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9
<br />Neighborhood Economics: The Value of
<br />Urban Neighborhoods
<br />Studies have shown that urban, walkable develop-
<br />ment generates a greater level of value for a com-
<br />munity than suburban development patterns. The
<br />City of South Bend worked with Urban3, a firm that
<br />approaches land value economics through property
<br />& retail tax analysis and community design. In 2016,
<br />Urban3 examined value per acre of land in South
<br />Bend and St. Joseph County. This analysis showed that
<br />properties in the Near Northwest generate a higher
<br />tax per acre than larger, more expensive housing on
<br />the edge of town or in the County.
<br />In addition to generating higher taxes per acre, repair-
<br />ing existing houses and infill development in a neigh-
<br />borhood like the Near Northwest has a lower cost of
<br />service for government. The necessary infrastructure
<br />already exists – streets, sewer and water lines, police
<br />and fire department coverage – and does not require
<br />the extension of the infrastructure network, which
<br />would increase short- and long-term costs to the City.
<br />Urban neighborhoods generate more revenue for the
<br />City and cost less to provide services making them a
<br />more sustainable approach to development.
<br />Even with this value, it can be a challenge to repair or
<br />build in the Near Northwest. Based on the American
<br />Community Survey, in 2017 the median value of an
<br />owner-occupied housing unit in Census Tract 6 was
<br />$55,000 and in Census Tract 7 was $101,700. The hard
<br />cost to construct a modest house can be $125 per
<br />square foot, making a 1,200 sq. ft. house $150,000 to
<br />build. This cost is more than housing values support.
<br />This only accounts for the hard costs to build a house,
<br />it does not include soft costs like purchasing land,
<br />completing survey, etc. An additional challenge is that
<br />most neighborhood vacant lots are in Census Tract 6,
<br />where housing values are lower.
<br />The housing values play an important role in people’s
<br />willingness to buy and/or repair a property. In Census
<br />Tract 7, owners can be encouraged to maintain, or
<br />make improvements to, their properties since they
<br />are able to invest in repairs without worry of a signifi-
<br />cant over-investment in the house. Investment helps
<br />sustain existing housing prices and can encourage
<br />increased value. While in Census Tract 6, the lower
<br />value of houses can discourage investment since it
<br />can be difficult to recover costs of basic repairs, let
<br />alone major rehabilitation work. The lower values can
<br />encourage limited investment, resulting in housing
<br />prices lowering over time. While urban neighbor-
<br />hoods provide a more sustainable approach for the
<br />city, having housing values lower than the cost of
<br />building a house hinders development.
<br />Taxable value per acre in South Bend
<br />Source: The Dollars and Sense of South Bend Development, 2016, Urban3, LLC
<br />Taxable value per acre in St. Joseph County
<br />Source: The Dollars and Sense of South Bend Development, 2016, Urban3, LLC
<br />not taxable
<br />< $50,000
<br />$50,000 - 100,000
<br />$100,000 - 150,000
<br />$300,000 - 350,000
<br />$250,000 - 300,000
<br />$200,000 - 250,000
<br />$150,000 - 200,000
<br />$350,000 - 500,000
<br />> $2,000,000
<br />$1,000,000 - 2,000,000
<br />$750,000 - 1,000,000
<br />$500,000 - 750,000
<br />Tax Value Per Acre ($)NORTH
<br />not taxable
<br />< $50,000
<br />$50,000 - 100,000
<br />$100,000 - 150,000
<br />$300,000 - 350,000
<br />$250,000 - 300,000
<br />$200,000 - 250,000
<br />$150,000 - 200,000
<br />$350,000 - 500,000
<br />> $2,000,000
<br />$1,000,000 - 2,000,000
<br />$750,000 - 1,000,000
<br />$500,000 - 750,000
<br />Tax Value Per Acre ($)NORTH
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