Deconstructing distressed-property spillovers: The effects of vacant, tax-delinquent, and foreclosed properties in housing submarkets
In this empirical analysis, we estimate the impacts of property-tax delinquency, vacancy, and foreclosures on the value of neighboring homes. We demonstrate that these externalities differ in high- and low-poverty submarkets. Numerous studies have estimated the externality of foreclosures. These papers theorize that the foreclosure impact works partially through creating vacant and neglected homes. To our knowledge, this is only the second attempt to estimate the impact of vacancy itself and the first to use tax-delinquency as a measure of property neglect. We link vacancy observations from Postal Service data with property-tax delinquency and sales data from Cuyahoga County, Ohio. We find that an additional property within 500ft that is vacant or delinquent reduces a home’s selling price by 1 to 2%. In low-poverty submarkets, the negative impact of a home that is both vacant and delinquent is −4.6%. Low-poverty submarkets penalize a sale near a tax-current recent foreclosure by 4 to 8%. In high-poverty submarkets, we observe positive correlations of sale prices with vacant foreclosures. This may reflect lenders selectively foreclosing only on relatively well-maintained properties.
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