Brownfields

Brownfields

browNfields Volume 12, Number 3 • 2010

U.S. Department of Housing and Urban Development Office of Policy Development and Research U.S. Department of Housing and Urban Development A Journal of Policy Development and Research

Managing Editor: Mark D. Shroder Associate Editor: Michelle P. Matuga

Advisory Board Peter Dreier Occidental College Richard K. Green University of Southern California Keith R. Ihlanfeldt The Florida State University Annette null Kinull nullssachusetts Institute of Technology Carlos null nullrtnull Anull Associates Inc. Douglas S. nullssey Princeton University Sandra null nullnullan nullhns nullnullins University nullrynullth Shinn nullandernulllt University Raynullnd null Struynull nulltional Onullnion Research Center Paul nulladdell University of Californianullnullrnullley nullhn C. nulleicher nulldson InstitutenullInc.

A Journal of Policy Development and Research U.S. Department of Housing and Urban Development Office of Policy Development and Research Cityscape Brownfields Volume 12, numBer 3 • 2010

The goal of Cityscape is to bring high-quality original research on housing and community development issues to scholars, government officials, and practitioners. Cityscape is open to all relevant disciplines, including architecture, consumer research, demography, economics, engineering, ethnography, finance, geography, law, planning, political science, public policy, regional science, sociology, statistics, and urban studies. Cityscape is published three times a year by the Office of Policy Development and Research nullDnullnullof the nullnull Department of nullusing and nullban Development. nullbscriptions are available at no charge and single copies at a nominal fee. The nullurnal is also available on line at httpnullnullww. huduser.orgnulleriodicalsnullityscape.html. PDnull welcomes submissions to the Refereed Papers section of the nullurnal. Our referee process is double blind and timely, and our referees are highly qualified. The managing editor will also respond to authors who submit outlines of proposed papers regarding the suitability of those proposals for inclusion in Cityscape. nullnd manuscripts or outlines to nulltyscapenullud.gov . Opinions expressed in the articles are those of the authors and do not necessarily reflect the views and policies of HUD or the U.S. government. nullisit PDnullnulls website, www.huduser.org, to find this publication and others sponsored by PDnull. Other services of nullD nullnull, PDnullnulls research information service, include listservs, special interest and bimonthly publications nullest practices and significant studies from other sourcesnull access to public use databases, and a hotline nullnullnullnullnullnullnull for help with accessing the information you need.

iiiCityscape Contents Symposium Brownfields Guest Editor: Edwin Stromberg Guest Editor’s Introduction ........................................................................................................ null Voluntary Cleanup Programs and Redevelopment Potential: Lessons From nullltimorenullnullryland ............................................................................................ null by Dennis nullignet and nullna nullberini nulle Private nullrnullt nullr nullownnullld Properties ......................................................................... null by nullrie nullwland nullownnullldsnullRisnullnullsed Corrective nulltionnulland Local Communities .................................... null by Peter null nullyer Field Survey onullnullnullSite Contamination Policy ..................................................................... null by nullgene nullldfarb nullownnulllds nullcertainty: nullProposal nullo Renullrm Supernullnd ................................................... null by David nullutnully and nullnull nulley Refereed nullpers nulle Prospects nullr Guiding nullusing Cnullice Voucnullr nullusenulllds to nullgnullnullportunity nullignullornullods .......................................................................................... nullnull by nullrnullnullnullure nullasuring nullignullornullod nullality nullitnullSurvey nullta: nullnullyesian nullproacnull .............................................................................................................. nullnull by nullent D. nullst Departments nullpact nulle Impacts onullnullre Rigorous Fnull nullderwriting Guidelines ............................................. nullnull by nullastair nullnullrlane

iv Brownfields

1nulltyscapenullnullnullurnal of nulllicy Development and Research • Volume 12, Number 3 • 2010 U.S. Department of Housing and Urban Development • Office of Policy Development and Research Cityscape Guest Editor’s Introduction Edwin Stromberg nullnull Department of nullusing and nullban Development The standard definition of a brownfield, as embodied in the nullall nullsiness nullability Relief and nullownfields Revitalinulltion nullt, is a nulleal property, the enullansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hanullrdous substance, pollutant, or contaminant.null nullderal concern about brownfields arose as a direct consequence of growing criticism of and reaction to the get-tough nullolluter-paynullfederal policies contained in the nullmprehensive nullviron - mental Response, nullmpensation, and nullability nullt of nullnull nullnullnullnull or nullhe nullperfund lawnull. null

nullRnullnull which nullngress passed in reaction to the nullve nullnal environmental disaster, came down forcibly on any entity that caused or tolerated environmental pollution. The law imposed a severe liability scheme nullown as nulltrict, retroactive, and nullint liability.nullnullthough modified and moder - ated in nullnull by amendments, nullRnullnullwas initially characterinulld by environmental lawyers as imposing a wide net with harsh and unremitting sanctions. Reaction to the law, particularly from the development community, was quite strong. nullitics claimed that the nullperfund law was draconian and that it was having a severe chilling effect on urban revitalinulltion, particularly for older and more mature cities. nulls provisions applied to any contaminated site, not nullst sites with nullRnullnulldesignation, which magnified the lawnull impact. The nullinton administration developed strategies to respond to these criticisms. The nullvironmental Protection nullency nullPnull implemented an aggressive set of initiatives to counteract the view that, through its rigorous enforcement of the nulluperfund law, it was a manullor obstacle to urban revitalinullation. The nullnulls nullownfield Pilot nullant program, which awarded nullnullnullnullgrants to localities to assess their own brownfield problems, was the most visible dimension of nullnulls brownfield initiative. nullngress asnulld what is now the nullvernment nullcountability Office nullnullnullto assess the enullent of the problem in the country. nullsing its analysis on very limited data resources, the nullO estimated that roughly nullnullnullnullbrownfields enullsted in the country. nulleanullrs and authors have often used higher figuresnullnull,nullnull nullnullnullnull and even nullnullnullnullciting nullO as the source. Today, among null nullme claim that the specific precipitating events were a few court cases that pulled lenders and investors into the nullRnullnull liability chain, which led to capital nullight. nulllthough this claim may be true, the nulluperfund law itself was the larger force at wornull. It cannot be emphasized strongly enough that what follows is my own personal opinion, not the ofnullial position of the nullnull nullpartment of nullusing and nullban nullnulllopment nullnullnull It is, howenullr, informed by many years as a nullnullemployee, wornullng on urban redenulllopmentnull

2 Stromberg Brownfields the frequent references to nullmillion brownfields, are mentions of sites such as gas stations, which were not originally part of nullnulls definition of a brownfield. null

nullnulls mission involves regulating contaminated land. nullnsequently, nullnulls perspective has been site specific and tended to promote assessing and cleaning up specific contaminated sites as the driving forces behind urban revitalinulltion and renewal. nullnullcommonly reported on the amount that its planning grants for small brownfields leveraged in urban investment or reinvestment, because the brownfield program was doing more urban redevelopment than nullst site cleanup and because no redevelopment would tanull place unless the initial cleanup dollarsnullven at small amountsnullere invested. nullnetheless, nullnulls proactive approach quicnully attracted the enthusiasm of and support from both the public and private development sectors. nullcause local governments were loonullng for federal leadership and assistance in overcoming the challenges of older urban areas and because grant funds for brownfields could be used for properties in attractive marnullet areas, programs for nullPnullnulls brownfields were popular. Overall, nullPnullnulls brownfield initiatives have contributed substantially to urban revitalinullationnull they have reenerginulld the field of urban revitalinulltionnullthey have prompted the nullnullto streamline its own regulatory approaches to brownfield investigation and cleanupnullthey have encouraged states and localities to streamline their own brownfield reclamation policies and to develop innovative approaches to reclaim blighted urban areasnulland they have provided a welcome infusion of funds, training, and technical assistance for revitalinullng declining and blighted urban communities. The null.null. Department of nullousing and nullrban Developmentnulls nullnullnullDnullsnull perspective has been different from the start. nullD is an agency concerned with development and redevelopmentnullit is not an environmental regulator. nullD never viewed its mission from a nullrownfields perspective,nullnullhat is, identifying and cleaning up specific sites as a significant engine of urban revitalinulltionnull nullthough nullnullD, along with all other federal agencies, is required to administer a wide array of environmental mandates, which are tanullen very seriously, such mandates represent only one aspect in the develop ment process. To emphasinullenull brownfields was the mission, mandate, and message of nullPnullnulls approach to the contaminated properties of older urban areas. nullnullD has never considered brownfields its manullor focus. Despite this differance, nullD funding might be the single greatest source of funding for brownfield revitalinulltion because of the great nullnullbility with which communities can use community develop - ment blocnullgrants. The purpose of the nullmmunity Development nullocnullnullant nullDnullnullprogram has been to promote local discretion, not specific categorical requirements. The general philosophy has been to encourage and support broad, neighborhood, community-oriented improvement, with the priority being on helping low- and moderate-income families and communities. nullfortunately, nullD has never tracnulld to what degree it has supported brownfield revitalinulltion, in part, because of a general policy of miniminullng granteesnullreporting burden and because nullD has no metric for measuring its effect on revitalinullng brownfields. null

null The distinctions between nullnullnulls views of brownfields and those of the Department of nullusing and nullban Development are discussed later in this introduction. null nulltil recently, the nullderal nullusing nullministrationnulls stringent site cleanup requirements have constrained its separate contribution to brownfields revitalinulltion. nulle nullgene nullldfarbnulls article, nullield nullrvey of nullD nullte nullntamination Policy,null in this symposium nulloldfarb, nullnullnull

3Cityscape Guest Editor’s Introduction The minor role that nullD played in the brownfield issue was also illustrated in the creation of the nullownfields nullpensing Tanullnullcentive, a nullnull enactment that allows developers to deduct all brownfield cleanup costs the year they are incurred instead of amortinullng them over many years. Primary responsibility for its management has resided with the nullnull Treasury. The surging interest in the idea of brownfield redevelopment led the nullinton administration to asnull nullngress to create the nullownfields nullonomic Development nullitiative nullnullnull. nullmmunities could use nullDnullfunds only if the sites met nullnulls definition of brownfields and nullnulls regulatory require - ments. The nullDnullprogram was quite smallnullnull million in annual appropriations in the first few years of its enullstencenullut may have been the high point in nullDnull formal role in brownfields as a policy issue. nullD and nullnullactively cooperated in the programnull implementation. nullth the transition to a new administration, however, nullDnull role in the brownfield issue eroded quicnully. The nullsh administration sought to terminate the nullDnullprogram, which nullngress contin - ued to fund, but at increasingly smaller levels. nullD policymanullrs stopped actively addressing the brownfield issue, leaving nullnullto dominate brownfield policymanullng. nullthough the nullDnullprogram has continued, and has been nullDnull only development program specifically addressing brownfield needs, at the local level, nullnull funds probably provided the bulnullof federal funding devoted to brownfields. nullcause brownfields are frequently associated with slums and blight, which are an eligible use of nullnull funds, such linnullge allowed for the use of nullnull for properties with signifi - cant marnullt potential that were not located in low-income areas. nulltween nullnull and nullnull, nullD did not mount any manullr new community or economic develop - ment initiatives, so it has been quiescent in its brownfield-related efforts as well. The nullDnull program continues, but, in the past nullyears, both administrations have recommended eliminating the program, deeming it duplicative of other federal community development effortsnullit has so far survived because of support in nullngress. nullthough nullD and nullnullmoved along seemingly parallel program tracnull in the nullnulls, nullD, in fact, did mount an effort to wornullwith nullnullon brownfield issues and to conduct research on brownfields relevant to nullDnull community revitalinulltion mandates. This effort was the result of an interagency agreement between nullD and nullnull signed by nullD nullcretary nullnry nullsneros and nullnull nullministrator nullrol nullowner in nullnull, which pledged mutual cooperation between the two agen - cies on brownfield issues. null a practical matter, there was too little cooperation in ensuing years, enullept for the staff cooperation on the nullDnullprogram, nullDnull participation in nullnulls federal part - ners wornullng group, and some scattered efforts in the field independent of headquarters oversight. nullDnull Office of Policy Development and Research nullDnullnullhas conducted a vigorous research program on the role of brownfields in urban decline and urban revitalinulltion. PDnull has spon - sored the following brownfield-related researchnullnulle nullfects of nullnullronmental nullzards and nullgulanull tion on nullban nulldenulllopment, a study of how brownfields and attendant liability and regulatory issues could be thwarting site cleanup and redevelopmentnull nulldenullloping nullownnullldsnullnullw nullates and nullcalities nulle Cnullnullnullnds, which documents how localities used nullnull and related programs for nullrownfieldnullredevelopmentnullnull nullsessment of nullate nullownnulllds Initiatinulls, which reviews and assesses leading state activities to address brownfields redevelopmentnull nullnullronmental Insurance for nullownnulllds nulldenulllopmentnullnullnullasibility nulludy, which analynulls the feasibility of using environ-

4 Stromberg Brownfields mental insurance as a tool in brownfield redevelopmentnull nullnullide to nullconstructionnullnull nullernullew of nullstruction nullth a nullcus on Community nullnulllopment nullportunities, which shows how deconstruction could be used in community renewalnulland nulludy of nullnulls nullte Contamination nulllicies, which focuses on nullderal nullusing nullministration brownfield cleanup requirements for multifamily housing. Other significant PDnull actions, aside from the development of the nullD-nullnullnullteragency nullree - ment on brownfields, include a report on the identification and assessment of possible changes to nullnullnullregulations to manull them more conducive to cleanup and redevelopmentnullpublic forums to enullmine policy options for brownfield redevelopmentnulla followup study of how nullD field offices implement these policies nullhe followup study is published in this issuenull and a forum, with nullnull participation, on how brownfields fit into the emerging sustainability agenda. nulll these studies can be accessed on www.huduser.org. nullthough nullD and nullnullwere moving along parallel tracnull for much of the past two decades, nullnulls brownfield mission and nullDnull revitalinulltion mission now are moving closer together. nullnull has recogninulld the need to promote broader scale renewal through its recently announced nullea - wide nullownfields nullsessment nullant program. nullnullhas also launched an urban waters revitalinulltion initiative, which is intended to be a multipronged, interagency effort to promote revitalinulltion with water resources as the hub. The current administration now formulates nullDnull basic mission in the following termsnullnullreate strong, sustainable, inclusive communities and quality, affordable homes for all.nullnullD has been given lead responsibility for the Partnership for nullstainable nullmmunities nullhose founding members are nullD, nullnull and the Department of Transportation nullOTnull through its stewardship of the nullstainable nullmmunities Planning nullant Program and the nullallenge nullant program. The underlying purpose of the Partnership for nullustainable nullommunities is to align housing, community development, transportation, environmental, and other federal resources and policies to support a sustainable future. The real challenge is to bring each agencynull considerable resources, nullowledge, and enullpertise into the Partnership for nullustainable nullommunities, as enullemplified by the principles of sustainability and livability, the DOTnulls formulation of sustainability. This means moving beyond brownfields as a critical policy focus. The contamination of urban land remains a very real concern, so the tools and approaches developed to address brownfields are still essential and will be for a long time, but it is time for a broader conceptual perspective to govern federal urban policy. In This Issue null nully nullnull, nullrgherita Turvani of the nulliversitnullnullnull di nullnenulla organinulld an nullnullloratory wornullhopnullon brownfields for the nullropean nullience nullundation nullnullnull null nullbruary nullnull, she approached Cityscape with a proposal to publish the papers from the wornullhop as a symposium. null agreed that some of those papers would interest Cityscape readers, and we are grateful to Dr. Turvani for her assistance. null guest editor, nullhave wornulld with authors of selected papers from the nullnullwornullhop and with authors of other papers that nullwas aware of to prepare this symposium, which consists of five original research articles. The articles, all thought provonullng, represent varying perspectives and approaches to brownfield issues. nullasmuch as no third-party referees were involved, their inclusion is entirely my decision.

5Cityscape Guest Editor’s Introduction The first two articles are small-scale empirical studies of industrial brownfields in a particular eastern city. Dennis nulluignet and nullnna nulllberininulls study, nullnulloluntary nullleanup Programs and Redevelopment Potentialnullnullssons nullom nullltimore, nullryland,nullenullmines whether a state voluntary cleanup program can support redevelopment of contaminated properties in an urban industrial area and whether the program can serve as a possible alternative to the conversion of agricultural land and open space nullhat is, greenfieldsnullin suburban and rural areas of the state. The study by nullrie nullwland, nullhe Private nullrnullt for nullownfield Properties,nullis an empirical study of the effect of site contamination on sales and sales prices of properties in an industrial area of nullltimore. The study found that, after the mid-nullnulls, contaminated parcels sold on the private marnullt, with price discounts accounting for contamination and cleanup. The author concluded that, although the private marnullt can address the costs of site cleanup itself, public intervention is still needed to overcome the classic problems of obsolete, obsolescent, and fragmented land use and urban infrastructure. Peter null nullyernull article, nullrownfields, Risnullnullsed nullrrective nulltion, and nullcal nullmmunities,null enulllores the seemingly irreconcilable connullct between economic development and environmental improvement. nullyer reviews some nullnull responses that avoid sacrificing environmental to economic gains and suggests lessons that states and municipalities may learn from others, after socioeconomic, political, and legal differences are tanulln into consideration. nullgene nullldfarbnull article, nullield nullrvey of nullD nullte nullntamination Policy,nullwhich is a followup to a nulludy of nullnulls nullte Contamination nulllicy nullnull, nullnullnull enullmines how nullD field offices administered the Departmentnull nullarticularly the nullderal nullusing nullministrationnullsnullofficial policy at the time nullnullnull, which discouraged using the risnullbased corrective approach to brownfield redevelopment. The article also has implications for the Departmentnull urban mission. nullnally, David nullutnully and nullnull nulleynull article, nullrownfields nullcertaintynullnullProposal To Reform nullperfund,nullreviews nullericanull brownfield problem nullhat is, the barriers to brownfield redevelop - mentnullfrom the perspective of the current environmental liability and financial support framewornull and offers a bold proposal to overcome enullsting impediments. Renullrences nullldfarb, nullgene. nullnull. nullnulleld nullrvey of nullD nullte nullntamination Policy,nullCityscapenullnullnullurnal of nulllicy nullnulllopment and nullsearch null nullnull nullnullnull nullnull Department of nullusing and nullban Development nullnullnull nullnull. nulludy of nullnulls nullte Contaminull nation nulllicies. nullshington, Dnull nullnull Department of nullusing and nullban Development, Office of Policy Development and Research.

6 Brownfields

7nulltyscapenullnullnullurnal of nulllicy Development and Research • Volume 12, Number 3 • 2010 U.S. Department of Housing and Urban Development • Office of Policy Development and Research Cityscape Voluntary Cleanup Programs and Redevelopment Potential: Lessons From Baltimore, Maryland nullnnis Guignet nullna nullberini nulliversity of nullryland nullstract In the nullited nullates, policy has increasingly shifted toward economic incentinulls and liability attenuation for promoting cleanup and redenulllopment of contaminated sites, but little is nullown about the effectinullness of such policiesnullnullese policies include, among others, state Voluntary Cleanup nullograms nullCnullnull which were established in the nullited nullates in the 1null0s and, to date, hanull been implemented in nearly enullry statenullnullis article focuses on 11nullnullltimore properties that were enrolled and participated in the nullryland VCnullfrom its inception in 1nullnullto the end of 200nulland enullmines what type of properties tend to participate in these programs, how these properties compare with other eligible but nonparticipating sites, and what the redenulllopment potential of VCnull properties and implications is toward opennullpace connullrsionnull nulle nulld that most applicants nullnullpercentnullactually renullested a No nullrther nullnullirenull ments nulltermination directly, rather than proposing cleanupnullNenullrtheless, the VCnullled to the identinullation and ennullronmental assessment of 1,1null acres of contaminated land in the city of nullltimore alonenullIn nullltimore, VCnullproperties tend to be industrial, located in areas zoned as industrial, and away from residential neighborhoodsnullIn more recent years, larger properties hanull increasingly enrolled in the programnullnullst participating sites are reused as industrial or commercial propertiesnullIn contrast with nullberini null00null, these nulldings suggest that, in nullltimore, pressure for residential denulllopment has not drinulln VCnullparticipation to datenullnullsed on differences in zoning renullirements, the VCnull may reduce demand for potentially contaminating actinullties on pristine land by as much as 1,23nullto nullnullnullacres, in nullltimore alonenull

8 Brownfields Guignet and Alberini Introduction and Motivation nullny observers believe that the liability regime imposed by federal and state hanullrdous waste programs in the nullited nullates is at least partially responsible for discouraging the purchase and reuse of contaminated or potentially contaminated sites, which have remained idle or underused. null

The resulting nullbrownfieldsnullnullindustrial sites whose enullpansion, redevelopment, or reuse nullmay be complicated by the presence or potential presence of a hanullardous substance, pollutant, or contami- nantnull nullPnull nullnullnull to the point that public intervention may be needed nulllnullr, Roberts, and nullith, nullnullnullcover thousands of acres in many urban and rural areas of the country nullnull, nullnullnull nullnumber of recently established state programs and new federal legislation aim to reverse these disincentives and stimulate the cleanup and productive reuse of brownfields. nullr enullmple, in the nullnulls, several states established nullluntary nulleanup Programs nullnullsnulloffering liability relief, other economic incentives such as tanullcredits or low-cost loans, oversight and enulledited approval of cleanup plans, and simplified cleanup standards in enullhange for site remediation nullartsch and Dorfman, nullnullnullnullyer and nullnnullndingham, nullnullnull nullder the nullderal nullownfield Tanullnullcentive, established in nullnull, environmental cleanup costs for eligible properties are fully deductible in the year in which they are incurred, as long as the property is used for trade or business or for the production of income. nullnullwise, state brownfield programs offer tanullcredits or other benefits in enullhange for cleanup and investment at potentially contaminated properties located in blighted areas. nullnally, the federal nullall nullsiness nullability Relief and nullownfield Revitalinulltion nullt of nullnull offers conditional relief from environmental liability for property owners and purchasers of land. This law also establishes the nullnull nullvironmental Protection nullency nullPnull nullownfields Program, which provides assessment and cleanup grants to state and local governments and communities and grants that states can use to establish revolving loan funds. nullttle is nullown about the effectiveness of these economic incentives and liability attenuation poli - cies in promoting cleanup and redevelopment. nullestions remain about whether these programs effectively provide public funding to redevelopment pronullcts that would have occurred anyway nulllberini, nullnullnull and concerns enullst about unspent dedicated public funding nullchoenbaum, nullnullnull nullmmon perceptionsnullthat most brownfield properties are former industrial sites, are located in central cities, and bear risnuller, less profitable redevelopment potential than equivalent pronullcts on pristine lands and in suburban areasnullhave been challenged nulle nullusa, nullnullnullPage and nullrger, nullnullnull Deason, nullernull and nullrroll nullnullnull analynulld urban redevelopment pronullcts and computed null The nullperfund program was established by the nullmprehensive nullvironmental Response, nullmpensation, and nullability nullt nullnullnullnull, passed in nullnull and amended and reauthorinulld in nullnull. null is probably the best nullown among the public programs addressing hanullrdous waste sites in the nullited nullates. nullder the nullperfund program, the nullnull nullvironmental Protection nullency nullPnull has the authority to identify contaminated sites needing remediation, tracnulldown the responsible parties, and force them to pay for cleanup nullr reimburse the nullency for the cleanups it initiatednull nullability for the cost of cleanup is retroactive, strict, and nullint and several, with potentially responsible parties to be sought among the owners and operators of the site and the transporters of the wastes. nullability in some cases has been construed to apply to property owners and lenders that foreclose on contaminated properties nullogleman, nullnullnull

9Cityscape Voluntary Cleanup Programs and Redevelopment Potential: Lessons From nullltimorenullnullryland the sinull of equivalent pronullcts in open and suburban areas, showing that because of differences in nullning the latter often tanull up considerably more land than infill redevelopment, thus contributing to sprawl and erosion of open space. nullbetter understanding of what types of properties tend to be enrolled in nullPs is crucial in evaluating programs offering incentives and assistance for brownfield cleanup and redevelopment. null

This article enullmines the nullP of nullryland and poses three related questionsnullnullnullnullat types of properties tend to participate in the nullryland nullPnullnullnullnullw do these properties compare with other eligible but nonparticipating industrial and commercial propertiesnullnullnullnullat is the redevel - opment potential of nullP parcels and can the nullP enroll enough acreage to be an alternative to the conversion of greenfieldsnull To answer the first two questions, the article enullmines the parcels enrolled in the nullP from its on - set in nullnull to late December nullnull. To ensure a relatively homogeneous legal and tanullenvironment, attention is restricted to enrolled properties in the city of nullltimore. null The enrolled set of parcels is supplemented with a sample of comparably sinulld parcels drawn at random from the universe of industrial and commercial properties in the city of nullltimore, which are used as a nullontrolnullgroup. The newly formed samplenullnrolled properties plus similar nonenrolled propertiesnullnabled us to establish whether the nullP tends to attract parcels that are systematically different from other industrial and commercial properties in nullltimore. During the study period, in response to questions nullnulland nullnull the nullP identified nullnullnullacres of potentially contaminated land in nullltimore, most of which were not identified through other programs, and thus, before the nullP, were linullly unnullown to city and state regulators. nullmple univariate analyses suggest that nullP properties in general are larger, less capital intensive, and have a higher probability of prior contamination than nonparticipating parcels. Probit regressions confirm that nullP enrollment and participation is more linullly among industrial sites located in industrial areas and less linullly at heavily built sites close to residential areas. nullen more important, the probit regressions point to the changing nature of the programnullr of the sites that tend to be attracted to the program. null the first few years of the nullP, smaller properties tended to be enrolled in the program. nullst recently, however, enrollment has been more linullly among larger properties. To answer the third question, the article enullmines the restrictions imposed on the property when the state agency granted a null nullrther Requirements Determination nullnullDnullor issued a nullrtificate of nullmpletion nullonull. null most cases, residential uses are not allowed, some physical maintenance is required to avoid enullosure to contaminants, and use of groundwater on the premises for drinnull - ing purposes is prohibited. There is very little evidence of changes in land use at enrolled sites, and enrolled properties tend to be located primarily away from residential areas. Tanulln together, these facts suggest that nullP sites will linullly continue to be used in an industrial or commercial manner. These conclusions are in sharp contrast with nullberini nullnullnull, who finds that the nulllorado nullP tends to attract sites under residential development pressure. null Throughout this article, the terms nullnrollmentnulland nullarticipationnullin the nullP are used synonymously. null null nullhe city of nullltimore,nullwe mean the independent city that has nullderal nullformation Processing nullandards code nullnullnull This area does not include the surrounding and more suburban nullltimore nullunty.

