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Effectiveness of RCA Institutions to Limit Local Externalities: Using Foreclosure Data to Test Covenant Effectiveness

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  • Jeremy R. Groves
  • William H. Rogers

Abstract

Residential community associations (RCAs) are said to be an efficient institutional agreement to limit local spillovers. While several studies have identified a positive marginal effect of RCA rules, none have explicitly measured the effectiveness of these institutions to limit local externalities. This study measures this effectiveness by estimating how the direct and spillover price impacts caused by foreclosure differ by RCA status. Using a spatial hedonic model that controls for selection bias using propensity score methods and coarsened exact matching we find that foreclosed RCA properties experience smaller direct foreclosure discounts and produce smaller spill-over effects than their non-RCA counterparts.

Suggested Citation

  • Jeremy R. Groves & William H. Rogers, 2011. "Effectiveness of RCA Institutions to Limit Local Externalities: Using Foreclosure Data to Test Covenant Effectiveness," Land Economics, University of Wisconsin Press, vol. 87(4), pages 559-581.
    • Handle: RePEc:uwp:landec:v:87:y:2011:iv:1:p:559-581
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    2. Guignet, Dennis & Jenkins, Robin R. & Belke, James & Mason, Henry, 2023. "The property value impacts of industrial chemical accidents," Journal of Environmental Economics and Management, Elsevier, vol. 120(C).
    3. 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.
    4. Yishen Liu & Anthony M. Yezer, 2021. "Foreclosure Externalities: Have We Confused the Cure with the Disease?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(S2), pages 428-460, September.
    5. Stephan Whitaker & Thomas J. Fitzpatrick IV, 2016. "Land Bank 2.0: An Empirical Evaluation," Journal of Regional Science, Wiley Blackwell, vol. 56(1), pages 156-175, January.
    6. Bensch, Gunther & Peters, Jörg & Sievert, Maximiliane, 2012. "Fear of the Dark? – How Access to Electric Lighting Affects Security Attitudes and Nighttime Activities in Rural Senegal," Ruhr Economic Papers 369, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    7. Guignet, Dennis & Jenkins, Robin & Ranson, Matthew & Walsh, Patrick J., 2018. "Contamination and incomplete information: Bounding implicit prices using high-profile leaks," Journal of Environmental Economics and Management, Elsevier, vol. 88(C), pages 259-282.
    8. repec:zbw:rwirep:0369 is not listed on IDEAS
    9. Anthony Yezer, 2016. "Testing the Association between Foreclosure and Nearby House Values: Can Differences Deceive?," Working Papers 2016-29, The George Washington University, Institute for International Economic Policy.
    10. Whitaker, Stephan & Fitzpatrick IV, Thomas J., 2013. "Deconstructing distressed-property spillovers: The effects of vacant, tax-delinquent, and foreclosed properties in housing submarkets," Journal of Housing Economics, Elsevier, vol. 22(2), pages 79-91.
    11. Gaétan de Rassenfosse & Alfons Palangkaraya & Elizabeth Webster, 2013. "Do Patents Shield Disclosure or Assure Exclusivity When Transacting Technology?," Melbourne Institute Working Paper Series wp2013n05, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    12. James N. Conklin & N. Edward Coulson & Moussa Diop, 2023. "Distressed comps," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 51(1), pages 170-195, January.
    13. Ying Huang & Ronald W. Spahr & Mark A. Sunderman, 2020. "The Impact of Default and Foreclosure on Housing Values: Rings Vs. Neighborhoods Approach," The Journal of Real Estate Finance and Economics, Springer, vol. 60(3), pages 338-374, April.

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    More about this item

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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