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INCREASING NEIGHBORHOOD STABILITY


This is one of three strategic approaches for the goal of building a stronger market. Click here to read about all three in context.

 

Buyers typically start out by defining their housing needs and financial limits. In most regions, most middle- or upper-income buyers have many different neighborhoods in which they can find homes within their means. Where they search is defined by the information they have. Buyers will consider buying in certain neighborhoods, reject some areas, and not even consider others based on the information that they get about neighborhoods within the region. The choice they finally make is often based less on the desirability of a given house than on neighborhood stability and amenity value.

 

While “neighborhood stability” can mean many different things, it is used here to refer to those physical, economic or social features of the neighborhood that are associated with the preservation and potential increase in the value of a property-owner’s investment in a neighborhood.

 

Six factors that either promote or discourage neighborhood stability are:

 

  • Property abandonment
  • Foreclosure
  • Property investment by owners
  • Concentration of poverty
  • Crime
  • Homeownership rate

 

Four of these factors—abandonment, foreclosure, poverty concentration and crime – are negative, while two – property investment and homeownership rate – are positive and need to be increased in order to render the neighborhood more stable.

 

A neighborhood is a network of interrelated physical and social elements. What happens to one property on a block affects the other properties, just as crime and drug activity affect all those in the vicinity, whether or not they are directly victimized. By reducing the incidence of destabilizing features, or increasing the incidence of positive features that enhance stability, a city or CDC can change a neighborhood’s attractiveness to potential homebuyers.

 

From a market-building perspective, the goal of neighborhood stability strategies is to
make catalytic changes to local dynamics that will ultimately create a cycle of positive market change.

 

A decline in property maintenance or an increase in abandoned properties may lead to lower property values, as will an increase in violent crime or poverty concentrations. Changing those dynamics can have a positive effect on property values and market activity. Increasing the homeownership rate, which leads to greater stability of tenure and maintenance investment, may also have a positive effect on property values. At the same time, focusing on the quality, appearance and level of maintenance of the neighborhood’s rental housing, particularly if it makes up a large part of the area housing stock, may be as important a factor in enhancing neighborhood stability.

 

Many stability issues lend themselves to more than one strategy. The choice of strategies depends on a CDC’s or a government’s mission or the available opportunities. One could try to reduce poverty concentrations through a strategy to build the neighborhood’s middle-income population, or by increasing low-income residents’ job skills and employment opportunities. At a regional level, concentrations of poverty can be fought by creating low-income housing opportunities in more affluent suburban areas in the region.

 

Seemingly similar strategies may lead to significantly different outcomes. Reducing the number of abandoned properties through a program under which a CDC rehabilitates properties with HOME funds, selling them to lower-income homebuyers, and reducing them by the same number through a program of incentives to get middle-income buyers to rehabilitate the properties for their owner-occupancy may look similar in terms of the properties themselves, but may have very different outcomes in terms of the subsequent impact on the area’s housing market. 

 

The former strategy may have significantly less market-building impact than the latter, both because of the economic characteristics of the families buying the houses, and the smaller financial investment that they are making. The goal in providing incentives for families to buy and rehabilitate vacant houses is not only to get those homes rehabbed, but to trigger a cycle where the neighborhood in general, and the neighborhood’s vacant properties in particular, gradually become more desirable to homebuyers, so that the incentives can be gradually reduced and ultimately eliminated. This is an example of a catalytic strategy.

 

The CDC or city has a wide range of strategy options to build greater neighborhood stability [see table below], including changing the physical environment, changing the financial climate within which property owners make decisions about their properties, counseling, training and educational programs or community-building and organizing strategies. 

 


Strategies to Increase Neighborhood Stability 

increase neighborhoood stability

 

 

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