10 Brownfields Guignet and Alberini nullnally, the article uses the figures presented in Deason, nullernull and nullrroll nullnullnull to compute the area that would be reasonably required if, instead of redeveloping the nullltimore nullP properties, equivalent pronullcts were undertanulln in more rural or suburban areas of the state. nullder alternate assumptions, this total area is estimated to be between nullnullnulland nullnullnullacres. null conclude that if the nullP properties are redeveloped, if redevelopment can be attributed enulllusively to participation in the nullP, and if the land requirements for these redevelopment pronullcts are similar to those in Deason, nullernull and nullrroll nullnullnull, the nullP holds promise as a good tool for reducing pressure on the conversion of open space and agricultural land. This finding should be interpreted with caution, however, because comparing the findings of this article with previous research nulllberini, nullnullnullsuggests that, until further analysis is done, enullrapolation will be difficult from one specific program and its achievements to another. The remainder of the article is organinulled as followsnull the nenullt section presents bacnullground informa- tion and describes the nullryland nullPnullthe Previous nullterature section reviews the literature that addresses brownfields and nullPsnullthe nulldel, nullmple, and Data nullurces section presents our econometric model of participation in a nullP and the data used to estimate this modelnullthe nenull three sections nullhe Data, nulltimation Results, nullles and Redevelopmentnullprovide answers to our research questionsnulland the nullnclusion section concludes the discussion. Background This section enullmines the emergence of brownfields and the subsequent policies that encourage the cleanup and reuse of these sites. null includes the general history of nullPs and specific information about the nullryland nullP. null also outlines several concurrent brownfield revitalinulltion programs and local initiatives that may innullence nullP participation. Brownfields and Voluntary Cleanup Programs The nullited nullates has a large supply of properties where prior industrial uses have resulted in contamination of soil, surface water, and groundwater with pollutants that are nonullous to human health and ecological systems. The nullnull nullvernment nullcounting Office nullnullnullnullnullnullestimated a nationwide total of nullnullnullnullto nullnullnullnullcontaminated commercial and industrial sites. nullte contamination, or even suspicion of contamination, is widely believed to seriously hamper the redevelopment and reuse of land. nullny observers argue that merely placing a property on federal or state registries of sites needing investigation about possible contamination inherently changes their designation to brownfields. Removal from such registries nullhe so-called nulle-listingnull would automatically remove any contamination stigma nullartsch, nullllaton, and Pepper, nullnullnull nullarting in the nullnulls, state regulators realinulld that enforcement-based programs did not have sufficient funding to address the large number of contaminated sites requiring remediation and began developing an alternative approach involving voluntary cleanup programs nullnull, nullnullnull null has recently been suggested that states lacnullng financial support from nullnulland states enulleriencing a slow progression at nullperfund sites, among other factors, are more linullly to adopt a nullP nullaley, nullnullnull null nullnull, more than null percent of the states had a nullP in place nulleyer, nullnullnull

11Cityscape Voluntary Cleanup Programs and Redevelopment Potential: Lessons From nullltimorenullnullryland nullP offerings and requirements vary widely across states nullPnull nullnullnullnullyer, nullnullnull nullny state- level nullPs grant liability relief in enullhange for voluntary cleanup, provided that the cleanup is approved by the state agency in the form of a letter of no further action, a certificate of completion, or a covenant not to sue. null nullPs often spell out simplified or variable cleanup standards linnulld to land use to protect residents and wornullrs from enullosure to contaminants. nullme states allow for engineering controls, such as caps, fences, or other physical means of preventing contact with pollution, and offer institutional controls, such as permanent land use restrictions or monitoring of the contamination plume, in lieu of a more permanent cleanup. The nullO nullnullnull surveyed null states with nullPs and found that in many states more than null percent of the cleanups used nonpermanent remedies and selected industrial land use standards. null addition, states frequently offer fast-tracnulloversight of cleanup plans. This approach helps reduce the time it tanulls before remediation is undertanulln and the uncertainty associated with stringency of cleanup standards nulleyer, nullnullnull null many locales, completion of voluntary cleanups at eligible sites can be combined with local, state, and federal brownfield programs that offer subsidies in the form of tanullcredits or low-cost loans. nullate nullP managers believe these programs have revealed previously unnullown contaminated sites to the state agency and have encouraged cleanups when the program requirements are not too burdensome to the applicants. null The Maryland VCP The nullaryland nullnullP was established in nullnullnullnull. nullny property that is or is perceived to be contaminated by controlled hanullrdous substances or oil nullince October nullnullnullis eligible for enrollment and participation, including sites on federal or state registries. nulltes listed on the nullnulls nulltional Priori - ties nullst nullPnull, sites under active enforcement by the nullryland Department of the nullvironment nullDnull, currently operating Rnullnullsites, null and sites contaminated after October null nullnull nullf the applicant is the responsible partynullare not eligible. nullrtain enulleptions may apply to sites under nullnullenforcement. nullligible applicants include property owners, commercial lenders, developers, prospective purchasers, lessees, innocent purchasers, and operators. The application must contain a Phase nulland Phase null environmental site assessment, a null,nullnullapplication fee, and any other information about the property required by the nullryland nullP. The applicant may request an nullRD, which, if granted, implies no need to do remedial wornull or, upon approval of the response plan and of remediation, a nullnull nullth options include certain liability assurances and are recorded in the nullnd Records. nullrolled parcels that are underused, vacant, or located in blighted areas can also obtain tanullcredits from the state. null nullcovenant not to sue is generally regarded as the strongest form of assurance, because, for all practical purposes, it is a contract by which the state commits not to sue over contamination at the site, as long as certain conditions are met. null nullr enullmple, the nullnull nullO study notes that public involvement requirements are generally nulldged inappropriate and, hence, a hurdle to remediation for the type of sites usually targeted by nullPsnullndustrial sites with light contamination. null These sites are regulated by the laws enacted in the Resource nullnservation and Recovery nullt of nullnull.

12 Brownfields Guignet and Alberini The liability relief offered is not absolutenullso-called reopeners are possible if new contamination occurs at the property, cleanup efforts enullacerbate the enullisting contamination, undiscovered contami- nation is found, or an imminent and substantial threat to human health enullsts. null the time of this writing, however, only two reopeners have occurred since the inception of the program nullDnull. null nullnulldoes not provide protection against third-party suits but does provide contribution protection against a party suit. null Other Programs and Factors Potentially Affecting VCP Enrollment Properties will be enrolled in the nullP if the benefits of doing so enulleed the costs nullee the nulldel, nullmple, and Data nullurces sectionnull nullrollment in the nullryland nullP should, therefore, depend on the demand and supply of potentially contaminated sites in nullltimore, which, in turn, may have been shaped by a number of concurrent federal and state programs, local initiatives, and the general conditions in the real estate marnullt. One such federal program is the nullderal nullownfield Tanullnullcentive, which became effective in nullnull. nulltween nullnull and nullnull, real estate developers and investors who nullnullincurred cleanup costs at properties meeting certain geographic requirements or with residents of low socioeconomic sta- tus, null and nullnullused the property to generate income, were able to write off the cleanup costs in the very same tanullyear and obtain a tanullcredit from the nullternal Revenue nullrvice. null nullnull, geographical and community requirements were relanulld and developers were allowed to avail themselves of the nullderal nullownfield Tanullnullcentive tanullcredits at all properties where nullnulland nullnullapply, regardless of location. null the end of nullnull, President nullsh enullended the nullderal nullownfield Tanullnullcentive. Properties in the city of nullaltimore have met the geographical and community eligibility requirements since the onset of the program, but very few census tracts met the requirements in the adnullcent countiesnullaltimore and nullne nullundel nullunties, which can be considered natural substitutes for the city of nullltimore for investment and business purposes. This natural substitution suggests that, between nullnull and nullnull, the federal tanullincentives may have conferred contaminated and underused properties in the city of nullltimore a relative advantage, all else the same, over similar properties in these neighboring counties, but this comparative advantage may have become less pronounced after nullnull. Observers argue that the nullall nullsiness nullability Relief and nullownfield Revitalinulltion nullt of nullnull nullnacted in nullnuary nullnullnullplays an important role in manullng property owners and developers more willing to invest in redevelopment pronullcts at contaminated sites. This law has three main null null other words, the recipient of a nullnullcan be sued by a third party directly, but another responsible party who has been sued by parties other than the state or a federal agency cannot demand reimbursement from the recipient of a nullnull null The geographical and community characteristics requirements were as follows. nullr the tanullincentive to apply, the property must be in nullnullcensus tracts with poverty rates of null percent or morenullnullnullcensus tracts with populations of less than nullnullnull where more than null percent of the tract is nullned for commercial or industrial use and the tracts are adnullcent to one or more census tracts with poverty rates of null percent or morenullnullnullfederally designated nullpowerment nullnes nullnull and nullterprise nullmmunities nullnullnulland nullnullnullnulldesignated brownfields pilot sites announced before nullbruary null nullnull. nullr enullenses incurred from nullgust null nullnull, to December null, nullnull, the eligible property need only meet one of the four listed criteria. nulltes listed, or proposed for listing, on the nullnullare not eligible for the incentive. null addition, only enullenses that are paid or incurred in connection with the abatement or control of a hanullrdous substance qualify for the incentive.

13Cityscape Voluntary Cleanup Programs and Redevelopment Potential: Lessons From nullltimorenullnullryland features. nullrst, it provides a statutory definition of brownfields, effectively broadening the universe of properties that qualify for program assistance to include, among others, properties with petroleum contamination. nullcond, it establishes funding for assessment and cleanup grants and for cleanup revolving loan funds to be awarded to communities and states under the auspices of the nullPnull nullrown- fields Program. nullvironmental assessment studies funded with nullnullgrants have been considered acceptable as part of the nullryland nullP application pacnullges since nullnull, when a memorandum of understanding was signed between nullnulland the nullate of nullryland. Third, the law provides liability relief for contiguous property owners, prospective purchasers, and innocent landowners, and it spells out the conditions for subsequent reopeners, enforcement actions, and information and public participation requirements for nullPs. The act was thus enullected to substantially reduce uncertainty about liability associated with potentially contaminated sites. nullfore both of these programs, which addressed incentives to private developers and property owners, nullnullsought to create conditions favorable to the cleanup and redevelopment of brown - fields and to economic growth in blighted areas through the nullownfield nullsessment Demonstration Pilot Program, which started in nullnull and provided grants to states and local governments for site assessment, identification, characterinulltion, and cleanup plans nullut not for actual cleanupnull The city of nullltimore was selected in the early rounds of grant allotment as a brownfields pilot site. null nullrger redevelopment efforts put forth by the city may also innullence nullP participation, especially in nullltimore. null nullnull, the nullltimore Development nullrporation nullDnull, a quasipublic organinulltion, was formed to provide economic development services for the city nullnullDnull, nullnullnullnullnull. The nullDnull strategically buys and aggregates parcels for industrial and commercial parnull to establish natural connections between city hubs and to implement the citynull nullban Renewal Plans. The nullnullis involved with more than nullnullnull redevelopment pronullectsnull has focused attention on revitalinulling a number of neighbor- hoods, including at least two former industrial areas nullarroll and nullirfieldnull and has established brownfield redevelopment as one of its manullr initiatives. nullnce nullnull, the nullnullhas completed more than null brownfield redevelopment pronullcts. null fact, out of the nullnullnullP sites analynulld in this article, the applicants for nullnullP properties were either nullnullor the city of nullltimore. Records from the nullryland nullate Department of nullsessments null Tanulltion nullDnullnullshow that the city owned an additional nullnullP properties. nullnullis thus directly involved with a small number of nullP properties. nulleing the citynull involvement may also encourage other private developers to participate in the nullP. nullnce the nullnulloffers resources and services to small and up-and-coming businesses, including assistance with preparing business plans, getting credit, and dealing with the tanulland regulatory environment, nullnullmay have indirectly stimulated redevelopment of brownfields. null remains very difficult, however, to establish the enullent of the effects from these innullences. nullnally, as per the nullnull nullryland nullart nullowth nulleas nullt, nullltimore is a designated priority fund - ing area, and, as such, it is targeted for state and county funding for infrastructure and investments null nulle nulleenberg and nullllander nullnullnull for an enullmination of city and county characteristics associated with nullarliernull receipt of nullnullassistance under this program and nulllitare and nulleenberg nullnullnull for evidence of program generosity to economically distressed areas.

14 Brownfields Guignet and Alberini that encourage and support its growth. null is interesting to note that industrial areas, even those located outside of nullltimore, can be designated as priority funding areas. nullthough it is difficult to identify the effects of local initiatives, the econometric models described later in this article account for these concurrent programs and events by interacting time period dummies with nully determinants in nullP participation. These interaction terms may also account for changes in the marnullt. One would enullect the demand for contaminated sites to be stronger during periods of economic enullpansions, when more real estate nullrenulldevelopment occurs. nulln contrast, the supply of brownfields may increase when the economy is slow and industrial plants go out of business or relocate to other areas. nullgregate construction permit figures for the nullltimore metro - politan area from nullnull through nullnull suggest that nullnullresidential and nonresidential construction trends are often at odds in these areas and nullnullnonresidential construction permits spinulld in nullnull, nullnull, and nullnull and declined in other years of the nullnull-through-nullnull period nullnull, nullnullnull Residential construction in the nullltimore metropolitan area was strong for most of the study period, suggesting that this housing marnullt was attractive and profitable. Previous Literature null are aware of only a handful of previous studies that have enullmined the economic incentives at play in nullPs. nullberini nullnullnull focused on the nulllorado nullP, restricting attention to the nullont Range counties of the state. nullch linull the nullryland nullP, the nulllorado nullP has two participation modes. nullplicants may apply for a no further action decision, or submit an actual cleanup plan. nullter cleanup is completed and approved, the state agency issues a no further action letter. nullberini found that nullnullactual cleanups accounted for only one-third of all applications and nullnullpar ticipating properties are almost never previously listed on federal registries of contaminated sites. The program seems to attract properties that are very linullly to be redeveloped soon. nulle also found that property values tend to be lower in truly contaminated properties but rebound almost completely after participation. nulling data from Ohio for nullnull through nullnull, nullmentelli and nullmons nullnullnull found that receiving a letter of no further action from the state does not improve transaction rates for sites with leanullng underground storage tannull, which continue to be bought and sold much less frequently than nontannullcommercial properties. Page and nullrger nullnullnull enullmined properties that entered into the nullPs in Tenulls and nullw nullrnull emphasinullng that these are only a subset of the entire universe of brownfields in those states. They empirically tested four common beliefs about brownfields, namely, that they are nullnullthe result of past industrial land use, nullnullin abundant supply in older industrial regions, nullnullprimarily an urban problem, and nullnullnull created by pollution events that toonull place before the nulluperfund statute nullor similar state legislationnull Tenulls and nullw nullrnulllend themselves to these research questions because of their different histories of industrial development and recent population and employment trends. Page and nullrger nullnullnull distinguished between previous industrial or commercial use and the brownfieldnull use at the time of entry into the program, finding that Tenulls actually has a higher percentage of sites with prior and current industrial uses than nullw nullrnulland that a higher share

Brownfields

15Cityscape Voluntary Cleanup Programs and Redevelopment Potential: Lessons From nullltimorenullnullryland of the nullw nullrnullbrownfields were abandoned or vacant at the time they entered the program nullnullpercent versus nullpercent, respectivelynull nullst of the Tenulls sites are in urban areas and in central cities nullnulland null percent of the total, respectively, versus null and null percent for nullw nullrnull. They concluded that industrial uses account for mostnullut not an overwhelming manullrity nullnullpercentnullof the properties enrolled in the nullw nullrnulland Tenulls nullPs, and that suburban properties are surprisingly more common in the nullw nullrnullprogram. They also found that half of the properties enrolled in the nullw nullrnullnullP were nullacre or less, but more than three-fourths of the properties in the Tenulls nullP were at least nullacre or larger. nullnce nullPs often have enulllicit land revitalinulltion goals, this research is also related to the literature that has enullmined developer interest in reusing brownfield properties. nullated-preference surveys in nullrope nulllberini et al., nullnullnulland in the nullited nullates nullernstedt, nullyer, and nullberini, nullnullnull suggest that developers can be attracted to contaminated sites by offering them subsidies, liability relief, and less stringent regulation. null The appeal of these incentives varies with the developernull prior enullerience with contaminated properties. De nullusa nullnullnull interviewed a small number null nullnullnullof developers, landowners, and city officials about their perceptions of redevelopment opportunities and economic incentives for brownfields, finding that liability is nulldged the most important obstacle to brownfield pronullcts. nullPs that offer protection from liability are linullly to attract primarily landowners and developers, who share similar views, especially on liability attenuation. nulleyer and nullyons nullnullnullnullnullnull suggested that low property prices have played a larger role than subsidies in stimulating entrepreneurial redevelopment activity on contaminated sites and that obtaining subsidies may entail significant transaction costs that offset their value. nullnullath nullnullnull found that contamination risnullthat is, the probability that a previously used site is contaminated, based on the previous usenullffects urban industrial redevelopment in nullicago both directly, and indirectly, via the differential in price before and after redevelopment. Deason, nullernull and nullrroll nullnullnull, De nullusa nullnullnull, and nullgman nullnullnull studied the potential for substitution between infill redevelopment and development of pristine or agricultural landsnullhe so-called greenfields. nullsing their analysis on nullning and land use ordinances for several cities, Deason, nullernull and nullrroll nullnullnull, estimated that an industrial, commercial, and residential development pronullct requires an average of null more than null and more than nulltimes more land, respectively, in greenfield areas than they do at urban brownfield properties. These differences are null nullonomic incentives have been advocated as potentially effective for stimulating cleanup and redevelopment of brownfields nullartsch, nullllaton, and Pepper, nullnullnullDe nullusa, nullnullnullnullwland, nullnull, nullnullnullnullount and nullyer, nullnullnull The effectiveness of economic development incentives remains a controversial matter, even with noncontaminated properties. nullr enullmple, studies suggest a statistically significant, positive relationship between tanullincentives and regional and local growth and property values nullartinull nullnullnullnulleenstone and nullretti, nullnullnullnullwman and nullllivan, nullnullnullnullasylennull, nullnullnull but researchers dispute the magnitude of the impacts of incentives on overall economic gains in targeted areas nullisher and Peters, nullnullnullnullnulland nullrray, nullnullnullPeters and nullsher, nullnullnull Research in this area is afnullcted by the problem that concurrent incentives manull it very difficult to disentangle the effects of each, a problem that can be remedied only by deploying very careful quasienullerimental approaches with control and treatment groups nullartinull nullnullnullnulleenstone and nullretti, nullnullnull null remains difficult, however, to ascertain whether incentives were effective or if business locations andnullr area redevelopment would have tanulln place even in their absence nulleters and nullsher, nullnullnull

16 Brownfields Guignet and Alberini driven by local requirements for setbacnull, height of buildings, parnullng facilities, and percentage of the property that can be covered by buildings. De nullusa nullnullnull reports that, contrary to claims sometimes made by developers, in downtown Toronto, residential pronullcts are actually more profitable at brownfields than in suburban areas nullue to demand and prices of downtown residential propertiesnull nullt everyone agrees that actual or suspected contamination is a deterrent to redevelopment. nullsing her analysis on interviews with real estate agents, nullwland nullnullnull suggested that incompatible land uses, inadequate infrastructure, and obsolete buildings are more important barriers than contamination is to the revitalinulltion of brownfields in nullltimore. nullhoenbaum nullnullnull found no significant difference in assessed land values, vacancy rates, property turnover, and redevelopment rates across brownfield and nonbrownfield properties in an industrial area of nullltimore from nullnull through nullnull. Model, Sample, and Data Sources This section presents the econometric model of nullP participation nullr enrollmentnull nulltimation of this model requires both participating and nonparticipating sites. null also addresses the collection of this sample of sites and the variables that may innullence nullP participation. The Model nullnsider a set of nullandidatenullparcels. This analysis assumes that a candidate parcel is enrolled in the nullP if the net benefits of participation are positive, null and that these benefits depend on characteristics of the property and surrounding neighborhood. nullt VCP* denote the net benefits of parcel inull participation in the program in year t, and assume that

, nullnull where nullis a vector of parcel and neighborhood characteristics, b is a vector of unnullown coef- ficients, and η is an i.i.d. standard normal error term. null cannot observe the net benefits of participation, but we assume that properties are signed up nullhat is, nullP nullnull when the net benefits of participation are positive and obtain a probit equationnull

, nullnull where Fnull·nullis the standard normal cdf. nullnce a site can participate in the program only once, we specify the log linulllihood function asnull

, nullnull null nullr an owner, the net benefits would be the appreciation in the value of the property minus the cost of remediation, the participation fee, and any other associated costs. nullr a developer, the net benefits would be the profits from the pronullct, net of land acquisition costs, transformation costs, remediation costs, nullP fee, and so forth. The avoided liability and litigation costs would presumably be captured into the appreciation and proceeds from the pronullct, respectively.

17Cityscape Voluntary Cleanup Programs and Redevelopment Potential: Lessons From nullltimorenullnullryland where i denotes the site, t denotes the year of the program, and t ℑ is the set nullt risnull at time t nullhat is, the set of candidate sites that have not participated as of year tnull null nulluation nullis, effectively, a discrete-time duration model and can be easily amended to incorporate site-specific random effects, which capture unobserved parcel characteristics that may innullence participation nullee nulleene, nullnullnull null This model is a reduced-form model. �14 null do not have reliable information about whether a particular parcel is or was on the marnullt at any given time, and, linullwise, have no comprehensive databases documenting nullenullevelopment permits. nullr these reasons, we are forced to nullnullomit potential or actual transactions or other pronullcts from nulluation nulland its log linulllihood counterpart nulluation null nullnullrestrict attention to parcel and neighborhood characteristics as the possible determinants of participation in the nullP, and nullnullgather only partial information about sales and pronulles for redevelopment, which we describe, but do not enulllicitly model, in the nullles and Redevelopment section. The Sample nullgoal of this study is to estimate a probit equation that predicts the probability of enrollment in the nullP as a function of site and neighborhood characteristics. nulltimating this probit equation requires a sample of both participating nullr enrollednullsites and eligible but nonparticipating sites. null obtained data about the nullP applications and sites from the nullnull null of December null, nullnull, more than nullnullapplications had been submitted to the nullryland nullP. null this article, attention is restricted to nullP sites in the city of nullltimore since the onset of the program up to December null, nullnull. Participation nullr enrollmentnullis defined as a direct application for either an nullRD or an actual cleanup proposal, so we lump together applications for a nullRD and a nullnull null some cases, multiple applications are submitted for the same sitenullin a few cases, a single site comprises multiple parcels. nullen multiple parties apply for the same property, enroll - ment is defined as occurring the time of the earliest submittal for that property. nullsing these criteria, we obtained nullnullnull enrolled sites in nullaltimore. Of these nullnullnull sites, nullnull nullnullnull percentnull were signed up with the goal of obtaining a nullnull which requires submitting and enullcuting a remedial plannullnull nullnullpercentnullapplied directly for an nullRDnulland no information was available for the two remaining sites. null nullr enullmple, if a site is enrolled in the program in nullnull, it is dropped from the sample for all subsequent years. null nullrequired assumption in the random effects probit model is that the unobserved parcel characteristics be uncorrelated with the regressors x. null is not possible to estimate a finulld effects model, because estimation would have to rely on parcels dropping in and out of the participation status, a situation that is not possible here. null nulle do not include among the regressors events such as actual or anticipated sales nullhat is, the property is on the marnulltnull other transactions, or redevelopment pronullct status, because these events are clearly endogenous with participation. The only econometrically acceptable way to include such events in the right-hand side of equation nullnullis to instrument for them. nullfortunately, in earlier analyses of commercial and industrial property prices in nullltimore nullongo and nullberini, nullnullnull we found that enullgenous parcel or neighborhood characteristics have very little predictive power for sales events. null addition, instrumental-variable estimation procedures in this contenull suffer from an identification problem because we are unable to determine characteristics of properties or legislative events that are determinants of sales but not of participation in the program. This identification problem prevents us from imposing plausible enulllusion restrictions.

18 Brownfields Guignet and Alberini nullter compiling the full list of enrolled properties, we then enullmined how to define the eligible but nonenrolled properties. nullnce any property contaminated or perceived to be contaminated by controlled hanullrdous substances or oil is eligible for participation, and nullonan and nulldich nullnullnull show that properties used for most industrial and commercial purposes have a moderate to high probability of contamination, it is reasonable to assume that any parcel designated for industrial or commercial use in nullltimore is a credible candidate for inclusion in the sample nullee Page and nullrger, nullnullnullnullgman, nullnullnull The first step in constructing our sample was to draw a random sample of nullnullnullnullindustrial and commercial parcels out of the universe of all such sites in nullltimore. To manull these randomly selected parcels proper counterparts for the enrolled properties, we formed predictions for the linullelihood of contamination nullPROnullnullOnullnull based on current land use at the site and on the estimated probabilities reported by nullonan and nulldich nullnullnull and included these probabilities as a control in our probit regressions. nulle also included a companion missing-value dummy when the records from nullnull did not contain specific land use information.null nullor each of the nullnull years of the study period nullnullnullnullnull through nullnullnullnullnull, the sample we used for the probit model consisted of the enrolled parcels that had not signed up yet, plus all of the nullnullabove- mentioned nonenrolled sites. This resulted in a total of nullnullproperties and nullnullnullobservations. Other Independent Variables Parcel and neighborhood characteristics act as a pronull for the net profits of participation. These characteristics include the sinull of the parcel nullnullnull, a dummy for the presence of a building or improvement nullnullnullnullnull, an interaction between the presence of a building and the year of construction of the oldest building on the premises nullnullnullnullnullRnullnullTnull and the capital intensity nullnullnullnullnullof the parcel, which we define as the total square footage of the building divided by the area of the property. These variables act as a pronull for remediation and demolition costs. nullavily built sites may differ from others in terms of demolition and cleanup costs because of tonullc construction materials nullor enullmple, asbestos, heavy metalsnull To avoid losing observations to the analysis because of missing values, we created companion dummy variables to denote missing values, recoded the original missing values to nullro, and included both the regressors of interest and the companion missing value dummies in the right-hand side of the probit regressions. nullparcelnull value should also be innullenced by its location and use. Therefore the following variables are also included as regressors in the probit modelnull distance to the central business district nullnullnullDDnullnullTnull and to manullr roads nullnullDDnullTnull null whether the site is for industrial use nullnullnullTRnullnull, surround - ing land use, and distance to the nearest residential nullne nullnullnullnullnullTnull null included the latter variable because nullwland nullnullnull nullnullnulldiscussed how potential buyers in nullltimore are reluctant to purchase industrial property near residential areas because of incompatible activities and greater political barriers. Regarding land use, we used nullnull land use data from the nullryland Department null Data from the nullryland nullate nullghway nullministration.

