Strategy for a Green City, Summer 2005

Advocates of urban greening often promote the intangible benefits that open space provides, such as improving the quality of city life and fostering a sense of community pride. While these benefits are difficult to quantify, a ground-breaking study from the Wharton School of the University of Pennsylvania now offers solid evidence that investment in greening yields significant economic returns, specifically, dramatic increases in real estate values.

Funded by the William Penn Foundation, The Determinants of Neighborhood Transformation in Philadelphia: Identification and Analysis—The New Kensington Pilot Study, was developed and produced by Susan Wachter, professor of real estate, finance, and city and regional planning at the Wharton School. It looked at the economic impact of "place-based investment strategies," particularly the Pennsylvania Horticultural Society's seven-year greening effort in the New Kensington area of North Philadelphia.

"We were always convinced that greening has a tremendously positive impact on communities," says J. Blaine Bonham, Jr., executive vice president of PHS. "The success of our Philadelphia Green program has demonstrated this. Now, the Wharton findings begin to quantify the positive return on the investment in greening."

From 1995 through 2002, the Pennsylvania Horticultural Society's Philadelphia Green program worked in partnership with the New Kensington Community Development Corporation (NKCDC) to address the blight caused by more than 1,100 parcels of abandoned land in the neighborhood and to come up with a vacant-land management plan for the community. The goal was to improve the area's appearance and help stem population loss, attract new residents, and encourage reinvestment.

The partners created a comprehensive greening program, funded largely by the city's Office of Housing and Community Development, with support from The Pew Charitable Trusts and the William Penn Foundation. The strategy included "stabilizing" vacant lots (clearing debris and installing fencing and trees), creating community gardens, planting trees, renovating parks, and transferring vacant lots to adjacent homeowners for private use. The results of the PHS-NKCDC partnership include 480 newly planted trees, 145 settled side yards, 217 stabilized lots, and 15 community gardens.

Wachter's team utilized new technology and economic models to measure the impact of greening as accurately as possible, adjusting for other factors that affect real estate values, such as varying characteristics of individual homes and proximity to public transportation and schools. Sales information and other real estate data came from Philadelphia's Board of Revision of Taxes, while NKCDC and PHS provided information on greening projects in the area.

The study incorporates sales records on thousands of homes and more than 50 variables. To analyze the relationship between greening investments and house values, the Wharton School's Geographic Information Systems laboratory created a special database that included the location and timing of greening projects.

The study found significant increases in the value of individual homes near cleaned lots, streets trees, and parks (see sidebar). It also found a considerable increase in the total value of property in the community. According to Wachter, tree plantings alone account for a total increase of about $4 million, while lot improvements increased the total value by $12 million.

Previous studies of urban greening investments have shown a positive relationship but have been smaller in scale, focusing on a limited number of properties and on the impact of a few parks or large-scale open spaces, such as greenways. For example, a Boulder, Colorado study found that the average value of properties adjacent to a greenbelt there was 32% higher than that of those located 3,200 feet away.

At the completion of the greening project in New Kensington, anecdotal evidence pointed to an immediate increase in property values in the neighborhood. Sandy Salzman, executive director of the New Kensington Community Development Corporation, says that, prior to the greening effort, the organization had a difficult time selling homes it renovated, but vacant lots in the neighborhood are now selling for thousands of dollars. "We couldn't give the land away when we started this program," she recalls.

"Clearly, the greening of New Kensington has borne fruit in economic terms," says Susan Wachter, who notes that the community-wide scope of the greening effort in New Kensington made it a natural focus for this research. "People are not only more willing to choose this neighborhood and pay more for living in this neighborhood, but it also spurs other reinvestment."

Steven T. Wray, deputy director of the Pennsylvania Economy League, who served on the committee that initiated the study, agrees: "The Wharton research shows that a coordinated, effective strategy for greening a neighborhood can have a real impact, not just on the appearance of the neighborhood, but on the value of housing and commercial property. That increase is multiplied as individuals and businesses further invest in the community."

Wachter suggests that the "direct and indirect impacts to the city's property tax base are likely to contribute to the overall fiscal health of the city." Going forward, she imagines a possible spill-over effect: with a healthier tax base, the city could offer improved services, encouraging more people to come back, thereby lowering individual tax burdens over the long-term.

The Wharton study shows that the positive effects of greening go well beyond intangible, "feel-good" benefits and that greening is an important tool for economic revitalization. Its findings will be part of continuing policy discussions on neighborhood investments in Philadelphia, as well as in other cities throughout the United States.

A more comprehensive Wharton School study looks at the entire city, measuring the impact of Mayor John Street's Neighborhood Transformation Initiative, a multimillion-dollar anti-blight campaign, on housing prices, public safety, and other quality-of-life issues. The results of that study are forthcoming.