Revitalizing deteriorated urban neighborhood real estate markets through concentrated homeownership development: Determining the spillover effects of new homes on the value of surrounding homes

The promotion of homeownership opportunities represents an important approach used by localities to support the revitalization of deteriorated urban neighborhoods. Homeownership is associated with a variety of social and economic benefits to the homeowner including increased residential stability and equity accumulation. The introduction of new homeownership opportunities into a deteriorated urban neighborhood as part of local public policy is intended to capitalize upon the anticipated positive social and economic outcomes. Such new homeownership development also presents the opportunity to generate positive spillover effects on the adjacent existing properties in the neighborhood which may ultimately result in higher real estate tax values for the locality.Although the theory and research considering such spillover effects are limited, the gravity model provides a basis for examining the spatial interaction between the new homes and the surrounding existing homes. The application of this model to the new homeownership intervention accounts for the influence of the new development in terms of density (number of units) and distance in relation to the existing units. In order to further consider the applicability of gravity theory, this study examines the impact of two new homeownership revitalization developments on surrounding residential property values in Newport News, Virginia.Geographic information systems (GIS) provided the framework for identifying properties located within specified rings surrounding the two homeownership revitalization areas. Real estate property value assessments were furnished by the City of Newport News for 2000 to 2005 and provided the opportunity to create a hedonic model to identify the primary property amenities which accounted for the variation in property values. The GIS-facilitated ring variables were incorporated into the hedonic model to enable the consideration of spillover effects generated by the new homes on the adjacent existing homes.The results of the study indicate that the introduction of the new homes appears to influence property values in the surrounding neighborhood where there was a dense core of new development and an existing homogenous neighborhood housing stock. Therefore, concentrated homeownership revitalization efforts offer the potential to positively influence the values of adjacent residential properties thereby enhancing a locality's real estate market.