Low-value Properties Research Articles

Judged by Their Deeds: Outcomes for Properties Acquired by Contract Sellers Following the Foreclosure Crisis in Detroit

Prior research has documented the reemergence of predatory land contracts in majority-Black neighborhoods in the wake of the foreclosure crisis. Though land contracts facilitate property transfers involving lower-value properties and credit-constrained households, they are less regulated and often include risky terms. This paper investigates outcomes associated with properties sold using land contracts signed between 2008 and 2015 in Detroit, leveraging real estate transaction, tax foreclosure, and eviction and land contract forfeiture records. We also assess outcomes for the broader portfolio of properties purchased by large contract sellers. We find that sales by large contract sellers are generally associated with higher odds of near-term failure. We also find that investors using contract sales withheld property taxes on much of their inventory, consistent with a short-term triage-based business strategy. Conversely, the single large non-profit contract seller in our study had a far higher rate of success compared to all other contract sales. These results provide evidence of negative outcomes for sales initiated by problematic entities and supports arguments for stronger regulation of land contracts and upstream interventions to prevent predatory investors from acquiring discounted homes from public and institutional sources.

A closer look at residential water demand elasticities in the short and long run

Hotter, drier summers and population growth are causing water management challenges for water authorities in New Zealand. Effective long-term planning requires understanding the dynamics of household responses to demand management and climate variables. This paper analyses a large dataset of household-level demand data over nine years. Dynamic panel time series models are used to estimate short and long-term elasticities, interactions between demand management and climate variables, and associations with property characteristics. The general belief is that water demand becomes more sensitive to price changes over the long term compared to the short term. Yet, previous studies that directly compared long and short-run elasticities had limitations, as they imposed a constraint on the long-run estimate, assuming it to be larger. The models presented in this paper are more flexible and can identify the opposite scenario should it be present. We find long-run price elasticity may not be larger for new high-value properties or high-value properties with small gardens. Low-value properties have smaller short-run and larger long-run price elasticity. High-value properties respond more to outdoor restrictions and associated conservation messages than low-value properties. We discuss the policy implications of these findings.

Are Online-Only Real Estate Marketplaces Viable? Evidence from China.

Online businesses have been surging worldwide during the past decade, especially during the recent COVID-19 epidemic. However, the market share of online real estate transactions is still limited, mainly due to the information-asymmetry problem. In this study, we manually collect data on online judicial housing auctions in China, which is currently the largest online real estate market globally, and investigate how information disclosure facilitates real estate transactions. The empirical results suggest that disclosing better quality information online can attract more potential buyers. In particular, providing more comprehensive information such as professional appraisal reports or videos of the property can help to convert buyers’ initial interests into completed transactions and higher sales proceeds. The positive effects of information are particularly strong when combined with offline services, in a more mature online market, and for low-value properties. We also provide preliminary analysis of factors affecting online-information-disclosure quality from both the macro and micro perspectives. We also provide preliminary analysis of factors affecting online-information-disclosure quality from both the macro and micro perspectives.

The distributional incidence of wildfire hazard in the western United States

Increases in wildfire activity in the western United States in recent years have led to significant property loss in wildland-urban interface areas, raising difficult questions for policymakers regarding mitigation of wildfire damages and how mitigation costs should be distributed. Yet in spite of increased attention to the distribution of environmental and climate-related risks across socioeconomic groups, and its relevance to current wildfire-related policy debates, the distributional incidence of wildfire hazard is not well understood. This paper fills this gap by combining property-level data on locations and values of residential properties, demographics, wildfire hazard, and historical wildfire perimeters. We find that there is substantial heterogeneity within high wildfire hazard areas, but that high wildfire hazard and impact from recent wildfires (2011–2018) have disproportionately been borne by high-income, white, and older residents, and by owners of high-value properties; properties in the tenth decile of market value by county are on average 70% more likely to be in high wildfire hazard areas than median value properties. However, because many high-value high wildfire hazard properties are concentrated in high density areas, most of the high wildfire hazard area in the western US is sparsely populated and comprises mainly relatively low-value properties.