19Cityscape Voluntary Cleanup Programs and Redevelopment Potential: Lessons From nullltimorenullnullryland of Planning to form nullnull and nullnullnullmeter buffers around each property and computed the percentage of the area of the buffer in various types of land use, such as low-, medium-, and high-density residential, industrial, and commercial. nullparcelnull eligibility for state nullterprise nullne incentives nullsually in the form of tanullcredits if a business is established on the premisesnulland for federal nullpowerment nullne incentives nullummies nullTnullnulland nullPnullnull may also innullence its participation in the nullP. These incentives are associated with setting up a business or offering employees certain educational opportunities at specific locations, and are unrelated to contamination and cleanup. They may, nevertheless, increase the attractiveness of a location to a developer and to prospective buyers. nullether nullP sites tend to be clustered is of interest because it renullcts either some effect on surrounding properties nullhat is, enrolled sites induce further enrollmentnullor simply the spatial concentration of the enullsting supply of contaminated sites. null controlled for this tendency with the number of sites previously enrolled in the nullP within a nullnullnullmeter buffer of each property nullnullnullnullPnull. The last set of independent variables included median house values nullDnullnullnull and socioeconomic characteristics of the residents in the neighborhood, measured at the nullnull nullnsus tract level. The Data This section further describes the types of properties that are enrolled in the nullP. nullivariate statistical comparisons are made between participating nullr enrollednullsites and nonparticipating sites. The section concludes with a discussion of the changing nature of the nullP and the types of properties that tend to be enrolled and, in turn, how these changes are accounted for in the econometric model. Description of Properties nullr null of the nullnullsites enrolled in the nullP, we identified the corresponding parcelnullnullin the nullnull database, and appended information about the parcel, its enullct location nullatitude and longitudenull structures, assessed value, and recent sales nullif anynull. The nullnullnull participating sites were actually composed of nullnullproperties, because in null cases one nullP application consists of multiple adnullcent parcels. null

The same type of parcel information is also available for the nullnullnonenrolled properties. nullhibit nulldisplays descriptive statistics of the sample. The average parcel in the sample covers about null acres and is located a little more than null miles from the nullnullD. nullearly all parcels nullnullnull percentnull have a building or other improvement, which accounts on average for null percent of the total property area nullariable nullPnullnullnull nullcause of the criteria used for constructing the sample, industrial properties account for more than null percent of all parcels. nullhibit nullalso shows that we were able to impute the prior probability of contamination for nullnull properties. Regarding additional neighborhood characteristics, half of the parcels in the sample are null nullecifically, out of the nullnullnullP sites, null sites consist of a single parcel, null sites of nullparcels, nullsites of nullparcels, and single sites each with null null null null null and null parcels.

20 Brownfields Guignet and Alberini located in a state nullterprise nullne and null percent are in a federal nullpowerment nullne. On average, industrial uses account for about null percent of the land use within a nullnullmeter radius around the properties and nearly null percent within nullnullnullmeters. The median housing value in the surround - ing census tract is on average about nullnullnullnull Comparison Across VCP and Nonparticipating Sites nullps of the nullP sites suggest that participating properties are more linullly to be in areas where economic inducements, such as those associated with state nullterprise nullnes and federal nullpower - ment nullnes, are offered to firms nullee enullibit nullnullin appendinullnull. nullthough they tend to be roughly the same distance from the central business district, participating sites tend to be farther from Exhibit 1 Variable Description N Valid Obs Mean Std Deviation Descriptive Statistics SIZE Area of parcel in acres 247 5.390 12.020 CBDDIST Distance to CBD nullnner nullrnullrnullin nullters 24null 3nullnull.99 2null21.17 BnullnullInull Bnulllnullnnullor otnullr inullrovenullnt present nullnullnullnull 247 0.794 0.40null nullBnullnullT nullear tnull olnullst nullilnullnnullnulls nullilt 52 1null43.31 30.944 CAnullTAnull Capital intensitnull 247 0.7null 1.22null nullnullDIST Distance to nearest nullnullr roanullin nullters 24null 4null.375 4null.null2 nullnullCnull nullenullctenullpronullnulllitnullof contanullnation 175 0.475 0.304 nullnullCnullnullSSInull nullonullnulllitnullof contanullnation nullnullnullenull nullnullnullnull 247 0.291 0.455 EnullZnull nullcatenullin Enterprise Zone nullnullnullnull 24null 0.51null 0.501 EnullZnull nullcatenullin Enullonullrnullnt Zone nullnullnullnull 24null 0.23null 0.425 nullEAnullnullnull nullnuller of properties previonulllnullenrollenullin nullnullnulltnulln 1null00 nullnullffer nullll nullarsnull 247 2.530 4.413 InullnullTnullAnull Zonenullinnullstrial nullnullnullnull 247 0.417 0.494 nullTInull nullercent of lannull in innullnullstrial nullse nullitnullin 1null500 null nullffer 24null 0.19null 0.212 nullTInull500null nullrcent of lannullin innullstrial nulle nulltnulln 500 null nullffer 24null 0.257 0.310 nullSZnullDIST Distance to nearest resinullntial nullne in nullters 24null 155.439 202.null7 nullnullAnullS nullnullan nullnullinnullvalnull in censnull tract null000 nullllarsnull 245 73nullnull 3null745 nullTnullnullnullTnull nullrcent of censnull tract popnullation livinnull nulllonullpovertnullline 24null 0.237 0.125 nullTnullnullnull nullrcent of resinullnts in censnull tract nullo onull nullnull 24null 0.4null 0.22null nullTBnullCnull nullrcent of African Anullricans in censnull tract 24null 0.3null 0.335 nullTnullSnullAnullCS nullrcent of nullspanics in censnull tract 24null 0.024 0.027 nullTCnullnullnull nullrcent of people nulltnullcollenull nullnullee in censnull tract 24null 0.175 0.150 Cnull nullcentral business districtnullnulls nullobservationsnullVCP nullvoluntary cleanup programnull nullte: Full sample null nullnullnullnull

21Cityscape Voluntary Cleanup Programs and Redevelopment Potential: Lessons From nullltimorenullnullryland manullr roads than nonparticipating eligible properties nullee enullibit nullnullin appendinullnull. Participating sites are more linullly to be surrounded by industrial properties and tend to be located farther away from residential nullnes nullee enullibit nullnullin appendinullnull. These spatial patterns confirm that the probit model should control for industrial versus another use of the parcel, for the prevalent uses in the neighborhood, and for distance to the nearest residential area, as mentioned in nulldel, nullmple, and Data nullurces section. null compared the means of all variables across nonparticipating and participating sites in the sample in enullibit null This table shows that participating properties tend to be considerably larger than nonparticipating eligible properties and tend to be somewhat less linullly to contain buildings or other improvements. null null enullected, enrolled sites have a higher predicted probability of contamination. Exhibit 2 Variable VCP = 0 VCP = 1 T Statistic N Valid Obs Mean Standard Deviation N Valid Obs Mean Standard Deviation Conullarison of nullans of nullarianulles for nullnparticipatinnullnullCnullnull0nullannullnullrticipatinnull nullCnullnull1nullnullrcels SIZE 131 1.1null 5.940 11null 10.134 15.04null nullnull003null CBDDIST 131 3null34.null0 2null79.010 115 3nullnull.470 1null95.5null 0.511 BnullnullInull 131 0.901 0.300 11null 0.null2 0.471 4.47nullnull nullBnullnullT 5 1null17.000 2nullnull3 47 1null4null110 30.2null null2.277null CAnullTAnull 131 1.141 1.305 11null 0.347 0.9null 5.435null nullnullDIST 131 322.770 421.112 115 null9.959 49null055 null5.197null nullnullCnull 100 0.27null 0.1null 75 0.73null 0.225 null14.419null nullnullCnullnullSSInull 131 0.237 0.427 11null 0.353 0.4null null2.010null EnullZnull 131 0.427 0.497 115 0.null7 0.4null null3.020null EnullZnull 131 0.1null 0.375 115 0.313 0.4null null2.null7null nullEAnullnullnull 131 2.41null 4.5null 11null 2.722 4.132 null0.553 InullnullTnullAnull 131 0.145 0.353 11null 0.724 0.449 null11.1nullnull nullTInull 131 0.0null 0.130 115 0.327 0.211 null10.null4null nullTInull500null 131 0.0null 0.1null 115 0.454 0.305 null11.277null nullSZnullDIST 131 103.9null 1null.1null 115 214.051 22null290 null4.314null nullnullAnullS 130 75null97.null 45null7null93 115 70null72.17 24null94.09 0.951 nullTnullnullnullTnull 131 0.2null 0.137 115 0.211 0.104 3.1nullnull nullTnullnullnull 131 0.409 0.235 115 0.5null 0.190 null5.nullnullnull nullTBnullCnull 131 0.474 0.339 115 0.239 0.2null 5.903null nullTnullSnullAnullCS 131 0.023 0.02null 115 0.025 0.027 null0.null5 nullTCnullnullnull 131 0.177 0.144 115 0.172 0.15null 0.250 nulls nullobservationsnullVCP nullvoluntary cleanup programnull nullnullsigninullant at tnull nullpercent levelnullnull nullsigninullant at tnull nullpercent levelnull nullte: Statistical comparison onulltnull means is done using tnullests onulltnull null nullpotnullsis tnullt tnull dinullerence in tnull means is nullronull null nullmetimes multiple parcels were combined into the same application to the nullP nullnd into the same redevelopment pronullctnull The average sinull of a nullP site is nullnull acres for the sites consisting of nullparcel, null.null acres for the sites consisting of nullparcels, nullnull acres for the sites consisting of nullparcels, nullnullacres for the one site consisting of nullparcels, nullnull acres for the one site consisting of nullparcels, null.null acres for the one site with nullparcels, nullnull acres for the one site with nullparcels, nullacres for the one site with nullparcels, and nullnull acres for the one site with null parcels. This suggests that in some cases it was necessary for developers to combine several very small parcels together to get a site of acceptable sinull for redevelopment.

22 Brownfields Guignet and Alberini nullrolled properties tend to be less capital intensive. nullildings at enrolled sites are linullly slated for demolition during redevelopment, thus a less capital-intensive site may be more attractive because of lower demolition costs. nullwland nullnullnull interviewed nullltimore real estate agents and industrial property owners and found that the enullense of removing obsolete structures is one barrier to redevelopment. There are no systematic differences across the two groups of properties for housing values and share of residents with a college degree. The proportion of residents who own their homesnulls opposed to renting themnulls higher near enrolled properties than near nonparticipating properties. The proportion of residents living in poverty tends to be lower surrounding enrolled properties. Regarding race and ethnicity of the neighborhood, enrolled properties tend to be located in neighborhoods with fewer nullrican nullericans, but no systematic difference enullsts regarding the proportion of people of nullspanic heritage. Features of Participating Sites null checnulld for possible overlapping between nullP participation status and the other programs described in the nullcnullround section nullther Programs and nullctors Potentially nullfecting nullP Participationnullbut found that only one nullP property received a grant from the nullnullunder the nullownfields Program established by the nullall nullsiness nullability Relief and nullownfields Revitalinull - tion nullt of nullnull. nullne of the nonparticipating properties received funding under this program. Only five properties that received assessment grants under the earlier nullnullnullownfield nullsessment Demonstration Pilot Program subsequently entered the nullP program. nullong the nullP properties, we found no obvious differences between those that applied for an nullRD and those for which a cleanup plan was submitted, enullept that the predicted probability of contamination is greater for the latter. nullong enrolled properties, those in industrial use tend to be larger than commercial properties. nullhibit nulldisplays the distribution of land use at nullltimore nullty participating sites by the year of enrollment, showing that nullnullparticipation has picnulld up steam since the inception of the program, Exhibit 3 nullnnullnulle at nullnullSites null nullear of Enrollnullnt 0 5 10 15 20 25 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Number of VCP Sites Year of Enrollment Residential Commercial Industrial VCP nullvoluntary cleanup programnull

23Cityscape Voluntary Cleanup Programs and Redevelopment Potential: Lessons From nullltimorenullnullryland with the largest enrollment nullnullsitesnullin nullnull, and nullnullindustrial properties manull up most of the enlisted sites. nullmmercial properties started being enrolled in the program starting in nullnull, but they still account for a small fraction of all sites. Residential properties are even less common. Perusal of enullibit nullsuggests that, all else the same, participation rates and hence the linulllihood of participation have changed over time. This change may have occurred because of changes in the eligibility criteria, the establishment of concurrent programs that target similar properties nullee the nullcnullround section nullther Programs and nullctors Potentially nullfecting nullP Participationnull, changes in the economic climate of the city, and changes in the real estate marnullt. To account for these changes, we grouped the null years from the inception of the program to nullnull into four discrete periodsnullnullnull through nullnull, nullnull, nullnull through nullnull, and nullnull through nullnull. null then interacted nully regressors with dummies for those periods. The first period nullnullnullthrough nullnullnullcaptures the early years of the nullP, the most restrictive version of the federal nullownfields Tanullnullcentive and one city administration. null The second period, consists of a single year nullnullnull to allow for the disruption to business associated with the events of nulleptember nullnull, nullnullnullnull, and because of subsequent policies and programs affecting contaminated sites that had not yet tanulln effect. nullth the third period nullnullnulland nullnullnull we hoped to capture the incentives associated with the nullall nullsiness nullability Relief and nullownfields Revitalinulltion nullt, which implied changes in funding for assessment and cleanup of contaminated sites and substantial limitation of nullperfund liability for prospective purchasers and owners. null nullnull, nullltimore voters passed the nullonomic Development nullan nullnd nullsue, which included null million for brownfield redevelopment nullnullDnull, nullnullnullnullnull. null change in political climate also occurred, starting with the beginning of nullnullnullnull, when Robert nullhrlich, a Republican, toonull over as nullovernor of nullaryland from Parris nulllen- dening, a Democrat. null is possible that this shift in state government may have changed priorities for state agencies. nullnally, in nullnull, the nullP was changed so that it began to admit oil pollution sites. These sites are linullly to differ in sinull and use relative to sites contaminated by other hanullrdous wastes. nullr enullmple, gas stations are comparatively small and are considered a commercial use. null nullsing our analysis on these considerations, we entered in the model the variable nullnull, a linullly determinant of participationnullnullnullnull the interaction term between nullnull and the dummy denoting the second period of the study nullnullnullnullnullnullnull the interaction term between nullnull and the third period of the study nullnullnullthrough nullnullnull and nullnullnull the interaction term between nullnull and the fourth period nullnullnullthrough nullnullnull This inclusion allows for the effect of property sinull on the probability of participation to vary over time. null null December nullnull, a change occurred in nullltimorenulls government when nullyor nullrtin Onullalley toonullover from nullrt nullhmonull, who had been mayor since nullnull. This change in city government may have resulted in changes of several aspects of city law, tanulltion, redevelopment efforts, and so forth. null seems reasonable, however, to include the first year of his administration within our first period because, during his first term as a mayor, Onullalley emphasinulld safety and crime reductions. This emphasis and any other regime changes were unlinullly to have had an immediate effect on redevelopment and investment opportunities. null The program was also amended to accept application pacnullges that included Phase nulland Phase null environmental assessment studies funded through grants from the nullnullnullownfields Program. null discussed at the beginning of this section, however, only one property appears to have availed itself of this opportunity.

24 Brownfields Guignet and Alberini Estimation Results nullhibit nullreports the results for the random effects probit model of participation. null null present three specifications. nullecification nullnullis the base specification, which includes sinull of the property and interactions between sinull and time period, in addition to the regressors listed in the nulldel, nullmple, and Data nullurces section nullther nulldependent nullriablesnull nullecifications nullnulland nullnull include census tract characteristics nulls of nullnullnullto capture socioeconomic differences in neighbor - hood character and blighted areas. nullhibit nullhad suggested that the nullP tends to attract larger sites. This tendency would appear to be a recent phenomenon, because the results of all the probit specifications in enullibit nullsuggest that, in the early years, the program actually attracted smaller properties, but that trend was subsequently reversed, as implied by the signs and significance levels of the coefficients on nullnull, nullnullnull nullnullnull and nullnullnull Exhibit null

Variable nullnull nullnull nullnull Coenullcient T Stat Coenullcient T Stat Coenullcient T Stat nullsnullts of nullnnullnullEffects nullonullt nullnullession of nullnullnullrticipation InullEnullEnull null1.null0null null4.93null null1.2733 null2.nullnull null1.9null0 null4.nullnull SIZE null0.0124 null1.nullnull null0.012null null1.nullnull null0.0127 null1.nullnull SIZE2 null0.0020 null0.13 null0.0022 null0.14 null0.0021 null0.13 SIZE3 0.0090 0.9null 0.00null 0.94 0.00null 0.95 SIZE4 0.0301 3.72null 0.0304 3.73null 0.0312 3.7nullnull CBDDIST 0.0000 0.02 null0.0000 null0.35 null0.0000 null0.11 BnullnullInull null0.2201 null1.34 null0.2271 null1.3null null0.2319 null1.4 BnullnullInullnullBnullnullT null0.0001 null0.null null0.0001 null0.null null0.0001 null0.77 nullBnullnullTnullSSInull null0.null47 null3.1nullnull null0.null19 null3.35null null0.null47 null3.34null CAnullTAnull null0.1null1 null2.nullnull null0.194null null2.72null null0.1nullnull null2.nullnull nullnullDIST null0.0001 null1.42 null0.0001 null0.92 null0.0001 null0.9null nullnullCnull 0.4593 1.73null 0.441null 1.nullnull 0.41null 1.55 nullnullCnullnullSSInull 0.1414 0.73 0.142null 0.73 0.129null 0.null EnullZnull null0.0143 null0.09 null0.0nullnull null0.37 null0.0097 null0.0null EnullZnull 0.0null5 0.4 0.0110 0.0null 0.05null 0.35 nullEAnullnullnull 0.0592 5.13null 0.0null0 5.22null 0.0null1 5.07null InullnullTnullAnull 0.453null 3.27null 0.4273 3.04null 0.4320 3.07null nullTInull 0.5401 1.3null 0.5251 1.32 0.1941 0.39 nullSZnullDIST 0.0007 2.37null 0.0007 2.3nullnull 0.0007 2.42null nullnullAnullS null0.0000 null1.29 nullTCnullnullnull 0.2null3 0.44 nullTnullnullnullTnull 1.3077 1.45 nullTnullnullnull 0.47null 0.null nullTBnullCnull null0.2992 null0.93 nullnullnullnulllinullonull null351.null90null null350.71099 null350.7null77 VCP nullvoluntary cleanup programnull nullnullsigninullant at tnull nullnullercent levelnullnullnullsigninullant at tnull nullpercent levelnullnull nullsigninullant at tnull nullpercent levelnull nullte: nullpendent variable: participation in year nullonulltnull programnull null The correlation between any two error terms within the same site is generally small nullbout nullnullnulland significant only at the null-percent level. nullvertheless, random effects were incorporated to obtain the correct standard errors.

25Cityscape Voluntary Cleanup Programs and Redevelopment Potential: Lessons From nullltimorenullnullryland null is possible that, in the later years, developers became familiar with the wornullngs of the program and saw opportunities for economies of scale in assessment, development, and cleanupnullmoreover, larger sites cater to large pronullcts and can be subdivided. This result may also have been a con - sequence of the nullall nullsiness nullability Relief and nullownfields Revitalinulltion nullt. nullfore this law, holding the probability of contamination per acre the same, a developer or owner would be more linullly to face enullosure to liability nullr be more heavily enullosednullwith larger properties. nullth the law in effect, which limits or eliminates liability for certain parties under specific conditions, larger sites become comparatively more attractive. This finding also suggests that the nullP did not prove to be particularly attractive to nulllosednullgas stations, which are generally small properties, after the nullP eligibility rules were amended in nullnull to include petroleum-contaminated sites. nullnversations with nullnullstaff suggested that very few leanullng underground storage tannullnullnullTnullsites were signed up with the nullP, probably because the nullP has relatively more stringent environmental assessment and cleanup requirements. nulls station owners and operators would have found the nullryland nullnull program more attractive because, until the middle of nullnull, this program would have reimbursed them for the cost of remediation. null The probit model confirms that participation is also more linullly to occur among sites without buildings nullan effect that is not significant at the conventional levels, howevernull and among properties with lower capital intensity, suggesting a preference for sites with lower demolition and remediation costs. Distance to the central business district or to manullr roads does not seem to be an important driver of participation. This finding should be interpreted with caution, because it may be due to collinearity and to the use of imperfect pronulles for site access. Distance to the central business district is correlated with several other spatial characteristics, and distance to manullr roads may not fully capture how easy or difficult it is to access a particular property in an urban setting. null enullected, participation is positively and significantly associated with the prior probability of contaminationnulln other words, the program is attracting sites that one would truly enullect to be contaminated. That does not mean, of course, that the property is necessarily cleaned up, and indeed about two-thirds of the nullP applications, as discussed in the nulldel, nullmple, and Data nullurces section, requested an nullRD. There is no evidence of an independent effect of nullterprise and nullpowerment nullne designations. nullwever, these designations are correlated with land use, location, and sinull of the site. Once again, it is thus difficult to say whether this result is genuine or an artifact of collinearity. nullst linullly, nullP propertiesnullrownfields, for all practical purposesnullre typically in abundant supply in blighted areas that are also addressed by state and federal economic development programs. The results suggest that participation is more linullly among sites nullned for industrial use and grows with distance from residential areas and with the percentage of the surrounding land designated null The fact that the nullP attracted larger sites in more recent years is in sharp contrast to general nonresidential development and building trends. Data from the nullltimore nulltropolitan nulluncil indicate that in nullltimore nullty the average sinull of such development pronullcts followed an inverted-nulltrend over the study period and had reached its lowest levels nullbout null,nullnull sq. ft.nullby nullnull through nullnull. The square footage of the average pronullct has been declining steadily over the study period in the entire nullltimore metropolitan area nullbout nullnullnullsq. ft. in nullnull through nullnullnull

26 Brownfields Guignet and Alberini as industrial nullhe latter is statistically insignificant at all the conventional levelsnull null The coefficient on nullnullRnullPnullsuggests that the number of nearby properties previously enrolled in the nullP is positively associated with the probability of enrollment. null is possible that successful participation encourages enrollment of other nearby sites. nullternatively, this finding may also be due to the spatial clustering of brownfields or to other unobserved amenities. nullecification nullnulladds the median housing value and the education level of the residents in the census tract around each property, although neither variable has an independent effect on the linulllihood of enrollment. These variables were intended to act as a pronull for up-and-coming versus blighted neighborhoods, but their effect nullf anynullis probably already captured in other site and neighborhood characteristics. nullecification nullnullincludes other characteristics of the residents, namely the percentage of people who live in poverty, own their homes, and are nullrican nullerican. null both nullnulland nullnull linulllihood ratio tests indicate that the newly added census-tract variables are nullintly insignificant. To get a sense of the magnitude of the probit coefficients, using specification nullnullwe computed the annual probability of participation nullr enrollmentnullfor a hypothetical industrial-use parcel of average sinull, distance to the nullD, capital intensity, and in an nullterprise nullne. null assumed that this site had the average prior probability of contamination, was surrounded by the average enullent of industrial land, and was at the average distance from residential areas. nullr a parcel with these characteristics during the first period of the program nullnullnullthrough nullnullnull the probability of enrollment in any given year was nullnull percent. nullcreasing the sinull of this average parcel by a standard deviation nullhat is, by null.null acres above the original nullnull acresnullslightly decreased the probability of enrollment from nullnull to nullnull percent. The story changes in more recent years nullnullnullthrough nullnullnull nullparcel that was average in all respects and was nullned for industrial use would have had a greater annual probability of participa - tion nullnullnull percentnull which increases to null.null percent if the parcelnull sinull is increased by a standard deviation above the average. null this larger parcel during the most recent years of the program was located an additional nullnull miles from the nearest residential nullne nullbout a two standard-deviation increasenull then the probability of participation would increase from null.null to null.null percent. Sales and Redevelopment nullnatural issue to address is whether properties that signed up for the nullP did so because they had nullst been or were about to be purchased or sold. null did not include sales events in the right-hand side of the probit equation because we were unable to find good instruments for them and for related econometric difficulties, but we checnulld whether participating sites were bought or sold around the time of enrollment in the program. Of the nullnullproperties in the sample, nullnullhad no records of sales in recent years nullfter nullnullnull These nullnullparcels with no recent sales were evenly split between nullP participants and nonparticipants null The probit regressions reported in enullibit nullused the nullnullnullmeter buffer when computing the percentage of surrounding land dedicated to industrial uses, but we obtained the same result when we used smaller buffer sinulls nullor enullmple, nullnull metersnullto capture closer neighbors of each property in the sample.

