The impact of place-based poverty relief: Evidence from the Federal Promise Zone Program

Abstract

We investigate the impact of targeted, federal spending in an economically depressed urban area by exploring the effects of the Los Angeles Promise Zone (LAPZ), one of the first-round designations of the Department for Housing and Urban Development's Promise Zone program. The place-based program sought to identify and assist struggling areas by providing them with primary access to grants from multiple federal agencies. With an understanding that improvements in local conditions are likely capitalized in housing values, we leverage parcel-level property data and estimate the change in property values for property inside the LAPZ compared to nearby, similar properties just outside of the Promise Zone boundary. We find that property values within the LAPZ differentially increased by approximately 6–11 percent (3–5 percent using an alternative estimator (DDNNM)) following the awarding of Promise Zone status in 2014, an increase of at least $50,000 on average. We show that this increase in property value stems from increases in land value, rather than through property improvements. In our discussion of the results, we explore potential mechanisms and consider welfare implications.