Evaluating and redesigning subsidy policies for home rehabilitation

Abstract

A method is developed for empirically estimating the direct leveraging, indirect leveraging, and externality benefits accruing from home rehabilitation subsidy policies. The method is applied to two single-family home rehabilitation subsidy programs administered by Minneapolis from 1976 to 1980. Multivariate statistical analysis of sampled homeowners reveals that for each dollar of grant and loan received, all else equal, participants spent S1.62 and S0.345 more, respectively, of their own funds on home upkeep, all expressed as annual averages for the period. A tentative finding of indirect effects on proximate homeowners' confidence in the neighborhood and concomitant rehabilitation expenditures is also observed. These home improvements, in turn, created an additional aesthetic externality benefit.Benefit-cost analyses employing estimated parameter values are conducted. Results show that both grants and loans are net beneficial from the societal perspective. From the budgetary perspective of the public sector, the grants program was net beneficial. Loan programs involving very low interest rates, deferred payments, and/or lengthy repayment schedules typically were not. Under wide ranges of parameter values, however, subsidized loans can be devised which yield superior budgetary efficiency to grants.These findings suggest that home rehabilitation subsidy policies should be redesigned so that the mix of grants and loans for individual recipients is varied in order to enhance budgetary efficiency. The central principle is to require that recipients who can afford to do so take out loans on terms which render them more net beneficial than grants, before any grants are awarded.

New Housing as Neighborhood Revitalization

“…Generally, revitalization evaluations focus on what was built or on subsequent mobility rates and property tax assessments in the target areas (Galster & Hesser, 1988). These distal and long-term assessments miss the residents' feelings and beliefs that are prerequisites to long-term revitalization success.…”

“…One goal of this study is to assess residents' feelings and beliefs that are crucial to healthy neighborhoods (DeGiovanni, 1984;Unger & Wandersman, 1982). Generally, revitalization evaluations focus on what was built or on subsequent mobility rates and property tax assessments in the target areas (Galster & Hesser, 1988). These distal and long-term assessments miss the residents' feelings and beliefs that are prerequisites to long-term revitalization success.…”

“…Confidence was measured by asking residents, "In the next 2 years, do you feel that general conditions on your block will get worse, stay about the same, or get better?" (a 3-point scale; Galster & Hesser, 1988). 1 Place attachment (coefficient α = .78; five items).…”