27Cityscape Voluntary Cleanup Programs and Redevelopment Potential: Lessons From nullltimorenullnullryland nullnulland null parcels, respectivelynull Of these nullnullparcels, we were unable to identify null in the nullnull records. The remaining null were mostly commercial and industrial parcels nullnulland null parcels, respectivelynulland were properly documented in the nullryland tanulltion data. Of these null well- identified parcels, null nullnullnull percentnullwere nullP participants. The remaining properties had been bought and sold during the nullnull-through-nullnull period for a total of nullnullsales. nullen we restricted our attention to the nullnullsales that occurred during or after nullnull nullhat is, since the beginning of the nullPnull we found that null of these sales were among null non-nullnullP properties and the remaining nullnull sales were of nullnull nullnullP properties. nulletween nullnullnullnull and nullnullnullnull, about null percent of the sold non-nullP sites were sold once, null percent were sold twice, nullpercent were sold three times, and none were sold four times. null contrast, null percent of the sold nullP sites were sold once, nullnull.nullnull percent were sold twice, null.nullnull percent were sold three times, and null.nullnull percent were sold four times. Of the null sales of nullP sites, null occurred at properties that received application approval as of December null, nullnull. Of these sales, null occurred before the nullP application was approved, and null occurred after approval. Of these sales, null toonullplace within nullmonths of the approval of the nullP application, but the lionnull share nullnullsalesnulltoonullplace nullmonths after application approval or later. Of these null sales, null were properties that had a proposed cleanup plan. Tanulln together, these facts suggest that the properties enrolled in the nullP come from a pool of properties that are sold or bought no less than the nonparticipating sites. The nenull logical issue to follow this discussion of transaction activity of nullP properties is whether parcels enrolled in the nullryland nullP are linullly to be redeveloped soon. Possibly, but we believe that redevelopment is unlinullly to bring significant land use changes. Of the null properties that had received an nullRD letter or a nullnullwithin the study period, residential use was enulllicitly prohibited at null sites nullnullnull percentnull null null sites nullnullnull percentnull only limited residential development was allowed. These restrictions are meant to protect the public from possible enullosures to contami - nants, while at the same time trying to encourage some form of reuse. null obtained the specific land use before and after nullP completion for null of the null properties that completed the program. Only nullproperties changed uses after completionnullmost were converted from parnullng lots null nullnull, warehouses null nullnull, and manufacturing facilities null nullnull to offices. Only nullproperties were converted to residential use nullhe first was initially a warehouse and the other a manufacturing facilitynull Tanulln together with the linulllihood that enrollment is greater at industrial properties in industrial areas and increases with distance from residential neighborhoods, the above evidence suggests that the vast manullrity of redevelopment would either nullep the enullsting land use or convert the parcel to nonresidential uses. nullfill redevelopment is touted as helping to meet smart growth goals and as avoiding conversion of open space, so it is natural to asnullhow well the nullP is doing in this respect. null of December nullnull, a total of nullnullnullacres were enrolled in the nullP in the city of nullltimore alone. Deason, nullernull and nullrroll nullnullnull considered eight brownfield properties in the city of nullltimore and assumed redevelopment as office buildings, commercial facilities, or homes nullee enullibit nullnullin

28 Brownfields Guignet and Alberini appendinullnull. They calculated the land area that would be necessary if such redevelopment pronullcts toonullplace in surrounding suburban areas nullaltimore, nullnt, and nulledericnullnulluntiesnull They consistently found that, based on local nullning, such redevelopment pronullcts would require larger land areas in these latter three counties than in the city of nullltimore. nullsuming that all of the participating nullnullnullacres are redeveloped and remain in their use at the time of enrollment, we used the land area nullatiosnullderived by Deason, nullernull and nullrroll nullnullnull to estimate the amount of open space that the nullP may have deterred from being developed nullee enullibit nullnullin appendinullnull. null considered greenfields in nullltimore nullunty as linullly substitutes for infill development because this rural or suburban area surrounds the city of nullltimore and is part of the overall metropolitan area. nullr purposes of this illustrative calculation, we assumed that nullP properties can accommodate similar pronullcts as any other properties. nullsing our analysis on these assumptions, if the urban redevelopment pronullcts on nullP properties were built on greenfields instead of brownfields, they would require as many as nullnullnullacres in suburban nullltimore nullunty under generous assumptions about the conversion nullationullbetween city and suburban pronullcts and nullnullnullacres under more conservative assumptions. This illustration suggests that if nullP properties are indeed all redeveloped, if redevelopment can be attributed solely to the nullP, and if greenfields and brownfields are truly substitutable, then the nullP is potentially an effective tool to deter open space conversion. Conclusions To understand the promise and potential of voluntary cleanup programs nullnullsnullin promoting remediation and reuse of brownfields, this study focused on enrollment and participation in the nullryland nullP, which began in nullnull. To ensure a homogeneous legal and tanullenvironment, we restricted attention to the nullnullnull sites in the city of nullaltimore that had participated as of the end of nullnullnullnull. Participation in the nullryland nullP has led to the identification and environmental assessment of nullnullnullacres of contaminated land in the city of nullltimore alone. The vast manullrity of applications nullnullpercentnullrequested a null nullrther Requirements Determination nullnullDnullon the part of the state agency, suggesting that actual cleanup is not undertanulln at most of the sites. null believe that participation in the program is often motivated by developersnullor business ownersnulldesire to protect themselves from future environmental liability. nullclean bill of health may, of course, also increase the value of property nullnd of any redevelopment pronullct on sitenull null that sense, the evidence from nullltimore confirms the findings for the nulllorado nullP reported in nullberini nullnullnull. One manullr issue to tacnulle when studying the determinants of voluntary cleanup is the identifica - tion of nullounterfactuals,nullnamely properties that are potentially eligible for the program but are not enrolled. nullven nullonan and nulldichnull nullnull estimates of the a priori probability of contamination for commercial and industrial properties, we believe that it is reasonable to consider virtually all commercial and industrial parcels in nullltimore as potential candidates for the nullP nullee Page and nullrger, nullnullnullnullgman, nullnullnull null therefore compared the nullP properties with a sample of similar sinull properties selected at random from the universe of industrial and commercial properties in nullltimore. Probit regressions confirm that participation is more linullly among industrial sites

Brownfields

29Cityscape Voluntary Cleanup Programs and Redevelopment Potential: Lessons From nullltimorenullnullryland located in industrial areas and less linullly in the presence of improvements and heavy building capitalinulltion. They also suggest that the distances to the central business district and manullr roads, respectively, are not very important. nullen more important, the probit regressions point to the changing nature of the programnullr of the sites that tend to be attracted to the program. null the first few years of the program, smaller properties tended to be attracted into the nullP. nullst recently, however, participation has been more linullly among larger properties. nullven the surrounding land use and the restrictions imposed on the use of the property by the nullP approval, it is linullly that such industrial properties will be nullpt in industrial or perhaps commercial use but will not be turned into residential pronullcts. This linulllihood is supported by recent home construction trends. Records from nullnull show that, from nullnull to nullnull, of the nullnull single-family homes built in the city of nullltimore, only nullwas built in an industrial use area and nullwere built in a commercial use area nullee enullibit nullnullin appendinullnull. null fact, only null.nullpercent of these homes are within nullmile of an industrial area, and most nullnullnullpercentnullare more than nullnullmiles from a nullP site. This finding is in sharp contrast with the findings in nullberini nullnullnull, who concludes that properties enrolled in the nulllorado nullP were most linullly under residential development pressure. nullsuming that all of the participating nullnullnullacres are redeveloped and remain in their use at the time of enrollment, and using the land area nullatiosnullderived by Deason, nullernull and nullrroll nullnullnull, we estimate that if the urban redevelopment pronullcts on nullP properties were instead built on greenfields, they may require between nullnullnulland nullnullnullacres in suburban nullltimore nullunty. nullcause most of the enrolled sites tend to remain in nonresidential uses, it appears that nullPs, at least in the case of nullltimore, may encourage commercial and industrial activities to tanull place on already contaminated brownfields, thus leaving pristine land available as open space or for residential uses. The findings should, as always, be interpreted with caution. This study is specific to the city of nullltimore, and, given the limited body of research about nullPs and their contenull-specific results, it would be necessary to conduct more research at a variety of locations before attempting to enullrapo - late from this studynull locale to another. nullture research endeavors might compare the nullP in a city linull nullltimore with nullPs of other cities that have enullerienced similar declines in population and manufacturing and blue-collar nullbs. nullother limitation of the study is that, given the many concurrent local and federal programs in place at the same time as the nullP, it is impossible to isolate the effect of any single policy in promoting brownfield cleanup and redevelopment. Thus, in conducting future research, it would be important to control carefully for previous brownfields pilot status and for the generosity of assistance and incentives to environmental assessment and redevelopment.

30 Brownfields Guignet and Alberini Appendix A. Maps of Sample Sites in Baltimore, Maryland Exhibit null1 Exhibit null2 Enterprise annullEnullonullrnullnt Zones Baltinullre nullnullr nullanull Cnull nullcentral business districtnullVCP nullvoluntary cleanup programnull Cnull nullcentral business districtnullVCP nullvoluntary cleanup programnull

31Cityscape Voluntary Cleanup Programs and Redevelopment Potential: Lessons From nullltimorenullnullryland Exhibit null3 Exhibit nullnull Baltinullre 199nullnullnnullnulle nullnnullnulle null99null annullnullnullnullnull Constrnulltion VCP nullvoluntary cleanup programnull VCP nullvoluntary cleanup programnull

32 Brownfields Guignet and Alberini Appendix B. Calculation of Land Area Conversion Ratios Exhibit null1 Exhibit null2 Propertnull Sinull nullcresnull nullsnulled nullnulle nullnullired nullea inullin nullltinullre Conulltnullnullcresnull nulltio nullnd nulle N Total nullres nullationull Total nullnullired nullr Enullivalent Pronullcts in Snullnullban nulleas nullopertnullSpecinull Conversion nulltios Calcnulllations for Bronullnnullelnull nullroperties in tnulle Citnull of Baltinullore Developnullnt Conversion nulltes Assnullenullin Tnulls Article nullee tnull Sales annullnullnullvelopnullnt section.null 1 15 nullnulle nullilnullnnull 1null37 1 null1.22 2 4.5 nullnullvelopenullconull. facilitnull 9.1null 1 null2.04 3 0.7 nullnulle nullilnullnnull 4.59 1 nullnull12 4 2.75 Tnull ofnulle nullilnullnnull 5.42 1 null1.97 5 null nullsinullntial nullltifanulllnullconulllenull null00 1 null1 null 1.3 nullsinullntialnull2nulltonullnullnulls 2.25 1 null1.73 7 2.null nullsinullntial 2.23 1 null0.null null 0.17 Tnullnulltornullofnulle nullilnullnnull 0.null 1 null3.94 nullneronull assnullptionsnull Innullstrial null 975.02 null24 null0null.12 Conullercial 14 null.null 3.0null5 194.0null nullsinullntial null 32.79 1.null null.99 nullnullr 13 104.null 1.00 104.null Total null444.05 More conservative assnullptionsnull Innullstrial null 975.02 1.00 975.02 Conullercial 14 null.null 2.00 125.72 nullsinullntial null 32.79 1.00 32.79 nullnullr 13 104.null 1.00 104.null Total 1null3null39 Source: nullasonnullSnullrnull and Carroll nullnullnull nullnullans onulltnull conversion ratios nullr tnull nullltimore pronullcts reported in nullasonnullSnullrnull and Carroll nullnullnullnullenullept nullr industrial use pronullctsnullnullere tnull nullure in tnulls table nullnullnull is tnull average nullr industrial pronullcts nationnulldenullnulleasonnullSnullrnull and Carroll nullnullnull do not enullmine industrial pronullcts nullr nullltimorenull null nulldian conversion ratiosnullnulle same enulleptions as in nullapplynull nullnullowledgments null thannullthe following organinulltions and individuals for their helpful comments and suggestionsnull the nulltional nullnter for nullart nullowth for their support and the data for this analysisnullattendees of the brownfields session at the nullternational nulllantic nullonomic nullnference, nullvannah, nullorgia, October nullnullnullparticipants in nullhe Reuse of nullntaminated nulltes in nullstainable Development nullrategiesnullnullrnullhop, nullnice, nullaly, nully nullnullnulland nullwin null nullromberg.

33Cityscape Voluntary Cleanup Programs and Redevelopment Potential: Lessons From nullltimorenullnullryland nulltnullrs Dennis nullignet is a Ph.D. candidate in the Department of nullricultural and Resource nullonomics at the nulliversity of nullryland. nullna nullberini is an associate professor in the Department of nullricultural and Resource nullonomics at the nulliversity of nullryland. Renullrences nullberini, nullna. nullnull. nulleterminants and nullfects on Property nulllues of Participation in nullluntary nulleanup ProgramsnullThe nullse of nulllorado,nullContemporary nullonomic nulllicy null nullnull nullnullnullnull nulllberini, nullnna, nulllberto nullongo, nulltefania Tonin, nullrancesco Trombetta, and nullargherita Turvani. nullnullnullnull. nullThe Role of nulliability, Regulation and nullconomic nullncentives in nullrownfield Remediation and Redevelop- mentnull nullvidence from nullurveys of Developers,null nullegional nullcience and nullrban nullconomics nullnull nullnullnullnull nullnullnullnullnullnullnull. nullnullr, nullndra, nullctoria nully, Peter Roberts, and nullthan nullith. nullnull. nullhe Definition of nullownfield,nullnullurnal of nullnullronmental nullanning and nullnagement null nullnull nullnullnull nullltimore Development nullrporation nullDnull. nullnull. nullverview of the nullltimore Development nullr - poration.nullhttpnullnullww.baltimoredevelopment.comnullverview-baltimore-development-corporation nullccessed nullptember null, nullnullnull nullnull nullnull nullanuarynull nullrownfields Progress in nullltimore and nullrylandnull nullronology.null www. baltimoredevelopment.comnulllesnulldfnullrownfieldsnullhronology.pdf nullccessed nullgust null, nullnullnull nullltimore nulltropolitan nulluncil nullnullnull nullnull nullebruarynull nulluilding Permit nullnual nullmmaries.null httpnullnullww.baltometro.orgnullontentnulliewnullnullnullnull nullccessed nullptember null, nullnullnull nullrtinull Timothy null nullnull. nullvaluating the nullpacts of nullcal nullonomic Development Policies on nullcal nullonomic Outcomesnullnullat nulls nullen Done and nullat null Doablenull null nullaluating nullcal nullonomic and nullployment nullnulllopmentnullnullw null nullsess nullat nullrnull nullong nullogrammes and nulllicies , edited by nullistair nulllan and nullng nullng. Paris, nullancenullOrganisation for nullonomic null-operation and Developmentnullnullnullnullnull nullnull nullnull. nullo nullnenulls nullom nullate and nullcal nullonomic nullnulllopment nullliciesnull nulllamanullo, nullnull nullnull nullnullhn nullstitute for nullployment Research. nullrtsch, nullarles, nullinullbeth nullllaton, and nullith Pepper. nullnull. Coming Clean for nullonomic nullnulllopmentnullnullnullsource nullonullon nullnullronmental Cleanup and nullonomic nullnulllopment nullportunities . nullshington, Dnull nullrtheast-nulldwest nullstitute. nullrtsch, nullarles, and nullidget Dorfman. nullnull. nullownnulllds nulltatenullfnullhenulltatenull null nulldnullfnullession nullnullew of Initiatinulls and nullogram Impact in the null nullates. nullshington, Dnull nullrtheast-nulldwest nullstitute. Daley, Dorothy null nullnull. nulloluntary nullproaches to nullvironmental Problemsnullnullploring the Rise of nullntraditional Public Policy,nullnulle nulllicy nulludies nullurnal null nullnull nullnullnullnull

34 Brownfields Guignet and Alberini De nullusa, nullristopher. nullnull. nullhe nulleening of nullownfields in nullerican nullties,null nullurnal of nullnullronmental nullanning and nullnagement null nullnull nullnullnullnull nullnull nullnull. nullrownfield Redevelopment nullersus nulleenfield RedevelopmentnullnullPrivate nullctor Perspective on the nullsts and Risnull nullsociated nullith nullownfield Redevelopment in the nulleater Toronto nullea,nullnullurnal of nullnullronmental nullanning and nullnagement null nullnull nullnullnullnull Deason, nullnathan P., nullorge nulllliam nullernull and nullry null nullrroll. nullnull. nullblic nulllicies and nullinullte nullcisions nullfecting the nulldenulllopment of nullownnullldsnullnull nullalysis of Critical nullctors, nulllatinull nullights and nulleal nullfferentialsnull Report to the nullnull nullvironmental Protection nullency nullnullnull nullorge nullash- ington nulliversitynullPnullnullownfields nullonomic Redevelopment nulloperative nullreement. nullailable at httpnullnullww.gwu.edunulleemnullrownfieldsnull. nullsher, Peter null, and nullan null Peters. nullnull. Industrial IncentinullsnullCompetition nullong nullerican nullates and Cities. nulllamanullo, nullnullnullnull nullnullhn nullstitute for nullployment Research. nullgleman, nulllerie null nullnull. nullzardous nullste Cleanup, nullability, and nulltigationnullnullComprehensinull nullide to nullperfund nullw. nullstport, nullnullnullorum. nullnull nulllliam null, and nulltthew null nullrray. nullnull. nullo nullonomic nullfects nullstify the nulle of nullscal nullcentivesnull nulluthern nullonomic nullurnal null nullnull nullnullnull nulleenberg, nullchael R., and nullstin nullllander. nullnull. nullhe nullvironmental Protection nullencynull nullownfields Pilot Program,nullnullerican nullurnal of nullblic nullnance null nullnull nullnullnullnull nullreene, nullilliam null. nullnullnullnull. nullconometric nullnalysis, nullth ed. nullpper nulladdle River, nullnullnull Pearson-Prentice nullall. nulleenstone, nullchael, and nullrico nullretti. nullnull. nulldding for nulldustrial PlantsnullDoes nullnning a nullillion Dollar Plantnullnullcrease nulllfarenullnullrnullng Paper null. nullnull. nullmbridge, nullnullThe nulltional nullreau of nullonomic Research. nullwland, nullrie. nullnull. nullhe Role of nullntamination in nullntral nullty nulldustrial Decline,null nullonomic nullnulllopment nullarterly null nullnull nullnullnullnull nullnullnull. nullnullnullnull. nullPrivate nullnitiative and Public Responsibility for the Redevelopment of nullndustrial nullownfieldsnullThree nullltimore nullse nulludies,nullnullonomic nullnulllopment nullarterly null nullnull nullnullnullnull nullnull nullnull. nullhe nullpact of nullntamination on the nullntonnulloutheast nullltimore nullnd nullrnullt,null nullurnal of the nullerican nullanning nullsociation null nullnull nullnullnullnull nullngo, nullberto, and nullna nullberini. nullnull. nullhat are the nullfects of nullntamination Risnull on nullm - mercial and nulldustrial Propertiesnullnullidence nullom nullltimore, nullryland,null nullurnal of nullnullronmental nullanning and nullnagement null nullnull nullnullnullnull nullryland Department of the nullvironment nullDnull. nullarylandnull nullluntary nulleanup Program.null httpnullnullww.mde.state.md.usnullrogramsnullandProgramsnullRRPnullrownfieldsnullcpnullnfonull nullccessed nullptember null nullnullnull nullnullath, Daniel T. nullnull. nullrban nulldustrial nullnd Redevelopment and nullntamination Risnullnull nullurnal of nullban nullonomics nullnullnullnullnullnull

35Cityscape Voluntary Cleanup Programs and Redevelopment Potential: Lessons From nullltimorenullnullryland nullyer, Peter null nullnull. nullonullng at nullate nullluntary nulleanup Programs in Perspectivenullnullability Relief, nullenullble nulleanup nullandards and nullstitutional nullntrols as nullrms of nullonomic Development nullbsidies. nullrnullng paper. nulluisville, nullnullnulliversity of nulluisville, nullnter for nullvironmental Policy and nullnagement. nullyer, Peter null, and Thomas null nullons. nullnull. nullessons nullom Private nullctor nullownfield Redevelop - ersnullPlanning Public nullpport for nullban Regeneration,nullnullurnal of the nullerican nullanning nullsociation null nullnull nullnullnull nullyer, Peter null, and null nullde nullnnullndingham. nullnull. nulleclamation and nullonomic Regeneration of nullownfields,nullnullnullews of nullonomic nullnulllopment nullterature and nullacticenullNonull1. nullshington, Dnull nullnull nullonomic Development nullministration. nullwman, Robert null, and Dennis nullllivan. nullnull. nullconometric nullalysis of nullsiness Tanullnullpacts on nulldustrial nullcationnullnullat Do null nullow and nullw Do null nullow nullnull nullurnal of nullban nullonomics null nullnull nullnullnullnull nullonan, nullannull and nullarles null nulldich. nullnull. nullecision nullalysis for nullilinullng nullnullrdous nullste nullte nullsessment in Real nulltate nullquisition,nullnullsnullnullalysis null nullnull nullnullnullnull Page, null nulllliam, and Robert null nullrger. nullnull. nullharacteristics and nullnd nulle of nullntaminated nullownfield Properties in nullluntary nulleanup nullreement Programs,null nullnd nulle nulllicy nullnullnullnullnullnull Peters, nullan, and Peter nullsher. nullnull. nullhe nullilure of nullonomic Development nullcentives,null nullurnal of the nullerican nullanning nullsociation null nullnull nullnullnull nullnull nullnull. nullate nullterprise nullne nullogramsnullnullnull nulley nullrnulldnull nulllamanullo, nullnullnullnull nullnullhn nullstitute for nullployment Research. nullhoenbaum, nullriam. nullnull. nullnvironmental nullntamination, nullownfields Policy, and nullonomic Redevelopment in an nulldustrial nullea of nullltimore, nullryland,null nullnd nullonomics null nullnull nullnullnull nullmentelli, nullthur null, and Robert null nullmons. nullnull. nullegulation of nullanullng nullderground nullorage TannullnullPolicy nullforcement and nullintended nullnsequences,nullnullonomic nullnulllopment nullarterly null nullnull nullnullnullnull nullgman, nulllary. nullnull. nullvironmental nullability and Redevelopment of Old nulldustrial nulltes. nullpublished paper. nulllitare, nullura, and nullchael nulleenberg. nullnull. nulls the nullnull nullvironmental Protection nullency nullownfields nullsessment Pilot Program nullvironmentally nullstnull nullnullronmental nullalth nullrspectinulls nullnull nullnull nullnullnullnull null.null. nullnvironmental Protection nullgency nullnullPnullnull. nullnullnullnull nullnulleptembernull. nullrownnullelds and nulland nullenullitalization. nullshington, Dnull nullnull nullvironmental Protection nullency. httpnullnullww.epa.govnullrownfieldsnull overviewnulllossary.htm nullccessed nullptember null, nullnullnull nullnull nullnull nullebruarynull nullate nullownnulllds and Voluntary nullsponse nullogramsnullnull nulldate from the nullates. nullnullnullnullRnullnullnullnull nullshington, Dnull nullnull nullvironmental Protection nullency, Office of nulllid nullste and nullergency Response.

36 Brownfields Guignet and Alberini nullnull nullneral nullcounting Office nullnullnull nullnull nullprilnull nullperfundnullnullate Voluntary nullograms nullonullde Incentinulls to nullcourage Cleanups. nullOnullnullDnullnullnull. nullshington, Dnull nullnull nullneral nullcounting Office. nullnull nullnull. Community nullnulllopmentnullnulluse of nullban Industrial nulltes. nullOnullnullD nullnullnull. nullshington, Dnull nullnull nullneral nullcounting Office. nullsylennull, nullchael. nullnull. nullanulltion and nullonomic DevelopmentnullThe nullate of the nullonomic nullterature,nullNew nullgland nullonomic nullnullew nullrchnullprilnullnullnullnull nullernstedt, nullris, Peter nulleyer, and nullnna nulllberini. nullnullnullnull. nullnullttracting Private nullnvestment to nullontaminated PropertiesnullThe nulllue of Public nullterventions,nullnullurnal of nulllicy nullalysis and nullnagement null nullnull nullnullnullnull nullunt, nullisten R., and Peter null nullyer. nullnull. nullactors nullfecting nullvestments in nullall- and nullrge- nullale nullownfield Pronullcts,nullnullban nullology nullnullnull nullnullnullnull

37nulltyscapenullnullnullurnal of nulllicy Development and Research • Volume 12, Number 3 • 2010 U.S. Department of Housing and Urban Development • Office of Policy Development and Research Cityscape The Private Market for Brownfield Properties nullrie nullwland nulliversity of nullryland nullstract nullis study enullmines land sales onullr a 10nullear periodnullnull0 to 2000nulln one southwest nullltimore industrial districtnullarroll Camdennullo determine the effect of land contamination on property sales and sales pricenullI tracnulld all sales, selling price, time on the marnullt, and the presence of land contamination in the nullnull0nullcre areanullnulle results indicate that after the midnullnull0s, contaminated parcels sold on the prinullte mar null nullt, with price discounts that accounted for contamination and cleanupnullnullt of the 1null parcels sold onullr the 1null0nullonull000 decade, positinull and marnulltnulllearing prices were found for null parcels with either connullmed or historicalnulleasonsnullonulluspect contaminanull tionnullInternullews with owners and bronullrs of parcels on the marnullt for 2 years or more and analysis of the data indicate that the contaminated parcels that did not sell within the 2nullear period nullnullhad abonullnullarnullt asnullng pricenullnullnullwere small and oddnullhapednull nullnullhad inadenullate road access for modern trucnullnullnullnullhad outdated water, sewer, and telecommunications connectionsnullor nullnullhad incompatible surrounding land usesnullnullwo policy implications result from these nulldingsnullnullrst, if a city such as nullltimore wants to renulltalize an industrial areanullaintaining its industrial function and remediating contaminationnullonullrnmentnullubsidized cleanups may not be the most costnullffectinull policynullnullther, the city should nullnullmodernize the outdated infrastructure, including roads and nuller optic connectionsnullnullnullremonull the outdated residential structures that sit in the midst of the industrial area and diminish the desirability of some land parcels for industrial usenullnullnullconsolidate small and oddnullhaped properties that are not conducinull to modern manufacturing, warehousing, or other industrial usesnullnullnullensure city sernullces are efnulliently pronullded, including trash cleanup and police and nulle protectionnulland nullnullimpronull access and egress for modern trucnullngnullnulle enulldence from the nullltimore study indicates that the prinullte sector will discount land prices and assume cleanup responsibilitiesnullnulle second policy implication is that the marnullt is capable of brownnullld cleanup in some locationsnull

38 Brownfields nullnulland Introduction null the concept of nullmart growthnull null and its promise of more livable cities catch the imagination of planners, policymanullrs, and developers, the redevelopment of inner-city brownfield sites becomes an even higher priority. To nullstify limiting development on greenfield sites, regions must find buildable land within enullsting city limits. nullntaminationnullhe legacy of nonenullstent environmental laws null and our industrial pastnulls widely perceived to be a deterrent to central-city revitalinulltion, especially in the industrial nullrtheast. null This study enullmines the impact of land contamination on the marnullt for industrial property and the enullent to which contamination is responsible for the economic decline of the nullrroll nullmden industrial district. nullsuspect the results in nullltimore can be transferable to other declining central city industrial areas in the nullited nullates. The common wisdom has been that nullnullenvironmental cleanup costs are so high relative to land values that the government has to step in and provide subsidies for cleanup and redevelopment, nullnullbannullnullrefusal to finance such transactions undermines marnullt demand, and nullnullthe federal nullmprehensive nullvironmental Response, nullmpensation, and nullability nullt nullnullnullnull or nullper - fundnulllegislation, which requires landowners to assume the responsibility for cleanup, and a lacnullof information about the risnull and costs of contamination have lead to a lacnullof demand for contami - nated land nullartsch, nullnullnullnullrtsch and nullllaton, nullnullnull These conditions are seen as particularly harmful to central-city industrial land marnullts, where demand for land is already weanull This article considers whether contamination deters central-city revitalinulltion, and to what degree factors other than contamination are an impediment to central-city redevelopment. This study tracnull in one nullltimore industrial district all land sales, selling prices, lengths of time on the marnullt, and pres - ence of contamination. This methodology allows this study to document the degree to which sales were restricted to the areanulls clean parcels and to identify factorsnullncluding contaminationnullhat are responsible for what is perceived as a relatively sluggish central-city industrial land marnullt. The results indicate that, since the mid-nullnulls, contaminated parcels in the nullrroll nullmden industrial district have been selling, and the marnullt has adnullsted to contamination by lowering prices. null fact, contamination does not appear to be the main sales barrier when the intended land use is industrial. To seriously implement smart growth and to encourage central-city industrial redevelopment, advocates and city officials must tacnulle the often ignored problems of older industrial areasnullroblems such as outdated parcel sinulls, inadequate roads for modern trucnull access, outdated and aging infrastructure, incompatible land uses, and unrealistic assumptions about the landnulls possibilities. null nullart growth is an urban planning concept whereby growth is concentrated in the center of a city to avoid urban sprawl and the mass consumption of open space and agricultural land. null The federal government passed the Resource nullnservation and Recovery nullt in nullnull and the nullmprehensive nullvironmental Response, nullmpensation, and nullability nullt in nullnull. null The common argument has been that nullperfund rules deter owners from selling their sites, securing financing for cleanup, or proceeding with reuse. nulle, for enullmple, nullrtsch nullnullnull.

