An Exploration of Inner-City Property Markets

Abstract A growing interest in the revitalization and development of inner-city property is evidenced by the number of articles that are appearing in the real estate and finance literature. This article examines over eighty academic and industry publications and groups the studies into five areas: (1) the development and demand for public and inner-city housing; (2) urban growth, sprawl and housing mobility; (3) financing and subsidization of inner-city housing; (4) price, rent gap and affordability concerns; and (5) gentrification and displacement in inner-city areas. Results indicate that interest in these unique properties will likely continue for many years; however, positive returns from the revitalization efforts will likely require government intervention. Introduction Inner-city properties in the United States and abroad have been the focus of a wide range of research topics over the last several decades. Since undeveloped inner-city areas are often linked with poverty and region-specific problems, the deterioration of the inner city is often seen as a precursor to increased unemployment, crime and violence, family and health deterioration, and welfare dependency for its region. Consequently, residents, property owners, real estate developers, as well as government policymakers are interested in understanding how inner-city areas evolve and how to preserve their often rich character. Economic strategies for encouraging the development of inner cities have been sought for decades, beginning with the development of immigrant settlement houses back in the early 1900s. Today, a growing number of people live in distressed areas, estimated to be as high as 17 million in the U.S. (Edgerly and Francis, 1995). Thus, attention is being given to revamping the inner city in light of the matriculation toward these areas. Many cities have undertaken extensive revitalization programs to stimulate reconstruction in inner-city and surrounding lower-income neighborhoods. While some regions have enjoyed positive returns from these efforts in the form of employment and population growth, others have not experienced the economic overhaul that developers and policymakers had envisioned. The question arises as to why some municipalities have been rewarded for their investment in revitalizing inner-city areas while other cities have continued to experience neighborhood decay. Much research has focused on inner-city development from the policy implications of urban renewal in general to the impact of gentrification and displacement. With the broad spectrum of literature on these topics, it becomes necessary to organize the results from studies to better understand how to encourage the rejuvenation and preservation of inner-city areas. Over eighty academic or industry publications are currently available that address the inner-city property market. While some research has focused on the economic viability of redevelopment of inner-city areas from a policy standpoint, many articles have taken the approach of the investment community and focused on the business opportunities provided by inner-city properties. Many lenders, developers, retailers and investment bankers are beginning to recognize the untapped potential of investment in these underdeveloped and under serviced areas (Slater, 2002). This study examines the wide range of literature on inner-city properties by categorizing the research into five areas: (1) the development and demand for public and inner-city housing; (2) urban growth, sprawl and housing mobility; (3) financing and subsidization of inner-city properties; (4) price, rent gap and affordability issues; and (5) gentrification and displacement occurring in inner-city areas. Published studies are categorized, summarized in a tabular format, and are discussed in this study as an effort to understand the environment and performance of this unique market both before and after revitalization. …