Wharton Study Supports the Economic Value of Community-Based Investments

Philadelphia, October 17, 2006 – Dr. Susan Wachter, professor of Real Estate, Finance and City and Regional Planning at the Wharton School of the University of Pennsylvania, has completed a study offering further proof that community-based investments provide significant economic benefits to neighborhoods as well as citywide gains. The study reveals that property values can increase 25 percent when integrated projects have been completed.

Public Investment Strategies: How They Matter for Neighborhoods in Philadelphia (2006), funded by the William Penn Foundation and researched by Professor Wachter and co-author Kevin C. Gillen, research fellow at Penn’s Institute of Urban Research, shows that investments in public space can boost the economy of the entire city with higher property-tax revenues flowing into city coffers as the market value of a “tax rateable” property rises.

More broadly, Public Investment Strategies bolsters the argument for integrating place based investment, including greening into comprehensive revitalization efforts and demonstrates the dramatic, immediate impact of visible improvements.

Key findings of the study include: 

• Improvements to streetscapes (street tree plantings, container plantings, small pocket parks, parking lot screens and median plantings) can add more than 25 percent to the value of a nearby home.
• Neighborhood commercial corridors in “excellent” condition are correlated with a more than 20 % net rise in value for homes within ¼ mile of the corridor and 10 percent net rise for those within ½ mile.
• Homes located in “business improvement districts” (BIDs) — neighborhood-based organizations that provide special services like trash removal and greening, such as University City District and Frankford Special Services District—are valued 30 percent higher than comparable homes not located in BIDs.
• While proximity to a neglected vacant lot subtracts 20 percent from the base value of an adjacent home, adjacency to a stabilized lot—one that has been improved through cleaning and greening—increases the home’s base value by approximately 15 percent.

The study looked at the effects on home values of separate investment strategies. “Consider a house that is near a new tree planting in a neighborhood that has been recently streetscaped and is adjacent to a greened and stabilized lot,” says Professor Wachter.  “The total increase in this dwelling value as a result of these last three events could be dramatic.”

The study also suggests that improving commercial corridors, streetscapes, parks, and cleaning vacant lots at the same time, have the potential for the greatest impact on struggling neighborhoods. “This is an exciting finding because it is what The Pennsylvania Horticultural Society (PHS) has been promoting through its ‘Green City Strategy,’” says PHS Executive Vice President J. Blaine Bonham, Jr. “We believe that this kind of comprehensive approach to improving the city’s green infrastructure can have enormous benefits.”

In Philadelphia during the past 10 years, business improvement districts have proliferated throughout Philadelphia, and most incorporate tree-planting and other greening projects into their programs. The Center City District (CCD), the city’s oldest BID, has been operating in downtown Philadelphia since 1991. The organization has invested more than $1 million in new street trees and spends about $150,000 per year on tree maintenance. “The Wharton study clearly validates this large investment,” says Nancy Goldenberg, CCD’s vice president of planning.

For Public Investment Strategies, Wachter and her team created a unique dataset that merges home sales data for 200,000 sales events in Philadelphia for the period 1980 to 2004 with information on various “place-based” public investments, as well as a spatial database developed by Wharton’s Geographical Information Systems laboratory.

The integrated database made it possible to measure the direct impact of public investments on “neighborhood value,” identified by how much people are willing to pay to live in neighborhoods. The researchers used “hedonic regression” techniques to control for other variables that affect property values, such as the physical characteristics of specific houses, the location and density of the surrounding neighborhood, and the time of sale. 

The research is also timely for Philadelphia because the city government is currently leading an effort with several non-profit partner organizations to create an open space plan for the entire city. “A study like this helps us craft a stronger case when we promote the value of the city’s green infrastructure,” says Philadelphia Green Senior Director Mike Groman. “For, example, the open space plan must incorporate a long-term strategy to maintain the city’s parks, civic spaces, and street trees, and now we can show that that expenditure will offer a significant payback.”

To view Public Investment Strategies: How They Matter for Neighborhoods in Philadelphia (2006), please visit the Web site of the Penn Institute of Urban Research at:  http://www.upenn.edu/penniur.  

About the Wharton School
The Wharton School of the University of Pennsylvania — founded in 1881 as the first collegiate business school — is recognized globally for intellectual leadership and ongoing innovation across every major discipline of business education. The most comprehensive source of business knowledge in the world, Wharton bridges research and practice through its broad engagement with the global business community. The school has more than 4,600 undergraduate, MBA, executive MBA, and doctoral students; more than 8,000 annual participants in executive education programs; and an alumni network of more than 81,000 graduates. 

FOR PRESS INFORMATION, CONTACT:

• TRACY L. SIMON, The Wharton School, University of Pennsylvania
  email or call 215-898-2863 
• LAURA BEITMAN, The Pennsylvania Horticultural Society
  email or call 215-988-8836