39Cityscape nulle Private nullrnullt nullr nullonullnullld Properties Literature Review Three parts of the growing brownfield literature are especially relevant herenull nullnullnull the literature enullplor- ing the reasons contamination presents a barrier to the redevelopment of urban land, nullnullstudies enullmining where inner-city property redevelopment occurs in spite of contamination, and nullnullthe literature attempting to place contamination in contenull with other barriers to redevelopment. null all three literatures, case studies constitute the most common methodology. The contamination- as-a-barrier literature focuses on the role of cleanup costs, the fear of unnullown and unpredictable future liability, the difficulty of obtaining private financing, and the legal costs associated with purchase agreements and collection of damages from other legally liable parties nullartsch, nullnullnull nullrtsch and nullllaton, nullnullnullDe nullusa, nullnull, nullnullnullnullnull nullnull, nullnullnullnulleen nulligh, nullnullnullnullaley, nullnullnullnullright, nullnullnullnullount, nullnullnullnullount and nullyer, nullnullnull nullRnullnullmade owners responsible for cleanup even if they did not cause the contamination. This legal liability could translate into immediate cleanup costs, legal costs associated with pursuing culpable parties, and uncertainty over future cleanup enullenditures. These costs and risnull are widely believed to be manullr deterrents to the sale and redevelopment of brownfields. nullreover, because lenders have, at times, been held liable for contamination cleanup costs, financial institutions are reluctant to lend for brownfield pronullcts, which further reduces interest in redevelopment. nullstudy by the nullnull Department of nullusing and nullban Development nullnullnull nulle nullfects of nullnullronmental nullzards and nullgulation on nullban nulldenulllopment nullnullnull, analynulld null redevelopment pronullcts in null cities in nullstates. The study concluded that, although all the previously mentioned barriers enullst, immediate cleanup costs are the main deterrent to inner-city redevelopment. Despite enullensive literature focusing on the costs, risnull, liabilities, and barriers to redeveloping a contaminated site, several decades of successful cleanups and redevelopment pronullcts indicate the enullstence of conditions in which some developers find it profitable to absorb the risnull of purchas- ing, cleaning, and reusing contaminated parcels nullepper, nullnullnullnullmons, nullnullnull nullny successful redevelopments required government subsidy, but not all. nullyer and nullyons nullnullnull documented the emergence of entrepreneurial firms redeveloping brownfield sites without public sector intervention. They found that these private ventures favored sites in high-value locations, under private ownership, and with larger parcels. This literature does not identify marnullt-clearing prices for contaminated land, nor does it put contamination in perspective with other conditions that may be deterrents to development. Three studies enullmined the price discounts associated with contamination. Page and Rabinowitnull nullnullnull found land price reductions of null to null percent on four industrial pronullcts spanning three states. nullnullath nullnullnull found that redevelopment occurred on polluted sites and nulliscounts in land value due to contamination risnull..consistent with the limited cost data available.... The industrial land marnullt is highly competitive in the nullty of nullicago...and it appears that the marnullt has successfully valued and capitalinulld the contamination liabilitynullnullcnullath, nullnullnullnullnull nullwland nullnullnull tracnulld all parcels in the nullnton industrial area of nullltimore over a nullnullyear period as in use or idle and as on the marnullt, sold, or for sale. nulle found that less than nullpercent of the land was idle and not on the marnullt. This finding contradicts the notion that landowners would rather let land sit idle than tacnulle the cleanup costs and challenges. nulle found that, when contaminated

40 Brownfields nullnulland parcels were discounted, they were as linullly to sell as parcels where no evidence or history of contamination enullsted. null Other recent studies have begun to put contamination in contenull with other central-city redevelop- ment barriers. The nullnullnullnull nullnullD study concluded that contamination alone was rarely the deal breanuller. nulleenberg et al. nullnullnull identified barriers to redevelopment other than brownfields, including state and local regulations, unsafe neighborhood conditions nullhat is, crime and stray animalsnull industrial decline, more attractive adnullcent areas, lacnullof schools, and poor transportation access. This studynulls contribution comes from its focus on all sales in one industrial area over a null-year period. These sold and for-sale parcels included both contaminated and clean sites. nullch of the previous literature used the case study approach. Despite being rich in detail, the case study approach misses important lessons that can be learned from a broader study that includes all parcels, contaminated and clean, in one industrial district. nullrst, the case study approach does not put the price of a contaminated land parcel in contenull with the whole neighborhood land marnullt. nullor enullmple, rather than blaming poor marnullt demand and high cleanup costs, perhaps the real sales barrier is created by the seller asnullng a price that is too high in light of marnullt demand and cleanup costs. This information can only be garnered by studying sales in one marnullt.nullnullcond, by focusing on the redevelopment of high-profile, often problematic parcels, researchers miss the private redevelopment of numerous low-profile, contaminated parcels. This study fills a gap in the literature by investigating all industrial parcels in one district and tracnullng their sales and prices over a decade. This study determines that the enullent to which sales were limited to clean parcels, the price discounts associated with contaminated parcels that sold, and the characteristics of parcels, both clean and contaminated, that languished on the marnullt for long periods or did not sell at all. null addition to tracnullng all sales over the decade, nullinterviewed RnullnullnullTORnull null , city officials, land purchasers, and land sellers. Through these interviews, null identified parcels withdrawn from the marnullt without sale, idle parcels not on the marnullt, new uses for sold property, and barriers to sale. nullith the enulleption of parcels used for stadium parnullng and a union office building, transferred parcels were used for industrial, construction, and warehouse purposes. Overview of Area and Early History nullndustry was originally attracted to the nullarroll nullamden district of nullaltimore because of the availabil- ity of water power from the nullnes nulllls, its location near a port, the presence of rail lines, and its pronullmity to the citynulls downtown area. null nullavy industry can be traced to the nullnulls. nullnborn maps null The previous study by nullwland nullnullnull surveyed all property owners in the nullnton nulldustrial area over a nullnullyear period. That study, therefore, could identify the time a parcel was on the marnullt before sale and cases in which parcels were put on the marnullet and then withdrawn without a sale during this period. This study included only three categories of contaminationnull clean, contaminated, and unnullown. null the current study, the time-on-the-marnullt is missing for many sales early in the nullnullnullnullnullnullnullnullnull decade because the sellers are inaccessible, real estate bronullers do not recall, and purchasers often do not nullnow how long the property was on the marnullt. Time-on-the-marnullt and parcels that went on the marnullt and were withdrawn later in the decade were captured through bronullr interviews. The current study includes five categories of contamination. null The area, which is adnullcent to the nullltimore and Ohio Railroad nullation nullow a museumnull was one of the earliest sites in the nullited nullates accessible to train transportation.

41Cityscape nulle Private nullrnullt nullr nullonullnullld Properties indicate the presence of glasswornull, metal foundries and ironwornull, bricnullornull, engine shops, meat slaughter and pacnullng houses, lumberyards, paint and varnish manufacturers, household products manufacturers, and scrap metal yards. The study area included about nullnullnullacres, comprising nullnullindustrial parcels nullee enullibit null. Exhibit 1 StnullnullArea for tnull Canullen Carroll Innullstrial DistrictnullCanullen Carroll StnullnullArea Sources of Data The data for this study were pulled from the nullltimore Department of Public nullornull nullPnull, the nullaryland Department of nullssessment and Tanullation nullDnullTnull, nullonulltar, nullacnullennullie nullommercial Real nullstate nullervices, the nullnvironmental Protection nullgency nullnullPnullnull, the nullaryland Department of the nullnvironment nullDnull, and nullnborn nullre nullsurance nullps. nullch of these data sets and their purpose are discussed here. Identifying Sales Transactions The base map for the nullrroll nullmden industrial district was created from the nullltimore DPnull parcel point file. The geographic information system coverage of this file records parcels by address and blocnulllots and includes information on the current owner, nullning category, land use, last sale transaction bacnullto nullnull, and sale price. The study includes only central business district parcels that are nullned and used commercially and industrially. These parcels include nullned business dis-

42 Brownfields nullnulland trict commercial categories nullnull nullnull and nullnull and all industrial nullcategories. null The study enullludes sites nullned residential, which are remnants of the time when industrial wornullrs walnulld to wornull nullobtained real estate transaction data from five sources. nullrst, nullenullracted nullnull-to-nullnull sales data from the nullltimore DPnullproperty tanullrecords. These data were supplemented and cross-checnulld with information from the nullaltimore Development nullorporation nullnullDnullnullnull the DnullTnull nullonulltar, a privately maintained RnullnullnullTOR null databasenull and nullacnullennullie nullommercial Real nullstate nullervices, a commercial real estate bronuller. nullhereas DPnulland DnullT data sources contained information on properties that sold, nullnullar contained information on commercial parcels currently for sale through real estate bronullrs. nullnullar records provided contact information, asnullng prices, descriptive data of unique features, and previous sales information for sites that are on the marnullt. nullnullprovided information on a few parcels for sale by owners. nullacnullennullie nullommercial Real nullstate nullervices added information regard- ing the amount of time a parcel remained on the marnullt before sale. nullere data were missing, the nullcnullnnulle data were supplemented with time-on-the-marnullt information obtained through personal interviews and phone calls to sellers and bronullrs. Time-on-the-marnullt data, however, are still missing for nullnullof the nullnullsales. nullom these sources, nullcreated a data set of all industrial parcels in the study area, including those never on the marnullt after nullnull, those currently for sale, and those that sold between nullnull and nullovember nullnullnullnull. null geocoded owner, address, sale price, date of sale, sale history, time on the marnullet of last sale, acreage, unique features, improved or unimproved status, and accessibility to the highway. nullfound nullnullidentified industrial records within the boundaries, as shown in enullibit null Of those, nullnullwent on the marnullt from nullnull to nullnull. This number included sales through bronullrs and by owners. nullide from the nullppers site, which the city is attempting to transfer to residential use, no parcels in this district were totally idle and not on the marnullt nullscalante, nullnullnull Collecting Environmental Information To measure environmental conditions on each of the industrial properties, nullloonulld to three sourcesnullthe nullnull the nullnborn nullre nullsurance nulllases, and the nullnull nullcollected substantial qualitative information on environmental conditions at each site and developed a broad rannullng system for the potential contamination level. The categories in the rannullng system indicated if the site nullnullwas clean or provided no reason to suspect contamination, nullnullwas adnullcent to a contami- nated parcel, nullnullhad a historical use consistent with contamination, nullnullwas confirmed as having contamination, or nullnullwas processed through the nullryland nulloluntary nulleanup Program nullnullnull null

which was initiated in nullnull. nullloonulld for evidence of contamination in nullrroll nullmden on nullnullnulls nulltional Priorities nullst of nullperfund sites and nullnulls brownfield site inventory, and nullidentified contaminated sites in the area by pulling all contaminated properties that fell within the nullP nulldes overlapping the study null nullnulland nullnullare defined as central business district commercial. nullnullincludes marine terminals, railway rights-of-way, and a science center. nullnull nullnull and nullnullare all manufacturing districts. nullenullluded all residential and neighborhood business district categories of nullnulland nullnull null nullate of nullryland, null nullnull nullnull. nullownfields-nulloluntary nulleanup and Revitalinulltion Program.

43Cityscape The Private Market for Brownfield Properties area. 8 MDE records parcels where toxic spills and releases have occurred, neighborhood complaints of contamination have been recorded, and sites have been processed through VCP. Freedom of nullformation nullt renullests were nulled with MDE for all properties sold and for sale. nulle tnullical connull tamination included asbestos, heavnullmetals, polnullhlorinated biphennulls, cadmium, lead, polnullnulllic aromatic hnullrocarbons, heavnulloils, and leanullng underground chemical and oil storage tannull. nullese sources connullmed contamination on null of the nullnullparcels in the studnullarea that sold during the decade. nullthough mannullof these sites have been subsenullentlnullremediated, this article records their condition at the time of the sale. nullo sites in the Carroll Camden industrial district are contaminated enough to be on the nullperfund list. nulle nullnborn Fire nullsurance nulllases were the primarnullsources used to identifnullparcels with a historical use that implies linulllnullcontamination. nullreviewed the atlases for southwest nullltimore for nullnull, nullnull, nullnull, and nullnull to garner information regarding original site boundaries, historical activities on each parcel, and the lanullut of activities within each site. nullrelied on the nullnborn atlases because frenullentlnulla connection exists between the level and tnulle of contamination and the nullnd of manufacturing activitnull. Parcels historicallnullused for steel and aluminum milling, chemical producnull tion, paint and varnish manufacturing, metal foundries and plating, glasswornull, coal bins, rubber cement milling, printing, engine shops, or fuel oil and crude storage before nullnull were classinulld as having historical reasons to suspect contamination. null the nullnullsites sold, null had historical uses that would suggest contamination. Exhibit nullindicates the historical use and contaminants consistent with those prenullnullnullmanufacturing activities. 8 nulle nullperfund parcels are listed online at httpnullnullww.epa.govnulluperfundnullitesnullplnull. nullobtained the properties on MDE data directlnullfrom the agencnull. nulle nullP Codes are nullnullnull nullnullnull nullnullnull nullnullnull nullnullnull nullnullnull nullnullnull nullnullnull nullnull8, nullnullnull nullnullnull and nullnullnull Exhibit 2 Source of Contaminant Contaminant Historical Land Uses in the Carroll Camden Industrial District and Associated Contaminants Paint and varnish manufacturers Mercury, polychlorinated biphenyls (PCBsnull arsenic, beryllium, cadmium, chromium, lead nullnullne shops nullhylene nullycol, trichloroethane, trichloroethyene, PCBs, arsenic, beryllium, cadmium, chromium, lead Metal foundries, ironnullrnull, steel and iron foundries PCBs, arsenic, beryllium, cadmium, chromium, lead, mercury nullassnullrnull PCBs, arsenic, beryllium, cadmium, chromium, lead, mercury Bricnullornull PCBs, arsenic, beryllium Coal plant Bennullne, trichloroethane, tetrachloroethane, conull, ammonia, tars and sludnull, toluene, naphthalene, anthracene, phenols, ash, clinnullrs, heavy tars, sludnull, lime sludnull, spent iron onulldes Lumberyards PCBs, arsenic, beryllium, cadmium, chromium, lead Household product manufacturers PCBs, arsenic, beryllium, cadmium, chromium, lead, mercury Chemical product manufacturers Bennullne, ethyl bennullne, toluene, nulllene nullbber cement millinnull Bennullne, toluene, nulllene, PCBs, chromium Source: EPA (2002)

44 Brownfields nullnulland Results nulltween nullrch null nullnull, and nullvember null nullnull, nullnullproperties, covering nullnullacres, went on the marnullet. Of those properties, nullnullnull sold, with nullnull selling at least once during the decade and reentering the marnullt. null null least one parcel was listed for sale and then pulled off the marnullt when it did not sell. null of nullvember null nullnull, null parcels were on the marnullt. nullst marnullt activity occurred in the last years of the decade. nullhibit nullshows breanullowns by level of contamination and year of sale. nullthough clean sites constituted the largest share of sales, null percent of the sales were parcels that had confirmed contamination at the time of the sale. Two parcels went through the nullPnullone was cleaned before it sold, and the second was cleaned and cleared through the program after the sale. The concentration of sales in the latter part of the decade is consistent with the increasing sophistication of remediation techniques, the increasing comfort of lenders in assessing risnull, the developing environmental insurance options, and the growing certainty on the part of government about cleanup standards nullee, for enullmple, nullD, nullnullnullnullyers and nullyons, nullnullnulland nullnull nullnullnull nullnullhibit null reports the effect of contamination on the price per acre of all sold parcels. The dependent variable is the real sale price per acre adnullsted to nullnull dollars. The independent variables arenull null nullnullcentnull dummy variable if the parcel is adnullcent to one that has historical contamination or is nullown to be contaminated. null nullstoricalnull dummy variable if the parcel has a previous use that linullly generated contamination. null nullntaminatednull dummy variable if the parcel is nullown to be contaminated at the time of sale. null One turnnull dummy variable if the parcel is one turn off the main highway, where the main highway is the route leading directly to nullterstate null null-nullnull null Two turnsnull dummy variable if the parcel is two turns off the main highway. null Three turnsnull dummy variable if the parcel is three turns off the main highway. null nulleanullhe sinull of the parcel in acres. null nullnulloldnullhe year the parcel sold. null nullprovementsnull dummy variable indicating whether the parcel includes improvements, primarily buildings. null Only the final sale is captured in this analysis. Exhibit 3 1null0null 1null3 1nullnull 1nullnull 1nullnull 2000 Total Nnullber onullSales Percent onull nulll Sales nullnuller of Sales null Catenullrnullof Contanullnation null evinullnt contanullnation 5 13 54 72 50 Anullacent to contanullnatenullpropertnull 1 null 21 2null 19 nullstorical nulle snullnullsts contanullnation 4 2 17 23 1null Connullnullnullcontanullnation 1 2 1null 21 15 Total 11 23 110 144 100

45Cityscape nulle Private nullrnullt nullr nullonullnullld Properties null addition to including the contamination variables, nullincluded location dummies to control for the enullected drop in price for sites farther from a main highway. nullnull is included because other studies have found a price-per-acre premium for larger sites nullowland, nullnullnullnullyer and nullyons, nullnullnull nullnullold is included to capture both the reductions in uncertainty and falling costs of remediation throughout the decade as well as the increase in land values on contaminated sites. null addition, nullnullold captures the state of the broader economy and enullectations about future appreciation. The presence of improvements was included to control for the effect of a building on price. nullalso tested enclosed square footage, but it was not statistically significantnulltherefore, null dropped it from the final equation. Exhibit null Model null Model null nullS nullsnullts for All Solnullnullrcelsnullepennullnt nullarianulle Is tnull nullal nullice per Acre Intercept null170null33null90 77null4null4null null 2.19null null null171null72null5null 79null24nullnull null 2.1null null Anullacent null353null7null 249null09 null 1.42null null359null5null 253null73 null 1.42null nullstorical null543null4null 2nullnull50 null 2.0null null null539nullnull 2nullnull37 null 2.00null null Contanullnatenull null559nullnull 309null17 null 1.nullnull null null594null59 324null13 null 1.nullnull null nulle tnulln null530null75 21nullnull7 null 2.45null null null531null44 219null29 null 2.42null null Tnull tnullns 135null04 293null4null null4null 150nullnull 303null4null null50null Tnullee tnullns null77null53null 443null10 null 1.75null null nullnull4null07 4nullnull5null null 1.75null null Area null35nullnull 22null21 null 1.57null null33.null1 23null2null null 1.42null nullnullolnull nullnull59 3null9null null.21null null nullnull3null 39null90 null.17null null Inullrovenullnts null null null null14null99 301null99 null .05null null null 2 Anull null 2 133 .1null .11 131 .17 .10 nullS nullordinary least snullarenull nullStatistically nullnullnull null Statistically nullnullnull

46 Brownfields nullnulland Potential missing variables that might permit a full hedonic model would include factors such as the shape of the parcel, the slope of the parcel, activities on the road to the parcel nullhat is, residential units that reduce the value of land for industrial usesnull activities surrounding the parcel nullgain, residential units that depress the value for industrial usesnull finer details on the sinull and quality of roads, specifics on the quality of access to nullnull, a more refined contamination variable nullhat is, the precise cleanup costsnull and enullstence of seller financing. null theoretical reason enullsts, however, to suspect that these variables are correlated with the contamination categoriesnulltherefore, their enulllusion does not bias the coefficients on the contamination variables. nullattempted to collect time-on-marnullt data, but, because nullcollected this information from sellers, buyers, or realtors, it was impossible to obtain data for all but null of the parcels sold. These null were sold in the latter part of the decade. null abbreviated run that included nullime-on-marnulltnulldata added nothing to the modelnulls enulllanatory power. nullfter holding transportation access, sinulle of parcel, and the year sold constant, the presence of contami- nation reduced the sale price. The coefficients on the historical-reason-to-suspect and nullown-to- be-contaminated variables were significant at the null and null-percent levels, respectively. null clean site on the main road sold for an average of nullnullnullnull,nullnullnull per acre. null parcel adnullacent to a contaminated site nullhat is, a site with either nullown contamination or historical reasons to suspect contaminationnullwas discounted null percent. nullsite with historical reasons to suspect contamination was discounted an average of null percent, and a site with nullown contamination was discounted an average of null per- cent. nullnull The fact that discounts were similar on suspected-to-be-contaminated-for-historical-reason and nullown-to-be-contaminated sites suggests that my method of identifying contamination by enullmining historical use is a good measure of contamination and that cleanup costs for the two categories are nearly equivalent. These discounts probably renullct nullnullremediation costs, nullnullthe fact that the marnullt for contaminated properties is more limited because the purchasers are restricted to those with their own nonbannullsources of credit, nullnulldelays associated with testing and assessing the costs of remediation, nullnullcosts and delays associated with cleanup before the property can be put to productive use, and nullnullany additional risnullassociated with owning a polluted parcel. null enullected, parcels located off the main highway sold at a discount. Parcels located one turn off the main highway accessible to null-nullnull sold for an average of nullnullnullnull,nullnullnull less per acre than parcels on the main highway. The coefficient on two turns off the main highway was not statistically different from the price on the main highway, but parcels located three turns off the main highway to nullnull sold for an average of nullnull,nullnullless per acre than parcels on the main highway. The year the property sold, nullnullold, was positively associated with the sale price. nullre recent sale prices have been higher. The price increases could renullct the private sectornulls growing enullerience in dealing with contaminated properties, the falling prices of cleanup technologies, the improving national economy during that decade, or revitalinulltion efforts initiated by nullnull null is not surprising that neither the presence of improvements nor the square footage of enclosed space nullnull was statistically null nullveral reviewers asnulld why this study did not include a more precise measure of the seriousness of contamination. null is difficult, for enullmple, to compare a more serious contaminant concentrated in one portion of the site with a less tonullc pollutant spread evenly across the site. Data on actual cleanup costs proved impossible to collect directly from landowners. null nullt reported here.

Brownfields

47Cityscape nulle Private nullrnullt nullr nullonullnullld Properties significant, because improvements could represent either a usable structure or a costly demolition. The average sales price for the nullnullparcels sold between nullnull and nullvember nullnull is shown in enullibit null nullth models that include and enulllude onsite improvements in enullibit nullreport relatively low R null s, null which is not atypical for cross-sectional data that have a lot of random disturbance nullee, for enullmple, nullenta, nullnullnull nullw R null s do not renullct the correctness of the model or the test of the hypothesis that contamination innullences selling price, unless omitted variables are correlated with the contamination variables, and no evidence of such correlation enullsts. Exhibit null Averanull Sales nullicenullnullvenuller 1990null000 nullE nullnullryland nullpartment onulltnull Environmentnull 17

$0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 MDE No Action No Contamination

Adjacent Contaminated Property Potential Historical Contamination

Confirmed Contamination null R null s report the proportion of variability enulllained by the modelnulls independent variables. Barriers to Sale and Redevelopment nullamining parcels that languished for long periods on the marnullt and those that sold quicnully can shed some light on the barriers to industrial land sales. nullhibit nullcompares the parcels that toonull more than nullyears to sell with parcels that sold within nullyear. Once again, contamination does not appear to be the main sales deterrent. The quicnullsellers had nullst as high of a probability of being contaminated as the languishers. The strinullng feature of this comparison is that quicnullsellers had an average per acre price of nullnull,nullnull as opposed to the sale price of nullnull,nullnullper acre for parcels that toonullnullor more years to sell. Parcels that were on the marnullt for more than nullyears as of nullvember nullnull had an average asnullng price of nullnull,nullnullper acre. One barrier to sales appears

48 Brownfields nullnulland to be that some sellers overvalue their property. null nullmilarly, nullwland nullnullnull found price to be a statistically significant determinant of time on the marnullt for both contaminated and clean sites in southeast nullltimore. nullrge parcels do not ensure a quicnullsale. null the nullrroll nullmden industrial district, the quicnull selling parcels were, on average, smaller than the parcels of the languishers. null older industrial areas, a parcel containing improvements is often at an advantage because obsolete buildings have to be removed before redevelopment can occur. nullt little difference enullsts in the proportion of improved parcels between the quicnullsellers and the languishers. null fact, little unimproved land in the nullrroll nullmden district enullsts at all. The areanulls long industrial history has left behind enullensive and often substantial structures. The comparison shows no indication that quicnullsellers and languishers are concentrated in specific locations. nullhibit null the quicnullsellers, and enullibit null the languishers, illustrate that both groups are spread over the whole industrial area. These results renullct that, for the time being, this industrial district is remaining industrial. nullcause the state does not require cleanup standards for industrial use that are as strict as for residential use, cleanup costs are lower in the nullrroll nullmden district than they would be in an area convert- ing to nonindustrial use. nulltes converting from industrial use to residential or commercial use face higher cleanup costs and, therefore, lower and possibly negative property values. nullny of the brownfield case studies reported in the literature address property being converted from industrial Exhibit null Nnullber onull Parcels nullnullnnullSales Price Per nullre nullnull Sinull in nullres Extent onull Contanullnationnull nullonullParcels nullveranull Tinull on the Marnullt Cnullracteristics of nullrcels on tnull nullrnullt nullre Tnulln 2 nullears annullnullss Tnulln 1 nullear nullnnullishers nullore than 2 nullarsnull nullr sale null 79null319 2.9 .25 clean .25 anullacent .50 nullstorical 3.4 nullars Solnull 10 null5null37 2.7 .20 clean .20 anullacent .40 nullstorical .20 contanullnatenull 3.4 nullars nullicnullsellers nulless than 1 nullarnull Solnull 1null 312null3null 1.null .37 clean .0nullanullacent .31 nullstorical .25 contanullnatenull 0.nullnullars null Real estate agents in the area say that some sellers are holding out for unrealistically high prices, hoping for the same high figures paid by the nullryland nulladium nullthority for the land under nullmden nullards, or they are waiting for spinoffs from the stadium. One owner of a large contaminated parcel that has been on and off the marnullt for years said, null have plenty of money and am in no hurry to sell.null

49Cityscape nulle Private nullrnullt nullr nullonullnullld Properties to residential or commercial use. This fact may enulllain their argument for the need for government intervention and subsidies. nullontaminated parcels being converted to residential use require more stringent and enullensive cleanup than parcels remaining in industry, pressing property values lower, thereby requiring government intervention and subsidy. Other Barriers to Resale nullconducted a series of enullended interviews to determine which factors are barriers to property sale and industrial redevelopment. nullinterviewed the real estate agents or property owners of every parcel that had been on the marnullt for nullyears or more or that was on the marnullt and withdrawn without sale. null addition, nullconducted four in-person interviews with private firms that purchased or sold contaminated parcels. null all cases, the land purchasers were using the property for their own businesses. null nullinterviewed city officials to identify parcels that were idle and not on the marnullt null and conducted site visits for every parcel sold and for sale. The interviews and site visits Exhibit null nullrcels Solnullin nullss Tnulln 1 nullear null nullst purchasers had their own financing. null nullinterviewed local real estate bronullrs nullucnullnullannullin, Robert nulllhauser, nullte nullDonald, David Tufaro, and nullll nullller, and nullans Paul and Richard nullcalante of nullnull nullconducted telephone or in-person interviews with the sellers, purchasers, developers, or bronullrs for the null parcels that had been on the marnullt for nullyears or more. nullalso visited each site. null addition, nullinterviewed purchasers or sellers of contaminated sites.

