An expectations model of neighbourhood change
Creators: name: Cameron, James Glenn
Publisher: name: University of British Columbia
Year: 2010

description: Most models of neighbourhood change have been developed in a U.S. setting. The cities of Canada and the U.S. have developed under different degrees or types of federal involvement in urban affairs and exhibit very different general characteristics, leading one to expect that the impelling factors of neighbourhood change, if it exists at all in Canada, will show dissimilarities to the income and racial motivation important in many U.S. theories. Evidence is presented that U.S. models of neighbourhood change are not entirely appropriate to the Canadian situation. The main thrust of the research, therefore, is to utilize those elements of previous models that remain relevant to develop a more general model of neighbourhood change that is capable of explaining why some areas are in rapid decline while others remain healthy and still others are rejuvenated. Thus, it will deal with both stability and change. The thesis has three main objectives: (1) to identify and isolate conceptually the forces promoting change and/or stability in Canadian neighbourhoods (2) to develop an explanatory model of neighbourhood change and J (3) to test and validate the model's predictive power against competing models. To serve this purpose, the research focuses upon the role of the public sector in influencing expectations. It is believed that government intervention in the United States has acted upon prices and expectations by bringing a number of distortions into the urban system. These are thought to be largely absent in Canada. In this manner it is felt that the government plays a key role in formulating expectations and thus indirectly influencing the course of neighbourhood change. A working hypothesis is that the more the government involves itself in urban affairs, the greater will be the cost to urban neighbourhoods in increased uncertainty and instability. To construct a more general model, the St. Louis arbitrage model was developed in a stock-flow context and extended to include a broader set of expectations hypothesized to be influenced by different degrees of government intervention. Investment and reinvestment behavior, turnover rates and transaction price information were used as indirect measures of these expectations. Expectations entered the model through their influence on the level of the demand schedule for housing units which, in turn, induced supply shifts (bringing arbitrage into play). The main contention of the thesis is that the sensitivity with which expectations are revised in the face of change is due to previous (harmful) government activity in housing markets. In the typical American case, uniformly negative expectations by residents can bring about a complete boundary shift in occupancy and a refusal to invest in or near areas undergoing neighbourhood change. In the opposite case, under positive expectations, an oversupply of less desirable housing would trigger a gradual movement of households and investment dollars to its location. The result is continued stability or a movement towards stability. The model had several implications for stable neighbourhoods which were later expressed as explicit hypotheses for a neighbourhood undergoing some form of change (a rezoning): (1) reinvestment behavior in housing should remain constant or increase (2) turnover rates should remain stable (3) average real housing prices should be constant or increasing. Each of these was tested in turn for Kerrisdale, a neighbourhood in Vancouver, B.C., and in each case the result implied unchanged expectations and thereby continued stability for the neighbourhood. To ensure that differences in housing characteristics and neighbourhood effects did not account for some of the observed variation in prices, detailed information was gathered on each housing unit (and its surroundings) that had sold over the 1955-1966 study period. Multiple regression analysis was used to test three related hypotheses about housing prices and the rezoning: (1) the implementation of the zoning change had a negative effect on the prices of the surrounding properties (2) the effect of the supposed externality diminishes with distance and (3) the rezoning had a positive influence on rezoned property values. The first two hypotheses were rejected and the third was accepted leading to the conclusion that the rezoning from prices of the surrounding single-family residences but the rezoning did have a positive influence on rezoned property values. There wasn't any indication from these tests either, that residents' expectations were unfavourably affected by the rezoning or that there should have been any revision in expectations. Thus the results are consistent with the implications of the expectations model and the tests were unable to refute it. Of course, the tests also would not refute the St« Louis arbitrage model if one accepts that it is capable of explaining positive neighbourhood change as well as decay. The objectives of the research have been accomplished and it is concluded that •the inclusion of general expectations and the role of government has been a step in the right direction in the development of a general model of neighbourhood change.