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Evaluating the Impact of the Neighborhood Stabilization Program in Detroit

A new data-driven study provides insights regarding the effects of the federal Neighborhood Stabilization Program (NSP) in Detroit, assessing how this place-based policy shaped key housing market outcomes in the aftermath of the 2008 foreclosure crisis. Using recent advances in statistical-econometric techniques, the researchers uncovered useful results about the program’s influence between 2006-2019. This research adds to the handful of studies on the NSP policy, highlighting its unique implications for Detroit.

In response to the housing market collapse and surge in urban blight in the wake of the 2007-2008 global financial crisis, the NSP provided over $7 billion nationally to redevelop foreclosed and vacant homes. Detroit received nearly $70 million across two rounds, targeting nine neighborhoods in 2008 and 2011. The richness of the study's findings owes much to Detroit's dedication to keeping data available and transparent. Thanks to the city's robust public data portal and its willingness to share detailed NSP data, the research team was able to conduct rigorous, data-driven empirical analysis. The research is composed two of parts. The first segment is a descriptive analysis, which offers an examination of the city's publicly available performance reports. This analysis provides a detailed explanation of how the NSP funds were utilized across different neighborhoods. The second part of the report presents a rigorous statistical analysis of impacts of the NSP on various housing outcomes in Detroit.

An examination of the city's quarterly reports revealed that Detroit channeled its NSP funds towards two primary endeavors: the rehabilitation of aging homes and the removal of severely dilapidated structures. Of the 38 initiatives, 31 were focused on the restoration of deteriorating housing units, and seven pertained to new construction. Rehabilitation utilized nearly half of the funds, with demolitions covering an additional 20%. The funding distribution underscores Detroit's balanced approach in preserving its architectural legacy while at the same time supporting new development opportunities.

The project also included an examination of the NSP impact on average home sales prices, foreclosures, and foreclosure rates in the treated areas compared to similar untreated neighborhoods. The treated neighborhoods were carefully chosen based on several criteria. First, they had high foreclosure risks as identified by the Department of Housing and Urban Development (HUD). This meant that many homes with subprime loans were located in these areas and were more likely to face foreclosure. Second, the treated areas experienced a surge in actual foreclosures during 2006-2007. The city also selected areas aligning with Detroit's broader redevelopment plans, those areas already seeing investments, and areas where the majority of residents earned below 120% of the city's median income. The research methodology mirrored an experimental approach. Using available data, the researchers identified treated and control neighborhoods that were very similar before the NSP came into play. The goal of this approach was to make the findings as close to what one would get from a controlled experiment.

Overall, the findings show the NSP achieved its core goal of slowing further deterioration in Detroit's hardest hit communities; however, the analysis did not find evidence that the NSP stimulated broader revitalization. With regard to housing prices, the results indicate that while the NSP did not trigger increases, it likely prevented steeper declines in treated areas relative to neighborhood that did not receive NSP funds. The program helped to stabilize downward price trajectories, especially for neighborhoods selected in the second round. However, the program impacts on foreclosures were negligible - the NSP maintained balance with untreated areas but did not significantly reduce foreclosure rates.

According to the authors, the limited impact of the NSP is a reflection of the sheer magnitude of Detroit’s economic and housing challenges. The NSP’s stabilizing influence amid structural decline constitutes a policy achievement. However, generating pronounced renewal would require interventions beyond the program's scope.

While the NSP has concluded, lessons from this study inform ongoing revitalization efforts in Detroit. As the city directs resources towards combating urban blight, evidence on the NSP's localized effects can be used to shape future investments. More broadly, the research highlights that alleviating neighborhood distress is crucial, but achieving equitable redevelopment demands a more comprehensive approach.

The authors note that their current work extends this analysis to examine potential demographic shifts in NSP areas and assess potential spillovers effects on nearby property values. Additionally, with newly obtained data on rehabilitation sites, they plan to evaluate impacts within localized buffers around NSP areas. They emphasize that continuous, data-driven inquiry is imperative as cities implement and refine place-based revitalization policies.