50 Brownfields nullnulland highlighted a number of barriers to sale and redevelopment, including small, odd-shaped sitesnull enullense of removing obsolete structuresnulloutdated road sinull and configurationsnullinadequate water, sewer, and telecommunications infrastructurenullenullsting land uses incompatible with industrynulland difficulty in changing the land use from industrial to residential because the private demand for marnullt-rate housing is not strong enough to compensate developers for the costs of remediating contamination and constructing residential units. null is typical of turn-of-the-nullth-century industrial cities, nullltimore still has residential city blocnull integrated with industrial-use blocnull. nullcause they no longer provide walnullng access to wornull these blocnull have lost their desirability as residential locations. nullnd values are low, housing condi- tions poor, and vacancy rates high. nullavy trucnulltraffic and dirty industrial activities nulluch as waste managementnullfurther depress the demand for housing in these areas. nullavy industry, of the type located in the nullrroll nullmden industrial district and many other turn-of-the-nullth-century cities, is incompatible with residential activity. nulldustrial land sellers with land near residential units have difficulty selling because potential buyers fear their industrial vehicles will hit playing children, because residents obnullct to heavy trucnulltraffic in off hours, and because of actual or perceived high rates of theft and vandalism. nullcnullof trucnullaccess also inhibits land sales, particularly in areas where the road width and pattern are incompatible with modern trucnullng requirements. The current street pattern was laid out for Exhibit null nullrcels Solnullin 2 nullears or nullre

51Cityscape nulle Private nullrnullt nullr nullonullnullld Properties residential use minulld with multistory, rail-oriented manufacturing and small-scale trucnullng. Rail dependence has declined, being displaced by container trucnullng. nullithout modern trucnullaccess, industrial parcels are difficult to sell. nullthough many believe that an inner-city sitenulls advantage stems from its ready access to infrastruc- ture, a common grievance among property owners is that water, sewer, and telecommunications facilities are outdated and inadequate. null null the nullrroll nullmden industrial district, land sellers, recent purchasers, and operating businesses complained that water and sewer facilities needed to be updated and enullanded and that modern telecommunications linnullges are missing. nullveral additional parcels that failed to sell contain obsolete buildings that are enullensive to demolish. null one case, the obsolete building is a refrigerated storehouse that cannot be renovated or demolished without significant enullense. null the final analysis, however, such properties are also languishing on the marnullt because the sellersnullasnullng prices are out of line with demolition costs and the propertiesnullproductive capacity. nullother barriernullleanup costsnullas arisen on a site that the city and a private developer are attempting to redevelop for housing. Despite city subsidies of nearly free land, null escalating cleanup costs have pushed pronullcted final house prices well beyond what the marnullt can bear in this section of downtown nullltimore. null Conclusion null tracnullng property sales in nullltimorenulls nullrroll nullmden industrial district, nullhave shown that brownfields have a marnullt-clearing price. nullw do these results compare with the case studies cited in the literature, where redevelopment failed or required costly government subsidynullnull results apply to cases in which contamination is serious but not at nullperfund levels of pollution and where the parcel will remain industrial as opposed to converting to residential or commercial. null addition, the results apply to a well-located industrial area. Route nullnull is a manullr nullnull interstate highway that runs down the entire eastern seaboard and intersects the nullrroll nullmden industrial district. The conclusions drawn in this study would not necessarily apply to the many more isolated and inaccessible contaminated industrial districts in nullltimore. null the nullrroll nullmden industrial district, contaminated parcels are selling without government intervention because sellers are lowering prices to compensate for contamination. nullom nullnull to nullnullnullnull, parcels with nullnown contamination sold at an average nullnull-percent discount, parcels with historical uses that give reasons to suspect contamination sold at an average null-percent discount, and parcels adnullcent to a contaminated site sold at an average null-percent discount. Only nullof the nullnullsites entered and completed the nullryland nullP. null nullgh-speed nullternet connections are not available at most sites. null The city is selling the land for nullnullnullnull null nullr a full description of the site, see nullwland. nullnullnull.

52 Brownfields nullnulland This conclusion does not imply that federal, state, and local brownfield initiatives are ineffective or unnecessary. nullny of the remediation techniques adopted by the private sector were initially tested as part of government-sponsored demonstrations. nullreover, in locations with weanullr marnullt demand, especially those areas with tonullc and enullensive contamination or those that will be changed to residential use, land values may fall into the negative range, in which case redevelop- ment will require government subsidy. null emphasinullng environmental contamination as the main obstacle, however, policymanullrs may have overloonulld other deterrents to redeveloping industrial districts in the central city. null the nullrroll nullmden industrial district, these barriers include outdated road configurations that manull trucnullaccess and egress difficult, antiquated infrastructure, inadequate telecommunication linnull- ages, incompatible residential and industrial land uses, obsolete buildings that prove enullensive to demolish, and sellers who are unwilling to lower prices. nullrtunately, all but the last of these barriers are those over which policymanullrs and city government officials have control. nullnullowledgments The author thannull nullrgi Dewar and the nullncoln nullstitute for nullnd Policy in nullmbridge, nulls - sachusetts, and the nulltional nullnter for nullart nullowth at the nulliversity of nullryland for financial support. null enullellent research assistant, nulln Piesen, assembled the data and prepared the maps. Richard nullcalante and nullans Paull of the nullltimore Development nullrporation, nullucnullnullannullin of the nullcnullnnulle nulloup, David Tufaro of Terra nullva, nullll nullller of nullnull, and a number of nullrroll nullmden business owners provided useful data and information. nullari nullilson, nullans Paull, nullng nullen, and three anonymous referees made valuable comments on an earlier draft. The author alone is responsible for any remaining errors. nulltnullr nullrie nullwland is a professor of urban planning at the nulliversity of nullryland in nullllege Parnull Renullrences nullrtsch, nullarles. nullnull nullinternull nullaying for Our nulldustrial Past,nullCommentary null nullnull nullnullnull nullrtsch, nullarles, and nullinullbeth nullllaton. nullnull. Coming Clean for nullonomic nullnulllopment. nullashing- ton, Dnull nullrtheast-nulldwest nullstitute. De nullusa, nullristopher. nullnull. nullontaminated nulltesnullThe nullnadian nulltuation in an nullternational nullntenull,nullnullurnal of nullnullronmental nullnagement nullnullnullnullnullnull nullnull nullnull. nullrownfield Redevelopment nullersus nulleenfield DevelopmentnullnullPrivate nullctor Perspective on the nullsts and Risnull nullsociated nullith nullownfield Redevelopment in the nulleater Toronto nullea,nullnullurnal of nullnullronmental nullanning and nullnagement null nullnull nullnullnullnull

53Cityscape nulle Private nullrnullt nullr nullonullnullld Properties nullvironmental Protection nullency nullPnull. nullnull. nullpediting Cleanup and nulldenulllopment of nullownnullldsnull nulldressing the nullnullr nullrriers to nullinullte nullctor Innulllnullmentnulleal or nullrceinulld. nullashington, Dnull nullvironmental Protection nullency. nullvailable at www.epa.govnullfinpagenullarnclenulltm. nullnull nullnull. nullownnulllds nullonomic nulldenulllopment Initiatinullnull nullashington, Dnull nullvironmental Protection nullency. nullcalante, Richard. nullnull nullctobernull Personal communication. nullnior economic development officer, nullltimore Development nullrporation, null null nullarles nullreet, nullite nullnull, nullltimore, null nullnullnullnullnull. nulleen nulligh, nullncey. nullnull nullovembernull nullocusnullnullvironmental nullnstraints to nullownfield Redevelopment,nullnullonomic nullnulllopment nullarterly nullnullnull nullnullnullnull nulleenberg, nullchael, nullren nullwrie, nullura nulllitare, and nulltoya Duncan. nullnull. nullrownfields, Toads, and the nullruggle for nullighborhood Development,nullnullban nullfairs nullnullew null nullnull nullnull nullnull. nullwland, nullrie. nullnull. null nullntamination the nullnullr nullrrier to nullner-nullty nulldustrial Revitalinulltionnull null nullcycling the Citynullnulle nulle and nulluse of nullban nullnd, edited by Rosalyn nulleenstein and nullesim nullngu-nullyilmanull nullmbridge, nullnullnullncoln nullstitute for nullnd Policy. nullnull nullnull nullugustnull nullentral nullty Declinenullnull nullntamination Responsiblenull nullonomic nullnulllopnull ment nullarterly null nullnull nullnullnullnull nullnull nullnull nullovembernull nullrivate nullitiatives and Public Responsibility for the Redevelopment of nulldustrial nullownfieldsnullThree nullltimore nullse nulludies,nullnullonomic nullnulllopment nullarterly null nullnull nullnullnullnull nullnull nullnull. nullhe nullpact of nullntamination on the nullntonnulloutheast nullltimore nullnd nullrnullt,null nullurnal of the nullerican nullanning nullsociation null nullnull nullnullnullnull nullenta, nulln. nullnull. nullements of nullonometricsnull nullw nullornull nullcmillan Publishing. nullnullath, Daniel T. nullnull. null Innullstigation Into the Impact of nullzardous nullaste Contamination nullability on nullban Industrial nullnd nulldenulllopment in the City of Chicagonull nullicagonullnulliversity of nulllinois at nullicago, nulleat nullties nullstitute. nullyer, Peter null, and Thomas null nullyons. nullnull. nullessons nullom Private nullctor nullownfield Redevelop- ers,null nullurnal of the nullerican nullanning nullsociation null nullnull nullnullnull Page, null nullilliam, and nullrvey Rabinowitnull nullnull. nullroundwater nullntaminationnullnulls nullfects on Property nullalues and nullties,nullnullurnal of the nullerican nullanning nullsociation null nullnull nullnullnullnull Pepper, nullith null nullnull. nullssons nullom the nulleldnull nullashington, Dnull nullrtheast-nulldwest nullstitute. nullnborn nullp nullmpany. nullnull, nullnull, nullnull, nullnull. nullre nullsurance nullps, nullltimore nullty. nullicagonull nullnborn nullp nullmpany. nullmons, Robert null nullnull. nullurning nullownnulllds Into nulleennullldsnull nullashington, Dnull nullban nullnd nullstitute.

54 Brownfields nullnulland nullaley, nullmuel R. nullnull. nullnvironmental Policy and nullban RevitalinulltionnullThe Role of nullnder nullability,nullCapital nullinullrsity nullw nullnullew null nullnull nullnullnull nullnull Department of nullusing and nullban Development nullnullnull nullnull nullecembernull nullsessment of nullate Initiatinulls to nullomote nulldenulllopment of nullownnulllds. Report prepared for the nullnull Department of nullusing and nullban Development by nullnullnullnsulting. nullashington, Dnull nullnull Department of nullusing and nullban Development. nullnull nullnull. nulle nullfects of nullnullronmental nullzards and nullgulation on nullban nulldenulllopmentnull Pronullct no. nullnullnullnullnullnull. nullashington, Dnull nullnull Department of nullusing and nullban Development. nullright, nullmes null nullnull. nullsnull and nullwards of nullownnullld nulldenulllopmentnull nullmbridge, nullnullnullncoln nullnd nullstitute. nullount, nullisten R. nullnull. nullhe Organinulltional nullntenulls of Decisions to nullvest in nullvironmentally Risnull nullban Properties,nullnullurnal of nullonomic Issues null nullnull nullnullnullnull nullount, nullisten R., and Peter null nullyer. nullnull. nullannullrs, Developers, and nullw nullvestment in nullownfield nulltesnullnullvironmental nullncerns and the nullcial Psychology of Risnullnull nullonomic nullnulllopnull ment nullarterly nullnullnull nullnullnullnull

55nulltyscapenullnullnullurnal of nulllicy Development and Research • Volume 12, Number 3 • 2010 U.S. Department of Housing and Urban Development • Office of Policy Development and Research Cityscape Brownfields, Risk-Based Corrective Action, and Local Communities Peter null nullyer The nullP. nullstems nulloup, nullc. nullstract nullis article addresses the problems facing communities that suffer both ennullronmental risnull from past contamination and depressed economic actinulltynullIn such settings, redenulllopment of contaminated sites and the associated economic denulllopment may renullire compromised standards for ennullronmental mitigationnullnullis potential connullct is often resolnulld through risnullbased correctinull action on sites cleaned only for their prospectinull usenullnullt partial cleanups can be shown to face inenulltable failure at some future datenullnullus, in such an approach, communities face risnull that they need to understand and should be capable of accepting or renullctingnullnulle article considers these risnull and assesses four alternatinull land use control strategies for assuring community participation in manullng decisions about both the cleanup process today and the response to risnull of failure in the futurenull Introduction null nullnull, the nullnull nullngress passed the nullmprehensive nullvironmental Response, nullmpensation, and nullability nullt nullnullnullnull or the nullperfund nulltnull which had a number of unenullected conse - quences. The actnull draconian liability provisions improved general environmental conditions by raising the enullected costs of future contamination to businesses and by discouraging the future use of tonullns. The actnull liability provisions, however, worsened environmental nullstice inequalities and undermined urban economic development prospects. nullRnullnullmade urban regeneration in the nullited nullates more difficult and less linullly to occur because of its clear public recognition of the environmental, and thus financial, risnull posed by past pollution, regardless of cause or intent. nullRnullnullmade urban land less competitive as a site for real estate investment relative to greenfield sprawl alternatives. null a result, all null states responded to nullRnullnullwith new liability, cleanup, and development policies. The most immediate returns on remediation and redevelopment of brown-

56 Brownfields nullyer field sites nullhose with real or perceived contaminationnull however, do not accrue to the states, but to local governments, which garner new tanullrevenues and may be able to remove tanulldelinquent sites from their own property rolls nulleyer and nullnnullndingham, nullnullnull Residents and property owners in local communities enullerience an inherent connullct between economic development and environmental protection obnullctives given that stronger environmental mitigation standards raise pronullct costs and thus can slow the redevelopment process nullullard, nullnullnull null considering communitiesnullcapacities to manull rational and informed development choices, however, this article does not focus on the environmental nullstice issue that concerns nullllard and many others, but rather considers the generally limited capacity of community-based organinulltions of all types to address these brownfield tradeoffs effectively nulllair and nullrroll, nullnullnull nulligh, nullnullnull nullthough communities across the nullited nullates struggle to regenerate after economic declines produced by business closings and relocations, many confront land contamination issues that compound the problem of depressed property values. null issue of further concern, common to urban settings, is the clustering in an area of multiple nonadnullcent contaminated parcels nullcatter site brownfieldsnullthat undermine each othernull economic attractiveness nulloyle and nullel, nullnullnull nullngo and nullberini, nullnullnull nullch scattered brownfields pose special problems, butnullronicallynull they can provide a stimulus for organinulld, communitywide regeneration effortsnullno one site can be addressed by itself in an economically efficient manner because the offsite effects of the environmental problems on nearby land would continue to pose enulleptional investment risnull. The interaction effects across the multiple scattered brownfields suggest a need for policymanullng that transcends the developernull focus on a single pronullct site and addresses the broader enullernal effects on properties across communities. The fact that a clear rationale for a collective community response enullsts, however, does not imply that it will be tanulln. The danger enullsts that a community-based response to economic distress may fail to address the full range of problematic enullosures posed by the past contamination. One recently proposed agenda for community-led development, for enullmple, mentions brownfields only in passing, although the agenda focuses on nullmericanull older core citiesnullnullonulland Treuhaft, nullnullnull The real risnullis that environmental problems associated with less costly site preparations may be overloonulld in pursuit of short-term and purely economic returns, a risnullthat may increase with neighborhood or community desperation. This article presents a review of some nullnull statesnulland municipalitiesnullresponses that avoid the sacrifice of environmental obnullctives to economic gains and suggests some lessons states and municipalities may learn from each other, once socioeconomic, political, and legal differences are tanulln into consideration. The discussion begins with a review of the real estate marnullt and general economic conditions that shape the available financially viable remedial response options. nullnull, the article addresses risnullfactors that shape decisions and then discusses two manullr types of controls for environmental contaminants left in place. The article then considers the roles of time and pronullct timing, enullmining first the role of the passage of time in emerging risnull and then the issue of the time value of money in decisions about response costs to be incurred or enullected. The article then enullamines the determinants of community roles in protecting local environments, enullplores how different patterns of land ownership affect the controls and risnullmanagement capacities of a pronullct, and offers a brief conclusion.

57Cityscape nullronullnnulleldsnull Risnullnullnullased Corrective Actionnull and Local Communities Markets and Remedial Response Options nullen before property values declined from nullnull through nullnull, nullnull real estate prices, in general, were not high enough to avoid the fundamental problem of mitigation costs that completely swamped land values on some brownfields. nullban sites that enullibited a land value that was lower than the cost to prepare the property for new construction were relatively common long before the nullredit crunchnulland the marnullt enulllosion of bannulluptcies and foreclosures. The relationship between clean property values and site mitigation costs, which determines the remedial responses contemplated, is shaped in large part by the continuous pattern of enullansion of the urban fabric that is generically referred to as sprawl. To date, the nullited nullates has perceived itself as boundless, with automobile-based commuting permitting enullremely low densities of settlement, resulting in the nationnull urbaninulld area enullanding more rapidly than its population for decades, even in regions with depressed economies. null these sprawling settings, the urban centers are quite literally hollowed out, leaving sections of total land and property abandonment. Detroit, nullchigan is the archetype on some level, with multistory office towers sitting empty for decadesnullbut other older industrial centers such as nulleveland, Ohio, have seen the phenomenon of a doubling of urbaninulld land area over a null- to null-year period of decline of total county or metropolitan area population. This pattern of abandonment and the subsequent low marnullt demand for land at the center of urban areas drove down property values, thereby severely limiting the enullent of marnullt-driven pollution removal pronullcts at older contaminated urban sites. nullntamination removal efforts in the nullited nullates have been driven by the intensity nullnd densitynullof intended new land uses, but even relatively high densities could not assure a financial capacity for complete removal of all contami- nants, even when such a response was technologically possible nullhich is not always the casenull nullnew concern in the nullited nullates for nullensificationnulla marnullt shift driven initially by demo - graphic factors and now amplified by the increasing costs of automobile commuting nullmplies a more intense focus on economically viable reuse of centrally located urban lands. The renewed emphasis by the Obama administration on finding ways to reduce emissions and general energy consumption is another factor promoting increased population density and reuse of enullsting buildings because of the high energy costs associated with demolition and new construction. nully growth in the intensity of land use could drive higher property sales and rental revenues, which would render the more enullensive and complete cleanup options cost effective. nulllimit enullsts, however, to which these revenue gains can lead to complete mitigations of past pollution. The costs of remedial responses rise at a more than proportional rate with enullent of removal or treatment of contaminantsnullit generally costs less to remove the first null percent of the pollution nullear the surface, for instancenullthan the last null percent nullhat which is buried deeper or more broadly spread aroundnull null some point, removing the nenull marginal unit of pollution from the site increases costs to a level at which the developernulls current costs and revenues, not the pronullect total costs over time, may drive contamination eradication decisions, because businesses cannot sustain long periods of negative cash nullw. nullme costs associated with past contamination may be deferrable for long periods of time. nulllly monitored contaminants that may be left on site, under regulations or special enulleptions, are still

58 Brownfields nullyer linullly to generate future costs. nullt the timing of those costsnullnd the lacnullof certainty of their timing and dollar valuenullaries with the enullent to which past pollution is remediated. That timing can also be affected by the different enullosure risnull posed by the variety of pollutants on a site, which is the subnullct of the nenull section. Contaminants, Risk Factors, and Controls on Residual Pollutants Three interacting factors shape the risnull to human health and the environment associated with residual pollutants left on sitenull null The pollution itself nullypes and volumes or quantities of contaminantsnull null The damage done from enullosure to different quantities of these substances. null. The means of enullposure nullor pathwaysnull by which humans andnullor the larger ecosystem are impacted. The more diverse the minullof different contaminants on a site, the more complenullthe tonullc soup and the more difficult it becomes to determine the damage and enullosure pathways. nulll three risnull factors, however, need to be understood to be able to derive any probability estimates of the enullent of damage under different conditions of contaminant retention for a site. nullt all risnullbased correc - tive action nullnullnull responses assume that these probabilities not only can be nullown but that they actually are nullownnull The Rnullnulllogic assumes that some preventive barriers or other management tools can be used on the enullsting contamination that can nullep it from causing harm. The calculation is generally based on tanullng actions to ensure that nully risnull of harm lie below some threshold, such as innullries or death per million people enullposed. The problem with this approach is that the probabilities generally cannot be nullown. nullven the uncertainties involved, especially with minulls of contaminants on site, the data required for such risnull calculations may be logically impossible to determine with any reliability. The starting point to any risnullcalculation is to recogninull that limiting human and ecosystem enullo - sure is a nully concern if a site contains contaminants. Perhaps that is why Rnullnullfocuses on limiting factor nullnullabove through the implementation of specific controls to limit human and ecosystem enullosure to contaminants left in place. That process of constraining the linulllihood of damage relies on two forms of controls intended to limit the pathways along which risnullenullosures could occur. null the nullited nullates, these controls are referred to in Rnullnullpolicies asnull null nullgineering controls nullCsnullphysical barriers instituted to contain pollution and nullep it from surfacing or migrating to eliminate nullr constrainnullenullosure pathways. null nullnd use controls or institutional controls nullnulls or ICsnullimplemented to constrain onsite human activities to limit any possible damage to nulls and the total time on site for human enullosure to whatever substances continue to move along partially blocnulld pathways. Two points of inadequacy in this approach to controls should be immediately obvious from this description. nullirst is the issue of ecosystem damage, which is overloonulled by controls that relate only to human enullosure limitations. nullcond is the assumption that the controls can be maintained over time, when the control specifications lacnullany discussion of the costs of maintaining those controls.

59Cityscape nullronullnnulleldsnull Risnullnullnullased Corrective Actionnull and Local Communities This latter point also renullcts a failure to consider ecological interactions other than those involving humansnullnullnull may constrain human digging to protect nulls, but they cannot control the behavior of pets, such as dogs, let alone the actions of rabbits, moles, or other wild animals that dig burrows for homes or foraging paths. nullth nulls and nulls limit the enullosure pathways, but they do not fully eliminate them. null the event of failure of either nulls or nullnull, offsite neighborhood enullosures can arise, with the resulting harm concentrated on those living, wornullng, and owning property in the area, and the risnullremains into the future nullowan and nullidgen, nullnullnull nullt the real estate transactions underlying most regenera - tion efforts involve sellers, buyers, financial bacnullrs nullncluding at times state or local government economic development agenciesnull, and potentially one or more prospective end users, plus appropri- ate regulatory agencies, including financial and environmental regulators responsible for limiting aggregate risnull The site neighbors and their community, the parties most affected by the pollution risnullnullrguably those with the highest stanull in assuring Rnullnullsuccessnullre rarely given legal standing in contaminated land site preparation and reuse decisions. Time, Use, and Emerging Risks nullme current monetary costs can be avoided through a partial mitigation or by using a clean to intended use redevelopment strategy. There is, however, scant evidence that such approaches hold down total pronullct costs over time. nullrong logical and empirical grounds enullst for claiming that Rnullnullfailure is inevitable. nullither the engineering nor the land use controls currently available or installed in the past decade have been in place long enough to show that they will last the tests of time nullernstedt et alnull nullnullnull The efficacy of nullnulls over time cannot be nullnown, due both to limited past enullperience with the enullisting containment techniques and to an inability to forecast the future. The empirical finding that a barrier has lasted null years is not proof that it will last nullnullr even nullnullears. nullnsider the followingnull null nullcidental damage may result from actions of site visitorsnullr even by those of nominally informed occupants. null nulltural disastersnulloods, windstorms, earthquanulls, and the linull may cause unenullected weanullning of containments. null nullimate changesnulln temperatures and humidity levelsnullan affect the viability of caps on pollution, such as those using clay and other natural impermeable layers. null nullme maintenance of barriers may be required and enullected in plans nulluch as repairs of the surface of paved areas with asphalt or other such capsnullbut may eventually be ignored or forgotten over time. nulls are even more vulnerable, because the limits on land uses and activities depend completely on the consistency and constancy of human behavior. null nullnformation on activity and use limits may be lost over the course of real estate ownership changes. null Provisions for informing new owners are rarely codified, and even fewer regulations ensure that information about contamination is transmitted to future leaseholders and occupants.