To Rebuild or Relocate? Long-Term Mobility Decisions of Hazard Mitigation Grant Program (HMGP) Recipients

Limited funds and the demand for disaster assistance call for a broader understanding of how homeowners decide to either rebuild or relocate from their disaster-affected homes. This study examines the long-term mobility decisions of homeowners in Lumberton, North Carolina, USA, who received federal assistance from the Hazard Mitigation Grant Program (HMGP) for property acquisition, elevation, or reconstruction following Hurricane Matthew in 2016. The authors situate homeowners’ decisions to rebuild or relocate in the context of property attributes and neighborhood characteristics. Logit and probit regressions reveal that homeowners with lower-value properties are less likely to relocate, and those subjected to higher flood and inundation risks are more likely to relocate. Additionally, homeowners in neighborhoods of higher social vulnerability—those with a higher proportion of minorities and mortgaged properties—are more likely to rebuild their disaster-affected homes. The authors discuss homeowners’ mobility decisions in the context of the social vulnerability of neighborhoods. Our results contribute to an ongoing policy discussion that seeks to articulate the housing and neighborhood attributes that affect the long-term mobility decisions of recipients of HMGP assistance. The authors suggest that local governments prioritize the mitigation of properties of homeowners of higher physical and social vulnerability to reduce socioeconomic disparities in hazard mitigation and build equitable community resilience.

The Socio-Economic Cost of Wind Turbines: A Swedish Case Study

The expansion of wind turbines plays a significant role in developing the ability of a country like Sweden to achieve climate-neutral energy production without relying on nuclear power plants. Wind-turbine energy production is expected to grow in the coming decades. Conflicts may arise between, on the one hand, the government and the energy authority, and, on the other hand, municipalities and property owners, especially if this expansion affects other economic activities, such as tourism and reindeer husbandry, or property values. This report aims to analyse the negative capitalization of wind turbines on property values in Sweden over the last ten years. Our conclusions clearly show a relatively significant capitalization and that this capitalization is relatively local, within eight kilometers of the wind power plant. Large wind turbines, or larger clusters of wind turbines in wind farms, impose a greater socio-economic cost on lower value properties.

How Effective is the Online Real Estate Transaction Platform? Evidence from China

Online businesses have been surging worldwide during the past decade, especially during the recent COVID-19 epidemic. However, the market share of online real estate transactions is still limited, mainly due to the information-asymmetry problem. In this study, we manually collect data on online judicial housing auctions in China, which is currently the largest online real estate market globally, and investigate how online information disclosure helps facilitate online real estate transactions. The empirical results suggest a higher quality of online information disclosure can significantly help attract potential buyers. In particular, providing more comprehensive information such as professional appraisal reports or videos can help convert buyers’ initial interests to actual transaction participation, leading to higher success probabilities and transaction prices. Such an information effect is particularly strong when combined with offline services, or in a more mature online market, or for lower-value properties. We also provide a preliminary analysis of factors affecting online-information-disclosure quality. The findings provide evidence on the feasibility of online real estate transactions and deliver suggestions for the future development of the emerging online real estate market.

The role of organized groups in administrative burdens of property taxation

There is a substantial body of literature regarding the effects of administrative burdens on the take-up of safety-net programs and the role of organized groups in this process. I investigate similar issues in the context of property tax assessment appeals. Disadvantaged groups spend well over the recommended 30% of their income on housing costs that include property tax, and, on top of that, assessors often overestimate lower-value properties. Appeals may provide some relief, but the process can be burdensome. Certain localities give condominium associations the right to file one joint appeal on behalf of all unit owners. I hypothesize that this rule reduces burdens for condominium units and causes them to appeal more frequently than houses, resulting in a distributive effect that depends on the local context. I present supporting evidence from two case studies in two locations: New York City, which allows joint appeals, and Allegheny County, Pennsylvania (Pittsburgh and surroundings), which does not. Thus, while administrative burdens can span diverse contexts, engaging a third party to assist potential beneficiaries consistently increases the take-up.

The Legacy of the Right to Buy and the Differentiation of Older Home Owners

This article explores older owner occupiers in lower value properties who, having acquired their home through the Right to Buy (RTB) in the 1980s, are now experiencing housing-related challenges in older age. This article outlines the views and perceptions of older owner occupiers, social landlords, voluntary groups and housing organisations to explore the legacy of the RTB. Current and future policy challenges in the area include the differentiation of home owners, difficulties of selling property with low equity in older age and the relationship between health and housing. This article calls to widen the analysis of the long-term impact of the RTB to owner occupiers in lower value properties and notes that ‘ageing in place’ goes beyond looking at people’s current house to the linked housing choices available to them. We recommend that policy support be extended to older home owners to increase housing choice in older age.

