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The Effect of Residential Investment on Nearby Property Values: Evidence from Cleveland, Ohio

This study analyzes the effect of both new and rehabilitation residential investment on nearby property values in Cleveland, Ohio. The methodology used is hedonic price regression with spatial lagged variables that are generated applying geographic information systems. There are four major findings. First, the effect of investment on property values is geographically limited. Second, new investment has a greater impact on nearby property values than rehabilitation. Third, there is evidence that new construction and rehabilitation have a significantly positive impact in low-income areas, as well as predominantly non-minority neighborhoods. Finally and most importantly, the research suggests that small-scale investment has no impact on nearby property values. Thus, investment policy, which promotes and encourages investments that are not sufficiently large, may not be able to improve tax bases and enhance neighborhoods. We also found that results could be misleading if spatial lagged variables are inappropriately measured.

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File URL: http://pages.jh.edu/jrer/papers/pdf/past/vol19n01/v19n023_048.pdf
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Article provided by American Real Estate Society in its journal Journal of Real Estate Research.

Volume (Year): 19 (2000)
Issue (Month): 1 ()
Pages: 23-48

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Handle: RePEc:jre:issued:v:19:n:1:2000:p:23-48
Contact details of provider: Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
Web page: http://www.aresnet.org/
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Order Information: Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
Web: http://pages.jh.edu/jrer/about/get.htm Email:


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  1. Linneman, Peter, 1980. "Some empirical results on the nature of the hedonic price function for the urban housing market," Journal of Urban Economics, Elsevier, vol. 8(1), pages 47-68, July.
  2. Robert A. Simons & Roberto G. Quercia & Ivan Maric, 1998. "The Value Impact of New Residential Construction and Neighborhood Disinvestment on Residential Sales Price," Journal of Real Estate Research, American Real Estate Society, vol. 15(2), pages 147-162.
  3. Vladimir Bajic, 1985. "Housing-Market Segmentation and Demand for Housing Attributes: Some Empirical Findings," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 13(1), pages 58-75.
  4. Palmquist, Raymond B, 1984. "Estimating the Demand for the Characteristics of Housing," The Review of Economics and Statistics, MIT Press, vol. 66(3), pages 394-404, August.
  5. J F Kain & J M Quigley, 1970. "Evaluating the quality of the residential environment," Environment and Planning A, Pion Ltd, London, vol. 2(1), pages 23-32, January.
  6. Mingche M. Li & H. James Brown, 1980. "Micro-Neighborhood Externalities and Hedonic Housing Prices," Land Economics, University of Wisconsin Press, vol. 56(2), pages 125-141.
  7. M Dear & Ruth Fincher & Lise Currie, 1977. "Measuring the external effects of public programs," Environment and Planning A, Pion Ltd, London, vol. 9(2), pages 137-147, February.
  8. Kerry D. Vandell & Robert H. Zerbst, 1984. "Estimates of the Effect of School Desegregation Plans on Housing Values Over Time," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 12(2), pages 109-135.
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