60 Brownfields nullyer null nullformal occupancy changes and unauthorinulld site uses pose the risnullof violating the preventive controls because such parties are linullly to ignore any information that is available. null The enullent of this problem may vary, including across local authorities in those nations and states that delegate such regulatory enforcement to the local level. nullpirical evidence derived from nullnull environmental insurance marnullt data reinforces the logical claims about the inevitability of Rnullnullfailure over the longer term. nullthough pollution liability nullnull insurance policies covering a null-year term were more readily available in nullnull, by nullnull that marnullt tightened terms to offering routine nullyear policies, with premiums on null-year terms not nullust doubling but increasing to as much as four to five times what the shorter term coverage policies cost. nullaranteed renewals were available in nullnull but were not obtainable at any price in nullnull, and underwriters were enullressing a desire to push policy terms down toward the nullyear period, characteristic of nullnull homeowners and automobile insurance coverage terms. null might be enullected from these findings, the overall supply of coveragenullhe total dollar limits of insurance available for Pnull policiesnulldid not enullpand as quicnullly as the contaminated land marnullet. nulllthough the insurance companies do not report the total dollars of risnullunderwritten per product line, the availability of Pnullcoverage may have decreased as demand increased nullount, nullnullnullnullunt and nullyer, nullnullnull nullsurers manull money by underwriting risnull. Their ability to do so is a function of their capacity to accurately predict losses and charge premiums for coverage appropriate to their level of claims. The tightening of term lengths in the Pnullpolicies available in the nullited nullates must be tanulln to renullct the insurersnullinability to accurately predict claims and losses beyond a very limited period of time. The limited supply of Pnull insurance, in turn, may be read to renullect the overall lacnull of confidence of the insurance underwriters in their ability to develop better loss prediction algorithms in the future, and thus their reduced interest in maintaining a position in the Pnullinsurance marnullt. Thus, the insurers, on balance, reinforce the claim of inevitable Rnullnullfailure through their marnullt behaviors. The Remedial Response Cost Issues The inevitability of Rnullnullfailure, in turn, poses questions for the private and public parties engaged in contaminated land redevelopment and area regeneration. These issues fall into the cost-benefit analysis framewornulland finally move the argument beyond simply monetary cost miniminulltion for private real estate investors. null can posit a constant level of benefits from site redevelopment and associated urban or com - munity regeneration, provided that the pronullct offers some minimum level of protection of human health and the environment. nullogically, then, the future costs of the remedy failure have to include the enullense incurred in reproducing that minimum level of protection and compensation for any harm caused by the temporary lapse in protection.nullThus, we can consider how the probability of Rnullnullfailure shapes three facets of decisions involving pronullct costs and a policy principle regard - ing environmental cost allocation. nullrst is the issue of miniminullng the present value of total pronullct costs, which involves the timing of costs, with the total dependent on the time value of money. Rnullnullreduces current pronullct costs, but inevitable future failure means that total pronullect costs will include required future enullpenditures.

61Cityscape nullronullnnulleldsnull Risnullnullnullased Corrective Actionnull and Local Communities null the future costs of failure and repair are sufficiently high, the discount rate sufficiently low, and the failure costs occur soon enough, then the present value of total pronullct costs could well be greater under Rnullnullthan under a clean-to-bacnullround approach. nullt a regeneration strategy cannot rely on the present-value cost as a basis for decisions on which sites to address and how to address the cost of cleanup if it is completely dependent on private capital investment. The issue of cash nullw is central to private investors who face debt service or other financial obligations over time, typically sooner rather than later. The present-value-cost criterion thus leads to the issue of the distribution of costs. The enullent of public responsibility for current costs is not clear if the policy obnullctive is total-cost miniminulltion over time. null question enullsts, however, about the logic of some public involvement if a criterion other than private inter - nal rate of return manullminulltion is to be applied to remediation decisions. Once the public sectornullnd public interestnullnters into the decision and the potential resource base for regeneration, then the decision process has to pose the question of the types of costs to include. nullnetary costs are what matter most to private investors nullnd may be all that matters to themnull so ecosystem and social costs may not be relevant to their decisions. nullt which monetary costs do they facenullnullich social costs are internalinulld into the investment decision and which are enullludednullnullw are collective monetary costs nullriven by air quality, water quality, and ecosystem health effects on human health status for people living or wornullng in an areanulladdressed as distinct from individual costs nulluch as changes in housing costs and the cost to access amenitiesnull The distribution of the cost burdens gets more complenullwhen nonmonetinulld costs are added to the minull especially when such elements are social or collective, manullng it generally impossible to internalinull these elements into the investment decision. nullt nullowledge of the distributionnullnd opinions about its efficacy and equitynullre linullly to affect willingness to pay. The resulting attitude will then shape the political will to invest the public funds that may be needed to complement pri- vate investment in regeneration pronullcts. Policymanullrsnullability to enullrcise political will, moreover, may be constrained by a localitynull ability to pay and fiscal stress. This discussion enullludes the politically sensitive question of the capacity of a coherent regeneration policy intended to miniminull aggregate costs to humans and ecosystems to adhere to the nullolluter paysnullprinciple. Rnullnullapproaches that reduce current costs to private investors can provide the aura of adherence to the principle. null, however, the future costs swamp the current costs, whether or not those eventual costs are discounted, the reality may be that the broader economy and soci- ety pay, not nullst the putative polluter. The problem is unavoidable without some form of indefinite insurance coverage when the polluternullr the regeneration investor benefiting from reduced current pronullct cost under Rnullnullis no longer in business or is economically incapable of paying for the inevitable costs of remedial response failure. Community Roles in Local Public Cost Minimization The geographic effects of any future Rnullnullfailures, damages, and response costs are concentrated in the areas around the sites that still retain some pollutants. nullt, unless a conscious effort is made by a developernullr required by some public regulationnullocal community representatives are not involved in contamination management decisions associated with urban regeneration efforts.

62 Brownfields nullyer null enulleption arises when a community-based organinulltion nullnullnullis itself a party to the real estate transaction. nullighborhood residents generally want to see eyesores, abandoned buildings, and environmental enullosures removed and welcome new investment, especially in economic activities that provide even short-term nullonstructionnullnullbs. nullw real estate investment, by and large, is in the interest of all neighborhood property owners, especially if the development removes the factors that contribute to depressed property values. null the regeneration effort brings new nullbs for local residents, neighborhoods receive an even broader benefit. nullt the costs of those new revitalinullng investments may be higher than is desired for long-term environmental risnullenullosures associated with Rnullnullsite mitigations, and those higher costs present a tradeoff problem for the nullOs. The apparent connullct between economic development and environmental protection costs is not new to debates in the economics literature. nullny analysts have claimed that protecting the environment carries a substantial price by slowing rates of economic growth or by manullng current growth unsustainable nullor enullmple, nullrgensen and nulllconulln, nullnullnullRees, nullnullnull Others have argued that the connullct is enullggerated and the overall effect of environmental regulations on the economy is minimal nullor enullmple, Daly and Townsend, nullnullnullnullffe et al., nullnullnull nullt others have acnullowledged a potential problem, but demonstrated that the connullct could be avoided or muted through nulldicious choice of regulatory methods nullor enullmple, nullrraro and nullleotti, nullnullnullnullhn, nullnullnullPagiola, nullshop, and nullndell-nulllls, nullnullnull The analyses in this debate over possible connullcts, however, are generally relevant only to econom - ic aggregates such as states or nations. The tradeoffs in depressed communities nullometimes very small sections of localitiesnullare much starnullr, because the effects involve location decisions internal to a larger economy. The presence of contaminated sites, from a marnullt perspective, may not be the primary deterrent to new investment, given localinulld social problems, locational disadvantages, and other factors nullalnullr et al., nullnullnull The pressure to limit the stringency of cleanups in such areas is driven by an enulleptionally high, immediate short-term need for nullbs and income but is confounded by the unequal enullosure to environmental risnull nullee nullllard, nullnullnull Disregarding the specific tactics that might be pursued, basically nullst two options enullst for nullOs and others confronting the dual problem of economic need and environmental risnull when partial site remediations are proposed under Rnullnullstandards. The first option is opposition and the second is acceptance, with some effort to monitor environmental conditions over time to ensure the nulls and nulls are not breached and the remedy is wornullng and preserved as long as possible. nullich response is preferred or adopted is linullly to be a function of both the community and its organinulltional capacities and the specifics of the particular regenerative pronullct, including factors such as the followingnull null The sinull of the pronullct and enullected local effects, especially the positive and negative enullernalities enullected by the community and residents in the short term. null Previous property ownership and the new owners, occupants, or facility users, especially if the new owners are perceived as more community-rooted or locally involved than the previous ones. null The legal disclosure or hearing requirements for new land uses, planning permissions, and the linull, especially to the enullent that they provide any reductions in uncertainty and perceived risnull to the community.

63Cityscape nullronullnnulleldsnull Risnullnullnullased Corrective Actionnull and Local Communities null The enullent to which some community is organinulld and recogninulld as having legal standing, and especially its enullerience in successfully innullencing redevelopment pronullcts and protecting local interests in the past. null The enullent of unanimity of community voice, especially regarding agreement on the tradeoffs between local environmental protection and economic opportunities. Community Land Ownership and Potential Control The linulllihood that a community facing such a pronullct sees resistance as its only possible response to an enullernally driven regeneration effort based on partial site mitigation will depend on the enullent to which local residents and landowners can affect or control remediation decisions. That control, in turn, can be provided through community land ownership, an approach that may contribute to the economicnullot nullst the political and socialnulliability of the redevelopment effort. null brienull enullmine four means by which such control might be transferred in whole or in part to communities, giving them a means for enullrcising voice, a stanull in remediation and regeneration, and a capacity for monitoring and protecting themselves over timenull null nullaseholds. null nullmmunity shares. null nullcial housing trusts and associations. null Transfer of risnullownership. nullguably, all these forms of land ownership or control could be enullrcised by a nullO, but a previous organinulltion with a broader mandate need not enullst. nullngle-purpose entities, or even the actions of individuals, not of community institutions, may suffice to provide means of control. null enullmine each in turn. nullaseholds The separation of the ownership of land from title to the buildings on the land is common in many countries but rare in the nullnited nulltates. null relatively new but growing null.null. institution, the nullommunity nullnd Trust nullnullnull has pioneered the use of retained title to land as a means of ensuring that low- income housing in high-value or rapidly growing real estate marnullts does not become inaccessible when households that bought the lower cost homes capitalinull on their rising home values over time. nullities have begun to recogninulle the value of nullnullTs to their regeneration and low-cost housing provision efforts, and the model is enullpanding in the nullnited nulltates nullDavis and nullacobus, nullnullnullnullnull. nullparation of the landholder from the owner of the premises built on the surface provides the trust with a source of income from the rising property values to use in financing new low- and moderate-income housing. That is the organinulltionnull rationale for the land ownership. The trustnull continued title holding, however, also offers the following benefits in terms of a capacity to manage risnullbased corrective actions on contaminated landnull null null provides a partynullhe trustnullwith a long-term economic self-interest in preserving land value, which does not arise in freeholds with recurrent and unpredictable changes in title.

Brownfields

64 Brownfields nullyer null The trustnulls stable, longer term interest and control can reassure other parties in the transaction that are concerned with pronullct uncertainties, potentially leading to both lower cleanup demands from regulators and improved access to nullnd lowered costs ofnullredevelopment capital from lenders and other financiers. null null holding and leasing the land, the trust lowers the current capital costs for developers nullince they do not need to purchase the landnullat the precise point at which reducing current enullenditures is most important to pronullct economic viability. null These combined effects may promote site reclamation and redevelopment in property marnullts that would not otherwise support remediation costs. nullmmunity Shares nullst regeneration efforts involve some sort of public-private partnership. The most common form of this relationship involves a public subsidy for a private investment that, presumably, would not otherwise occur. The subsidy is nullstified in terms of public benefits from the private pronullctnull however, those benefits are the effects enullerienced across the entire political aggregate providing or sponsoring the support. The immediate neighborhood of the pronullct may not gain from the invest - ment and may even lose, as in the case of gentrification. This matter of divergent public interests has led to an effort to incorporate community benefit agreements into development plans using large public subsidies or special planning provisions nullanullmusa, nullnullnullnulloss, nullnullnullnulllnulln, nullnullnull The benefits pursued tend to be focused on provi - sion of nullbs and housing for area residents, and, more broadly, some protection from the negative effects of rising local property values on low- and finulld-income residents, but they may include some environmental provisions, or at least access to decisions on remediation plans. One spinoff from this concept nullctually dating bacnullto the idea of community development corpo - rations nullnullDnullsnull, originally conceived during the null.null. nullar on Poverty of the nullohnson nulldministration in the nullnullsnullis the sale of community shares in the pronullct, with associated voting rights and voice nullobinson, nullnullnull nullares are offered at unit costs affordable to local residents andnull null nully be sold to residents, enullsting property owners, or others interested in the neighborhood nullnd often get sold to previous residents who have moved awaynull null nulln enable the articulation of interests in the community that are longer term than those of for-profit pronullct investors. null nully be structured as special shares that do not participate in all investment risnull or proceeds. null nully mimic leaseholds, with even minority interest holdings in the total land or pronullct values. null nully, by providing a basis for articulating local interests and ongoing capacity for public disclosure of pronullct decisions and activities, lower community resistance and thus ease the pronullct development and approval process.

65Cityscape nullronullnnulleldsnull Risnullnullnullased Corrective Actionnull and Local Communities Social Housing nullrusts and nullsociations nullthough some housing and land trusts have recently emerged in the nullited nullates, nullrope has a long tradition and a varied practice of social housing, well articulated in the form of what are nullown in nullitain as nullousing associationsnullnullall, nullnullnull null the nullited nullates, these associations may be at-arms-length local housing agencies with municipal support or more independent local nonprofit agencies providing housing at below-marnullt rates. nullny are real estate subsidiaries of nullnull. nullalogous to the land trusts, associationsnull null nulle long-term property holders. null nullt on behalf of their members and residents, and they, in turn have direct voting rights, generally as members of a cooperative, which gives them more direct involvement and access than in the case of a separate land trust as landowner. null nullve an interest in protecting against contamination risnull on behalf of the residents, as members with economic and human health concerns. null nullst maintain their financial viability and borrowing capacity over time and, thus, must protect the integrity and marnullt value of their assets. null nullve the capacity and motivation to control environmental response decisions in reclamation and regeneration. nullransfer of RisnullOwnership null the contenull of the in-perpetuity liability risnullthat nullRnullnullimposed in the nullited nullates, a marnullt has developed for parties willing to accept those low-probability but high-cost risnull for enull - tended periods of time nullalland, nullnullnullnullnullrtney, nullnullnull nullparty with some or all responsibility for past contamination on a site can pay a fee to another organinulltion that will accept the transfer of that legal obligation. null effect, the ownership of the risnull along with funds to manage the risnull and to insure against remaining uncertainties, is transferred to a new party by the originally re- sponsible party, that can then walnullaway from the problem nullernstedt et al null nullnullnull This transfer creates a new legal interest in the site, that of the risnullaccepter, and that interest thennull null nullnerates a long-term interest by the new risnullownernulln interest that, by legal design, does not dissipate or decline with the sale, change of occupancy, or new use of the property itself. null Provides legal recourse and a new responsible party that can be held accountable by current and future property owners, community members, and site residents or occupants, provided the identity of the new responsible party is made nullown nullhich should be an element of the risnull transfer agreementnull null nullds the cost of paying for the liability transfer to the initial pronullct costs, requiring more upfront capitalinulltion than would be required without the risnulltransfer. null Remains vulnerable in the future to uncontrollable nullnd offsitenullchanges in the economic or financial condition of the new risnullowner and its insurernullnull

66 Brownfields nullyer null other words, even if the risnullaccepter is the local community andnullr its agent, this fourth approach to providing for long-term stewardship of an Rnullnullsite may remain inferior to the preceding options, if only because of its cost. The purer marnullt solution, in this case, appears to be inferior when viewed from the communitynull perspective. Neighborhood Power: The Value of True Devolution The fourth option above is inferior to the three preceding it, in part, because it does not fully tanull advantage of the benefits from neighborhood power by not really devolving the control to the local level. nulle can summarinulle the derivation of this conclusion in the following simple logical progressionnull null nullewardship is needed over time for all sites that are cleaned for use and leave some contaminants in place. null nullgally available ownership forms will vary acr oss nullrisdictions, but options always enullst for providing some form of ownership shares and associated interests to residents and others with long-term stanulls in the area, and thus the site. null nulles on the ground ar e always needed to monitor ongoing and changing land uses and to identify activities or events than might threaten engineered controls, and to spot evidence of control failures. null nullch local eyes always have the most self-interest, in their r oles as residents, occupants, or property owners, but these individuals may not have access to property management data and decisions nullor, at times, the nullowledge to act on that type of informationnull null nullcal eyes in the form of interested individuals or or ganinulltions are not sufficient in themselvesnull they must also have the necessary organinulltional capacities to fulfill stewardship roles. null nullmmunity involvement, when the local eyes have both the access to information and the nullowledge and institutional capacity to use it, can lower the costs of both the regeneration pronullct and the needed stewardship, thus enabling both private developers and public redevelopment bodies to avoid enullenses and risnull they would otherwise have to incur. Providing greater capacity for communities and community members to act is a logical approach to ensuring long-term stewardship for Rnullnullsites and monitoring of residual contamination of any clean-to-use regeneration pronullct. This approach requires the state to provide at least some residents or their agents the legal standing required to tanull action through ownership, noted in item nullnullabove. nulling the residents as stewards, however, also requires that their capacity to act coherently is assured through public provision of needed tools, as noted in items nullnulland nullnull nullclear need remains for a strong public role in contaminated land regeneration. nullrst, the standards for site mitigation and control of contaminants need to be set at the nationalnullf not transnationalnullevel, where the application of scientific nullowledge is not undermined by local economic desperation. nullcond, the tools for neighborhood action, as previously noted, need to be provided at the state or national levelnullthe elected and appointed officials in many localities are linullly to consider empowered community residents and organinulltions a threat to their powers, so requirements giving neighborhood representatives legal standing in Rnullnulldecisionmanullng processes will remain a necessity.

67Cityscape nullronullnnulleldsnull Risnullnullnullased Corrective Actionnull and Local Communities nullnullowledgments The author thannull the editorial reviewers for Cityscape for constructive comments and suggestions that definitely improved this argument. Remaining errors and omissions are the authornulls responsibility. nulltnullr Peter null. nulleyer is the president and chief economist with The null.P. nullystems nullroup, nullnc., and professor emeritus of urban affairs and economics at the nulliversity of nulluisville, where he ran the nullnter for nullvironmental Policy and nullnagement. null has been engaged in research on brownfield issues for the Department of nullusing and nullban Development, the nullvironmental Protection nullency, and the nullonomic Development nullministration since the mid-nullnulls. nulls firm focuses on energy, climate change, and related environmental and economic policies. Renullrences nullll, nullchael. nullnull. nullCnullnullropean nullusing nullnullew 200null. nullndon, nullited nullngdomnullRoyal nullstitute of nullartered nullrveyors. nullnullmusa, nullrtanull null nullnull. nullmpowering nullmmunities Through DeliberationnullThe nulldel of nullmmunity nullnefits nullreements,nullnullurnal of nullanning nullucation and nullsearch null nullnull nullnullnullnull nullair, nullhn P., and nullchael null nullrroll. nullnull. nullnner-nullty nullighborhoods and nulltropolitan Development,nullnullonomic nullnulllopment nullarterly null nullnull nullnullnullnull nullyle, nulllissa, and nulltherine null nullel. nullnull. null nullrvey of nulluse Price nulldonic nulludies of the nullpact of nullvironmental nullternalities,nullnullurnal of nullal nulltate nullterature nullnullnull nullnullnullnull nullllard, Robert D. nullnull. nullmart nullowth nullets nullvironmental nullstice.nullnull nullowing nullarternull nullhienullng nullnullble Communities, nullnullronmental nullstice, and nullgional nulluity, edited by R.D. nullllard. nullmbridge, nullnullnullssachusetts nullstitute of Technology Pressnullnullnullnull nulllland, Dean null nullnull. nullnvironmental nullability Transfer Pronullctsnullnullnullllernullnullwnernull Perspective,null nullnnullironmental nullransactions and nullrownnullelds Committee Newsletter nullnullmerican nullar nullssociationnull nullnull nullnullnullnull nullnullnull. nullrraro, nullrlo, and nullrnullo nullleotti. nullnull. nullconomic nullowth, nullternational nullmpetitiveness and nullvironmental ProtectionnullRnull and nullnovation nullrategies nullith the nullRnullnulldel,null nullergy nullonomics null nullnull nullnull. Daly, nullrman, and nullnneth null Townsend, eds. nullnull. Valuing the nullrthnullnullonomics, nullology, nullhics. nullston, nullnullnullssachusetts nullstitute of Technology. Davis, David null, and Ricnullnullcobus. nullnull. nulle Citynullnull nullrtnershipnullnullnicipal nullpport for Community nullnd nullustsnullPolicy nullcus Report null. nullmbridge, nullnullnullncoln nullstitute of nullnd Policy. nullnull Radhinull null, nullrah Treuhaft, and Regan Douglass. nullnull. nullared nullosperity, nullronger nullgionsnullnull nullenda for nullbuilding nullericanull nullder Core Citiesnull Oanulland, nullnullPolicynullnnull httpnullnullww.policylinnull orgnulldfsnullorenullties.pdf nullccessed October null, nullnullnull

68 Brownfields nullyer nulloss, nulllian. nullnull. Community nullnenulls nullreementsnullnullnullng nullnulllopment nullonullcts nullcountablenull nullshington, Dnull nullod nullbs nullrst. httpnullnullww.goodnullbsfirst.orgnulldfnullbanullnullfinal.pdf nullccessed nullptember null, nullnullnull nullhn, Robert null nullnull. nullconomic Prescriptions for nullvironmental Problemsnullnullw the Patient nullllowed the Doctornull Orders,nullnulle nullurnal of nullonomic nullrspectinulls nullnullnull nullnullnull. nullffe, nullam null, nulleven R. Peterson, Paul R. Portney, and Robert null nullavins. nullnull. nullnvironmental Regulation and the nullmpetitiveness of nullnull nullnufacturingnullnullat Does the nullidence Tell nullnull nullurnal of nullonomic nullterature null nullnull nullnullnullnull nullrgenson, Dale null, and Peter null nulllconulln. nullnull. nullnvironmental Regulation and nullnull nullonomic nullowth,nullnulle nullNnullnullurnal of nullonomics null nullnull nullnullnullnull nulligh, nullncey null nullnull. nullomoting nullre nulluitable nullownnullld nulldenulllopmentnullnullomising nullproaches for nullnd nullnnull and nullher Community nullnd nullnulllopment nulltities. nullmbridge, nullnullnullncoln nullstitute of nullnd Policy. nullngo, nullberto, and nullna nullberini. nullnull. nullhat nulle the nullfects of nullntamination Risnull on nullmmercial and nulldustrial Propertiesnullnullidence nullom nullltimore, nullryland,null nullurnal of nullnullronmental nulllicy and nullnagement null nullnull nullnullnullnull nullcnullartney, nullinulle. nullnullnullnull. nullnullnvironmental nulliability Transfer Pronullectsnull null nulluyernulls Perspective,null nullnnullironmental nullansactions and nullownnulllds Committee Newsletter nullmerican nullr nullsociationnullnull nullnull nullnull nullyer, Peter null, and null nullde nullnnullndingham. nullnull. nullclamation and nullonomic nullgeneration of nullownnulllds. Reviews of nullonomic Development nullterature and Practicenullnull. null nullshington, Dnull nullnull nullonomic Development nullministration. Pagiola, nullefano, nullshua T. nullshop, and nulltasha nullndell-nulllls. nullnull. nulllling nullrest nullnullronmental nullrnullcesnullnullrnulltnullased nullchanisms for Consernulltion and nullnulllopmentnull nullndon, nullited nullngdomnull nullrthscan. Rees, nulllliam null nullnull. nullconomic Development and nullvironmental Protectionnullnull nullological nullonomics Perspective,nullnullnullronmental nullnitoring and nullsessment nullnullnullnullnull Robinson, nullsa. nullnull. nullrnullt Creenullnullazanullnullward nullsident nullnership of Neighborhood Change. Oanulland, nullnullPolicynullnnull httpnullnullww.policylinnullorgnulltfnullfnullnullnullcnullnullnullbbnull-nullnull-anullnull ecanullbfnullafnullnullnullnullnullTnullnullnullnullnullnullnullnull.PDnull nullccessed nullptember null, nullnullnull Rowan, nullorge T., and nullnthia nullidgen. nullnull. nullrownfields and nullvironmental nullsticenullThe Threats and nullallenges of nullntamination,nullnullnullronmental nullactice nullnullnull nullnullnull nulllnulln, Patricia null nullnull. nullderstanding Community nullnenull nullreementsnullnullportunities and nullaps for nullenullelopers, nullunicipalities and Community nullrganizationsnull nulllbany, nullnullnull nulllbany nullaw nullchool, nullovernment nullw nullnter. nullcial nullience Research nulltwornull httpnullnullapers.ssrn.comnullolnullpapers.cfmnullbstractnull idnullnullnullnull nullccessed nullptember null, nullnullnull