Foreclosure Discount: Definition and Dynamic Patterns

The lack of a consistent definition of foreclosure discount gives rise to discount rates that vary from nonexistent to sizeable across locations and time. We define the foreclosure discount as the discount of the real estate owned (REO) sale price relative to a normal‐sale estimated market value. With a dataset of 1.34 million REO sale transactions, across 16 CBSAs between 2000 and 2012, we find three noteworthy empirical findings. First, a high REO sale concentration in a market increases the foreclosure discount. Second, foreclosure discount is negatively related to recent house‐price appreciation. Third, the often reported high foreclosure discount for lower value properties is likely due to property condition.

Single-Family Housing Market Segmentation, Post-Foreclosure Resale Duration, and Neighborhood Attributes

During the recent economic recession, the foreclosure crisis drew vast attention from scholars and policymakers. Numerous studies focused on factors resulting in foreclosures, the impact of foreclosures, and the relationship between neighborhood attributes and foreclosures. Fewer studies investigated the foreclosure resale mechanism by focusing on buyer characteristics and the market duration of foreclosed properties. This research uses foreclosed residential properties in Broward County, Florida, between 2007 and 2011 to explore how market segmentation by assessed value relates to time on market of foreclosed properties. This research finds that extremely low-value properties and very high-value properties generally take longer to sell. Mid-value properties take a shorter time to sell. After controlling for housing attributes and market segmentation, certain neighborhood characteristics, such as lower percentage black population, lower percentage Hispanic population, lower educational attainment, and higher homeownership rate, are associated with increased likelihood of a real estate owned property being sold. These results will help policymakers determine better strategies for the foreclosure resale process. Special attention should focus on properties taking longer to sell or not able to sell during certain time frames to alleviate the negative effects of these properties on neighborhoods.

Land Bank 2.0: An Empirical Evaluation

In 2009, Cuyahoga County, Ohio, which contains Cleveland and 58 other municipalities, created the Cuyahoga County Land Reutilization Corporation. This land bank was established to acquire low-value properties, mitigate blighted housing, help stabilize neighborhoods, and slow the decline of property values. As of September 2013, the land bank had acquired 3,405 properties and demolished 1,853 structures. This empirical study evaluates the effectiveness of the land bank by estimating spatially corrected hedonic price models using sales near the land bank homes. In the six months before they are purchased by the land bank, the distressed properties are estimated to lower the sale price of nearby homes (within 500 feet) by 5.2 percent. The negative externality from the distressed properties decreases to 4.4 percent once the land bank takes possession. A vacant lot created by a land-bank house demolition reduces the values of nearby homes by 2.4 percent. By reducing the negative externalities of distressed properties, the land bank has recovered about $3.8 million in value for homes sold during the study period. We estimate that tax collections were $3.2 million higher than they otherwise would have been. The land bank’s largest impact takes the form of preserved value for homes that did not sell during the study period, and we estimate this to be approximately $156 million.

Explaining the Pace of Foreclosed Home Sales during the US Foreclosure Crisis: Evidence from Atlanta

As the US foreclosure crisis approached its climax in 2007 and 2008, the buildup of lender-owned homes had been building for some time. Around this time, however, lenders began selling homes, especially low-value properties, at a much faster pace, releasing them into local housing markets. This paper examines the sales of foreclosed single-family homes into the Atlanta market from January 2005 through early 2009. A primary goal is to understand the drivers of such sales. A proportional hazards model is used to identify factors affecting the time that homes spend as ‘real estate owned’ properties, with a special focus on low-value properties. We find that the pace of sales of low-value properties accelerated during 2007 and, especially, in late 2008 and early 2009, and the rate varied based on lender type, neighborhood characteristics, and submarket location. These findings have implications not simply for understanding real estate markets more broadly, but especially for housing market recovery and neighborhood stabilization policies.

Private enforcement and social efficiency

This paper makes precise the distributional consequences and social efficiency of private enforcement of property rights. Properties of different values are subject to predation and owners choose between self-defense and private enforcement services. A distributional conflict of interest arises as private protection purchased by rich owners deflects predators on low value properties. The market structure of enforcement and development affect the distribution of property income through relative changes in the security of high and low values property. Moreover, because of the externality enforcers impose on poorer owners, the availability of private enforcement may constrain the policy of a benevolent State.