy Effects of Foreclosures," The Journal of Real Estate Finance and Economics, Springer, vol. 66(2), pages 422-442, February.
    8. Anthony Yezer & Yishen Liu, 2017. "Can Differences Deceive? The Case of “Foreclosure Externalities"," Working Papers 2017-29, The George Washington University, Institute for International Economic Policy.
    9. Sadayuki, Taisuke, 2018. "Measuring the spatial effect of multiple sites: An application to housing rent and public transportation in Tokyo, Japan," Regional Science and Urban Economics, Elsevier, vol. 70(C), pages 155-173.
    10. Koster, Hans R.A. & van Ommeren, Jos & Volkhausen, Nicolas, 2021. "Short-term rentals and the housing market: Quasi-experimental evidence from Airbnb in Los Angeles," Journal of Urban Economics, Elsevier, vol. 124(C).
    11. Marcel Fischer & Roland Füss & Simon Stehle, 2021. "Local house price comovements," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(S1), pages 169-198, March.
    12. John P. Harding & Jing Li & Stuart S. Rosenthal & Xirui Zhang, 2022. "Forced moves and home maintenance: The amplifying effects of mortgage payment burden on underwater homeowners," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(2), pages 498-533, June.
    13. Alm, James & Hawley, Zackary & Lee, Jin Man & Miller, Joshua J., 2016. "Property tax delinquency and its spillover effects on nearby properties," Regional Science and Urban Economics, Elsevier, vol. 58(C), pages 71-77.
    14. Lambie-Hanson, Lauren, 2015. "When does delinquency result in neglect? Mortgage distress and property maintenance," Journal of Urban Economics, Elsevier, vol. 90(C), pages 1-16.
    15. Adam M Guren & Timothy J McQuade, 2020. "How Do Foreclosures Exacerbate Housing Downturns?," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 87(3), pages 1331-1364.
    16. Schuetz, Jenny & Spader, Jonathan & Cortes, Alvaro, 2016. "Have distressed neighborhoods recovered? Evidence from the neighborhood stabilization program," Journal of Housing Economics, Elsevier, vol. 34(C), pages 30-48.
    17. Simlai, Prodosh, 2019. "Subprime credit, idiosyncratic risk, and foreclosures," The Quarterly Review of Economics and Finance, Elsevier, vol. 74(C), pages 175-189.
    18. Gerardi, Kristopher & Rosenblatt, Eric & Willen, Paul S. & Yao, Vincent, 2015. "Foreclosure externalities: New evidence," Journal of Urban Economics, Elsevier, vol. 87(C), pages 42-56.
    19. Lingxiao Li & Erdem Ucar & Abdullah Yavas, 2022. "Social Capital and Mortgage Delinquency," The Journal of Real Estate Finance and Economics, Springer, vol. 64(3), pages 379-403, April.
    20. Agarwal, Sumit & Zhang, Yunqi, 2018. "Effects of government bailouts on mortgage modification," Journal of Banking & Finance, Elsevier, vol. 93(C), pages 54-70.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:regeco:v:63:y:2017:i:c:p:38-56. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/regec .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.