Is Urban Decay Bad? Is Urban Revitalization Bad Too?

Abstract

Many observers argue that urban revitalization harms the poor, primarily by raising rents. Others argue that urban decline harms the poor by reducing job opportunities, the quality of local public services, and other neighborhood amenities. While both decay and revitalization can have negative effects if moving costs are sufficiently high, in general the impact of neighborhood change on utility depends on the strength of price responses to neighborhood quality changes. Data from the American Housing Survey are used to estimate a discrete choice model identifying households' willingness-to-pay for neighborhood quality. These willingness-to-pay estimates are then compared to the actual price changes that accompany observed changes in neighborhood quality. The results suggest that price increases associated with revitalization are smaller than most households' willingness to pay for neighborhood improvements. The results imply that, in general, neighborhood revitalization is more favorable than neighborhood decline.