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Housing Externalities

Author

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  • Esteban Rossi-Hansberg
  • Pierre-Daniel Sarte
  • Raymond Owens III

Abstract

Using data compiled from concentrated residential urban revitalization programs implemented in Richmond, VA, between 1999 and 2004, we study residential externalities. Specifically, we provide evidence that in neighborhoods targeted by the programs, sites that did not directly benefit from capital improvements nevertheless experienced considerable increases in land value relative to similar sites in a control neighborhood. Within the targeted neighborhoods, increases in land value are consistent with externalities that fall exponentially with distance. In particular, we estimate that housing externalities decrease by half approximately every 990 feet. On average, land prices in neighborhoods targeted for revitalization rose by 2 to 5 percent at an annual rate above those in the control neighborhood. These increases translate into land value gains of between $2 and $6 per dollar invested in the program over a six-year period. We provide a simple theory that helps us interpret and estimate these effects.

Suggested Citation

  • Esteban Rossi-Hansberg & Pierre-Daniel Sarte & Raymond Owens III, 2008. "Housing Externalities," NBER Working Papers 14369, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:14369
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    More about this item

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • 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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