69Cityscape nullronullnnulleldsnull Risnullnullnullased Corrective Actionnull and Local Communities nulllnullr, nullris, Patricnullnullnullll, nullarles nullrtch, nullinullbeth nullllaton, Peter null nullyer, and nullisten R. nullunt. nullnull. nulle nullfects of nullnullronmental nullzards and nullgulations on nullban nulldenulllopmentnull nullshington, Dnull nullnull Department of nullusing and nullban Development, Office of Policy Development and Research. httpnullnullww.huduser.orgnullublicationsnulldfnullfield.pdf nullccessed nullptember null, nullnullnull nullernstedt, nullris, Peter null. nulleyer, Tom Dinullon, nullristen R. nullount, and Poulomee nullasu. nullnullnullnull. nullnulliability and the nullng Termnullnullfects on nullstainable nullban Regeneration in the null and nullnullnullnull nullwards nullore nullffectinulle and nullustainable nullrownnulleld nullenullitalisation nullolicies, edited by Detlef nullrimsnully, et al. Dessau, nullderal Republic of nullrmanynullnullderal nullvironment nullency nullrmanynullnullnullnull nullrnstedt, nullis R., Peter null nullyer, nullna nullberini, and nulluren nullberle. nullnull. nullncentives for Private Residential nullownfields Development in nullnull nullban nulleas,null nullurnal of nullnullronmental nulllicy and nullnagement null nullnull nullnullnullnull nullunt, nullisten R. nullnull. nullnullronmental Insurance nulloducts nullailable for nullownnulllds nulldenulllopmentnull 1nullnull nullghland nullights, nullnullnullrthern nullntucnull nulliversity for the nullnull nullvironmental Protection nullgency nullnullPnullnull. httpnullnullnullwww.epa.govnullbrownfieldsnullinsurancenullinsrepnullnull.pdf nullaccessed nulleptember nullnull, nullnullnullnullnull. nullunt, nullisten R., and Peter null nullyer. nullnull. nullnullronmental Insurance nulloducts nullailable for nullownnulllds nulldenulllopmentnull00null nullghland nullights, nullnullnullrthern nullntucnull nulliversity for the nullnull nullvironmental Protection nullency nullPnull. httpnullnullww.brownfieldstsc.orgnulldfsnullnvironull insurancenullnullnullpdf nullccessed nullptember null, nullnullnull nullditional Reading De nullusa, nullristopher. nullnull. nullhe nulleening of nullownfields in nullerican nullties,null nullurnal of nullnullronmental nullanning and nullnagement null nullnull nullnullnullnull Dewar, nullrgaret. nullnull. nullelling TanullReverted nullndnullnullssons from nulleveland and Detroit,null nullurnal of the nullerican nullanning nullsociation null nullnullnullnullnullnull nulling, Reid, nullith nullrtholomew, nulleve nulllnulllman, nullrry nulllters, and Don nullen. nullnull. nullowing Coolernullnulle nullidence on nullban nullnulllopment and Climate Changenull nullshington, Dnull nullban nullnd nullstitute. nullnullrthy, nullnda. nullnull. nullhe nullownfield Dual nullnd-nulle Policy nullallengenullReducing nullrriers to Private Redevelopment nullile nullnnecting Reuse to nulloader nullmmunity nullals,null nullnd nulle nulllicy null nullnull nullnullnullnull nulltional nullsociation of nullcal nullvernment nullvironmental Professionals nullnullnullPnulland nullrtheast-nulldwest nullstitute nullnullnullnull nullnull. nulllocnullng nullownnullldsnullnullys to Community nullnulltalizationnull nullshington, Dnull nulltional nullsociation of nullcal nullvernment nullvironmental Professionals and nullrtheast-nulldwest nullstitute. httpnullnullww.resourcesaver.comnulllenulloolmanagernull nullstomOnullnullnullnullnullnull.pdf nullccessed nullptember null, nullnullnull

70 Brownfields

71nulltyscapenullnullnullurnal of nulllicy Development and Research • Volume 12, Number 3 • 2010 U.S. Department of Housing and Urban Development • Office of Policy Development and Research Cityscape Field Survey of HUD Site Contamination Policy Eugene Goldnullrb nulliversity of nulllinois at nullicago nullstract nullom 2000 through late 200null the housing arm of the nullnull nullpartment of nullusing and nullban nullnulllopment nullnullnull nullderal nullusing nullministration nullnullnull recommended a nullignullonullleannullapproach for contaminated sites rather than the risnullbased correctinull acnull tion nullnullnull approach fanullred by the nullnull nullnullronmental nullotection nullency and state Voluntary Cleanup nullogramsnullnullst ofnulles followed nullnullnulls dignullonulllean guidance and did not appronull pronullcts on brownnullld sitesnullnullme, howenullr, tried to promote redenulllopment of housing on brownnullld sites by following nullCnull nullis article, based on a 200nullsurnully of nullnullnullld ofnulle practice, discusses the issues encountered when nullld ofnulles tried to resolnull, on a casenullynullase, pronullctnullenulll basis, the connullct between site contamination and brownnullld redenulllopmentnull Introduction null nullnull, after almost nullyears during which the nullderal nullusing nullministrationnull nullnullnullnullnullig-to- cleannull policy differed from the null.null. nullnvironmental Protection nullgencynulls nullnullPnullnullsnull risnull-based corrective action nullRnullnullnullnull approach, the null.null. Department of nullousing and nullrban Developmentnulls nullnullnullDnullsnull Office of Policy Development and Research nullDnullnullcommissioned a study of nullDnull nullte nullntamination Policy nullnull PDnull, nullnullnull nullthough nullD environmental regulations allowed for risnullbased cleanups nullnullnullR null.nullinullnullnull chapter nullof the nullltifamily nullcelerated nullocessing nullnullnullnullide did not recommend nullnullnullltifamily nullbs null accept property for firm commitment where a site con- tamination problem had been nullapped or paved overnullnullnull nullusing, nullnullnullnullction nullnullnullnor to accept properties nullith testing, nullshing, or monitoring wells in operationnullnullnull nullusing, nullnullnull nullnullnull The nullnulland state nullluntary nulleanup Programs nullnullsnullfavored a risnullbased approach to corrective action that would allow the use of engineering barriers and institutional controls on brownfield sites. The nullnull study enullmined the difference between nullnulland nullnullpolicies and null nullnullnullltifamily programs are administered by null nullltifamily nullbs strategically located around the country.

72 Brownfields Goldnullrb recommended that nullnull nullltifamily nullusing should permit the use of risnullbased methods, including institutional and engineering controls,nulland should also upgrade its risnullmanagement capabilities nullnull PDnull, nullnullnullnull-null. nulltil nullD revised the nullnullnullide in late nullnull to allow for the Rnullnullapproach to site cleanup, the dig-to-clean policy set forth in nullction nullnull of the nullnullnullide was waived only on limited occasions and then with great caution. nullcause it was neither statutory nor regulatory, the nullide could be waived, but the burden would then be upon the nullnullunderwriter to clearly set forth in the record the reasoning behind each pronullct-level waiver. The purpose of the nullnull study was to survey field practice and ascertain how nullD staff were coping with the challenge of promoting development in older urban areas with their high incidences of site contamination, given the fact that this dig-to-clean policy made it difficult for the housing arm of nullD to support brownfield redevelopment. nullnullD has always been a heavyweight in the brownfield arena. nullts nullagship nullommunity Development nullocnullnullant nullDnullnullprogram pumps about null billion dollars annually into local government pronull - ects to benefit low-income null and slum and blighted nulltypically brownfieldnull null areas. nulliscal year nullnullnullnull nullnullnullnull data, for instance, showed more than nullnull million spent on property acquisition nullncluding null.null million spent specifically on brownfield cleanupnull nullnull million on various economic development activities that included commercialnullindustrial rehab and construction, acquisition, and infrastructurenull nullnullmillion on housing constructionnullnullnull million on nullction nullnullloan repaymentnulland null.nullbil - lion on public improvements. null null is reasonable to infer that much of this nullnull funding supported brownfield redevelopment. nullD funding for brownfield pronullcts far enulleeds that of other agencies, but nullD allocation decisions are made locally, when local governments divert a portion of their entitlement grants to specific brownfield pronullcts, whereas nullnullfund allocations are made at the federal level when funds are awarded to specific nullnullbrownfield program applications. nullusing is an important part of the brownfield equationnullin todaynull post-industrial society, housing is often the highest and best use of the obsolete industrial buildings andnullr undersinulld parcels that are near the central city. null mid-nullnull, the nullrtheast-nulldwest nullstitute surveyed the states to determine the level of benefits they were ennullying through the redevelopment of brownfields. That survey confirmed what case enullmples and pronullct anecdotes had suggestednullhat residential reuse of brownfields was an increasingly viable option in many communities. nullthough survey responses showed that only a few states tracnullspecific types of brownfield investments nulluch as housingnull nulllifornia reported that nullnullnullnew housing units had been developed on brownfield sites, nulllorado attributed nullnullnullnew units to pronullcts that gained approval through its nullP, and nullchigan documented nullnullnullnew units at null different brownfield sites across the state nullartsch and Dorfman, nullnullnull null null general, null percent of nullnull must be spent in low-income areas nully census tractsnullareas where brownfields are often foundnullnd, after paying for administration, the remaining funds may be spent on brownfield nulllum and blightednullareas. null null nullR nullnullnullbpart nullnulligible nulltivities was revised in nullnull nullnullnull nullnullnull to clarify the eligibility of brownfield cleanup, development, or redevelopment within enullsting program eligibility categories. null httpnullnullww.hud.govnullfficesnullpdnullommunitydevelopmentnulludgetnullisbursementreportsnull.

73Cityscape Field Survey onullnullnullSite Contamination Policy nullnullnullltifamily programs have operated since the nullw Deal. The theory is that if nullnullprovides mortgage insurance to private sector lenders, these lenders are more linullly to enullend credit to meet rental marnullt demand. The nullnullinsured loan is often the critical linchpin that holds complenull layered affordable housing financing together. One of nullnullnullnulls goals is to nullenullpand access to affordable private marnullt housingnullnullnull, nullnullanull nullnullhas insured between null.nulland null.nullbillion in multi- family mortgages every year since nullnull, with a high of null.nullbillion in nullnull, a low of null.nullbillion in nullnullnullnull, and nullnull.nullnull billion nullrepresenting nullnull,nullnullnull dwelling unitsnull in nullnullnullnull, the latest full year reported nullnull nullusing nullnull nullnullnull nullthough nullnullunderwrites only a small share of the rental marnullt nullnull, nullnullbnull nullnullmarnullt-rate rental units house a substantial number of low- and moderate- income people. null null nullnull, nullnullapproved nullnullloans that also had nullw-nullcome nullusing Tanull nulledit nullnullTnull

financing. Those loans represented appronullmately null,nullnullunits, with more than null percent of those units housing very low-income families. nullny of the nullnullnullpronullcts also use other nullD programs, such as nullnull, nullnull, and nullPnullnull funds, in their financing structure. nullny nullnullpronullcts have units that house tenants that are subsidinulld by the nullction nullrental hous - ing assistance program nullnull, nullnulldnull The restrictive dig-to-clean null housing policy set forth in the nullnullnullide did not seem consistent with nullnulls mission to support affordable housing, because it made it more difficult to find sites in older urban areas andnullr to support the added cost of dig-to-clean cleanup. nullw did nullnullconceive of this dig-to-clean policy that eliminates many previously developed sites from consideration for housing usenullnull the late nullnulls, nullD quicnully responded to the nullve nullnal crisis null by promulgating nullnullD nullotice nullnull-nullnull before enactment of the nullomprehensive nullnvironmental Response, nullompensation, and nullability nullt nullnullnullnull or the nullperfund lawnull in nullnull. nulltice null-null nullnullnull, drafted before the subsequent nullRnullnullnullperfund framewornullhad tanulln shape, called for nullD nullo tanull consis - tent actions when responsibilities are shared by several agenciesnulland for nullD staff to enullmine nullll pertinent material,nullrenullct sites that posed nullerious health risnull,nulland request that nullnullreview sites with nullotential or possible enullosure.null null null the early nullnulls, after more than a decade of the development of nullperfund practice and not much substantive review of site contamination as part of its environmental review process, nullDnull Office of nullusing recogninulld that mortgage processing had to be modified to renullct the current reality where Phase nullnullvironmental nullte nullsessments nullnullsnullhad become standard practice. null nullnull, nullD nulltice null-null required the sponsor to submit due diligence documentation and remediation before any nullD approval, null unless the pronullct had received preapproval from the applicable government cleanup agency. null null nullnull, this requirement was further modified when nullD issued the nullnullnullide and included the dig-to-clean standard null The phrase dig to clean is used in this report as shorthand for the nullP nullction nullnull requirement that nullnull will not accept property for firm commitment where a site contamination problem has been capped or paved overnullnullnull nullusing, nullnullnull nullction nullnull. null null nullnull, when state and federal authorities declared a federal health emergency at the site of a former chemical landfill that had been redeveloped with a school and housing in nullve nullnal, nullw nullornull all federal agencies were asnulld to enullmine their procedures relative to site contamination. null nullD nulltice null-null nullee appendinullnullin nullD PDnull, nullnullnull null This requirement meant this cleanup was funded by sponsor equity. null nullD nulltice nullnull-null nullee appendinullnullin nullD PDnull, nullnullnull

74 Brownfields Goldnullrb in its section on site contamination. null null nullnull, nullP lenders were underwriting null.nullpercent of basic nullnullmortgage insurance applications nullersus null.nullpercent in null nullnullnullnullnull, nullnullcnull The nullnullnullide instructed lenders to adhere to strict dig-to-clean standards by prohibiting the use of engineering barriers nullo capping or paving over contaminationnulland monitoring wells. null addition, in nullnull, nullD modified the processing instructions for the nullction nullnullnullpportive nullusing for the nullderly Program and the nullction nullnullnullpportive nullusing for Persons with Disabilities Program to require dig-to-clean treatment of contaminated sites. null nullthough the early nullnulls saw the birth of the brownfield program at nullnull it is important to remember that, at that time, the archetypal images were contaminated pronullcts, such as nullve nullnal, that posed health risnull. Transactional lawyers were also raising the legal possibility of nullnulls stepping in to remove the contamination and then going to court with potentially responsible parties nullRPsnullto be reimbursed for the cleanup. null a few high-profile cases, null lenders not only lost the value of their security null but also were held accountable for reimbursing cleanup costs as PRPsnull nullcause nullD is a large organinulltion involved in many real estate transactions, the Department was involved in cases in which it or its program participants were held liable. nullny nullD affordable housing programs use the worst sitesnullites that no one else wants. nullD, as a federal agency, has a duty to ensure that minority and low-income residents are not dispropor- tionately affected by redevelopment of contaminated sites. null null addition, when developing its site contamination policy, the Office of nullusing saw its role as protecting not only potential residents but also the financial solvency of the nullnullmortgage insurance fund. nullnulltanulls pride in being a government program that pays for itself through sound analysis and mortgage insurance premi- ums. null long as the default rate stays low, everything is onullynullnullDnull endorsement of unacceptable risnull would put the entire nullnullmortgage insurance program in nullopardy. nullth this perspective in mind, the Office of nullusing crafted a policy that allowed nullD to approve brownfield sites that had been completely cleaned up nullia the dig-to-clean approachnullbut not to approve sites where the problem had been capped or paved over. nullDnull rationale was that, although nullnullwas designed to insure financial risnull that the conventional marnullt was unwilling to tanull nullnulls there a marnullt for multifamily housing at this unproven locationnullnull it was nullot nullnulls role to tanull environmental risnullnull null nullonnullsnull, nullnullnull nullnversely, some were concerned that this policy, more restrictive and conservative than the one favored by nullnull would manull it difficult to support housing on brownfield sites, particularly at a time when brownfield redevelopment of minulld-use, walnullble communities was being touted as the road to sustainability. null nulle nullnull and nullnull processing instructions in appendinullnullin nullD PDnull nullnullnull. null nullr enullmple, nullited nullates v. nulleet nullctors Corpnull, nullnullnull.null nullnull nullnullh nullr. nullnullnull null The value of the foreclosed property was lower after it was identified as a contaminated parcel. null nullecutive Order nullnullnullof nullbruary null, nullnull, nullederal nulltions To nulldress nullvironmental nullstice in nullnority Populations and nullw-nullcome Populations,nullcommonly nullown as the nullvironmental nullstice nullecutive Order. null nullterview nullonnullsnull, nullnullnull

75Cityscape Field Survey onullnullnullSite Contamination Policy Issues This survey of field office practice raised a number of significant issues relating to nullD field office participation in brownfield redevelopment. Low Level of Awareness null an e-mail survey, to which null percent of the nullnullnullltifamily nullbs responded, when asnulld to report about their enullerience with brownfield pronullcts, including renullctions, most nullnullpercentnull had nullothing to report,nulleven when brownfields were defined very broadly, as in the nullRnullnull nulluperfundnulldefinitionnull null The nullnull nullownfield nullatute nullnullnullnullnullnull defines brownfield to mean real property, the enullansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hanullrdous substance, pollutant, or contaminant. nullveral possible enulllanations for this response enullst. null nulltivity was tanullng place in fringe nullndeveloped greenfieldnullareas. null most growth was tanullng place in fringe areas, then greenfields, with no site contamination, would not raise site contamination issues. null nullnull, the nullnullnullommittee On nullvironmental nullsuesnullnull subgroup of the nullb Directorsnullreported that some field offices, particularly those in the nullest, did not report site contamination as an issue that affected their day-to-day operations. null nulleld offices did not recogninull site contamination issues. nullme offices reported nullo brownfield pronullcts,nullyet either reality checnull with third parties, such as the state or nullnull or followup interviews, indicated that the office had processed brownfield pronullcts. nullery office in the followup oral interview had at least one brownfield encounter. nullme offices thought that nullrownfieldnullwas an official state designationnullothers did not realinull that a site that is not contaminated could be a brownfield because no one is willing to invest the time, energy, and funds to characterinull its problems. null nullnullnulls brownfield program, many sites have been freed for development after the nullnullfunded site characterinulltion identified either no or minor recogninulld environmental conditions nullnullsnull null nullownfield pronullcts were processed by state housing finance agencies nullnullnullnullthrough nullnullnulls Risnull nullare program. null a state nullnullperforms environmental processing pursuant to null nullR null under the Risnullnullaring program, they are not subnullct to nullP guidance. During the reality checnull it became evident that more than one brownfield pronullct was processed by the state nullnull nullother way of enulllaining the responses to the survey is by relating them to one of the manullr findings of the nullDnullDnull nullnull studynullhat nullD has limited capacity and enullertise to deal with site contamination problems. nullny offices appeared not to recogninull that they were dealing with brownfield sites and many did not manull full use of their environmental staff to review and analynull those sites. nullme offices toonullthe statenull approval as evidence that the site had been cleaned up to null null nullnullnull nullnull nullnullnullnull nullction nullnullanull

76 Brownfields Goldnullrb nullD dig-to-clean standards. null Others were satisfied with environmental consultants reporting that any Rnulls had been removed and did not asnullfor the local nulltate nullPnullapproval. Brownfield Policy Is Restricting Activity nullme nullrisdictions have had difficulty meeting affordable housing needs in established urban areas when restrictive policies are followed nullartsch, nullnullnull nullrrently, the nullnullnullltifamily programs represent a large portion of the affordable housing marnullt. nullnullplays an important part in the very complicated equation for layered affordable financing, because the principal lender often insists on nullnullmortgage insurance of their funds. nullnullapproved loans cannot use standard nullnull Rnullnullprocedures unless the nullb waives the nullP guidance or the state nullnullprocesses the pronullcts as a Risnullnullare. nullonically, some developers in several communities who originally intended to wornullwith nullD on minulld-income housing developments at brownfield sites have been forced to develop all marnullt-rate housing because of nullDnull unwillingness to change its approach. Despite these barriers, initiatives across the country show that affordable housing pronullcts can succeed at brownfield sites. null scores of cases, older contaminated sites have been converted into residential housing for senior citinullns and low- and moderate-income families. nullny of these pronullcts come on the heels of marnullt-rate developments, which also proves that the stigma can be overcome and that residentsnullcomfort with institutional controls, such as covenants on the deed, can be achieved. nullreover, these pronullcts have been accomplished in a way that manulls economic sense and ad - dresses environmental considerations appropriately nullartsch, nullnullnull The nullownfields Revitalinulltion nullt, which toonulleffect in early nullnull, has done much to address barriers to redeveloping contaminated property, including those sites being reused for housing purposes. nullom a procedural perspective, the law sets the stage for more innovative public-private redevelopment partnerships because it clarifies difficult liability issues that have deterred site acquisition and redevelopment. null addition, the law allows nullnullbrownfield grant recipients to use a portion of their site assessment or cleanup grants to pay insurance premiums that provide cover- age nulluch as for cleanup cost overrunsnullfor these sites. This nullnullbility helps prospective developers secure private financing by providing a better way to quantify and manage risnull null the past, this uncertainty has been a nully deterrent to housing activities on brownfield sites. Perhaps most importantly, the nullownfields Revitalinulltion nullt clarifies the state-federal relationship regarding cleanup, manullng it easier for developers to use innovative remediation technologies and engineering controls as part of a cleanup. nullw, sites addressed by a statenull nullP or response program are protected from nullnullenforcement and cost-recovery actions. The only enulleptions are sites where contamination has migrated across state lines or onto federal propertynullif releases of contaminants, or the threat of releases, present an imminent and substantial endangermentnullif new information shows that a cleanup is no longer protectivenullor if a state requests federal intervention. nullates now will share nullnullmillion in nullnullbrownfield program funding annually to support these response programs. null return, states will need to maintain a nullublic record of sitesnulladdressed through their voluntary response program, and update that record annually nullartsch, nullnullnull null The nullD dig-to-clean standard would not have been achieved if the cleanup were Rnullnullbased.

77Cityscape Field Survey onullnullnullSite Contamination Policy nullield reaction to the effect of the nullnullP and nullections nullnullnullnullnullnullnull nullotice of nullunding nullvailability nullnullOnullnullnull dig-to-clean policy variednull null nullw nullornullCity The nullw nullrnullnullb issued a policy paper on nullbruary null, nullnull, that asnulld for permission to implement a policy more friendly to brownfield reuse that included permitting the use of engineering controls. They noted that, in nullnull, nullction nullnullapplications had declined by null percent, from null to null and that the nullb had been returning funds for subsidinulld housing for elderly people and people with disabilities because it did not have any suitable nullhat is, cleannull pronullcts to fund. null Pnullladelpnulla The Philadelphia nullb has wornulld with brownfield sites and even waived the nullP policy. Philadelphia has enullressed concern that the limited nullection nullnulland nullction nullnull resources are either not being used or are being channeled to suburban areas. null Cnullcago The nullicago nullb has found that the nullP brownfield policy manulls it difficult to nullep up with the demand in those areas of nullicago undergoing redevelopment and, as a result, has waived nullP criteria and followed the nullnullRnullnullstandard when possible. null nullyond nullP The nullP guidance has created a regulatory environment that is hostile to reuse of brownfields. null found two sites with no Rnulls, apparently meeting nullP criteria, that had been renullcted or subnullct to severe scrutiny because of the brownfield stigma. Of the nullnull nullnullnull nullultifamily nullubs, null nullPhiladelphia, nullaltimore, nullhicago, nullolumbus, and nullinneapolisnull waived this policy null for nullD mortgage insurance programs at the time of the survey, nullnullostonnull was considering waiving, and nullnullacnullonville and null. nullrthnullwere open to waiving. nulliver of the nullP policy was needed in many cases for proposed nullnullaffordable housing brownfield pronullcts to be financially viable, because pronullct financing could not support complete removal of the contamination and government funding was limited. nullnulls reluctance to participate in brownfield sites in which the cleanup had been approved locally made it more difficult to put together viable affordable housing pronullcts in older urban areas, and this restrictive policy had a chilling effect on infill development nullchopp, nullnullnull nullnulls limited participation in brownfield redevelopment, in turn, had a negative effect on environmental quality, because development in outlying areas is associated with adverse effects nullnullnull nullnullnulland urban settlement is associated with lower generation of pollutants nullnull, nullnullnull nullDnull original vision regarding site contamina - tion called for nullD to nullstablish interagency and intergovernmental policies and proceduresnull and nullo tanull consistent actions when responsibilities are shared by several agencies.null null The nullnull dig-to-clean policy was developed in a vacuum, and, when this study was performed in nullnull, null nullaivers are permitted for multifamily mortgage insurance processed under nullP but are not permitted for the nullction nullnulland nullction nullnullprograms that support housing for elderly people and people with disabilities. null nullD nulltice null-null, paragraph null issued nullptember null, nullnull.

78 Brownfields Goldnullrb little indicated that nullD nullusing brownfield policy would undergo any significant change in the foreseeable future. nullt only is policy revision a lengthy process, but staff also appeared reluctant nulln nullnullnullto alter the policy. Resistance To Altering Policy The dig-to-clean policy was developed in the late nullnulls. null the late nullnulls, nullDnull Office of nullusing had established a practice of issuing more detailed guidance for the environmental assess - ment process than did the Office of nullmmunity Planning and Development nullPDnulland the Office of Public and nulldian nullusing nullnullnull The Office of nullusing continued that practice when it issued nullD nullusing nulltice null-null on site contamination in nullnull. nullusing nulltice null-null was the first nullD guidance that clearly called for the regular institutionalinulld use of the nullerican nullciety for Testing and nullterials nullnullnull nullnull nullhases nulland nullnullin pronullct analysisnullit called for either cleaning up the site before pronullct approval or gaining preapproval from nullhe applicable nullderal, state, andnull or local agency with nullrisdiction.null null null nullnull, The nullnullnullide enullanded this guidance, as noted previously, by stating, nullnull will not accept property for firm commitment where a site contami - nation problem has been capped or paved overnullnullnull nullusing, nullnullnullnullction nullnullnull The nullnull PDnull study nullnull nullnsulting, nullnullnullcalled for updating the policy to include using risnullbased methods, approval before cleanup, upgrading nullDnull analytic capabilities, and other measures to encourage brownfield redevelopment. nullD did not implement these recommendations until late nullnull nullnd it is still too early to ascertain the actual effects of these changesnull null the course of developing this report, nullD policymanullrs voiced many concerns, clearly implying that they believed the dig-to-clean policy wornulld and that it would not be wise to modify it. Dual Standards nullr nearly null years, the federal government had two standardsnullnullnulls Rnullnullapproach and nullnulls dig-to-clean approach. null nullving two standards was confusing. nullen a developer asnulld his or her engineering firm what to do to clean up a site nullhat is, to manull it fit for residential usenull the engineers would usually answer based on generally accepted business practice, which was Rnullnull nullate programs accommodated the Rnullnullapproach that nullnullfavored. nullny developers and environmental consultants were not aware that two federal agencies had two different approaches for cleaning up brownfield properties. nullat could happennull null Pronullct planning could be based on one set of costs, and pronullct feasibility would fall apart when nullnullfinancing was needed, because more enullensive cleanup would be required. This scenario could occur even if nullD nullnull funds were being used, because only nullnull nullltifamily followed the strict dig-to-clean approach nullee enullibit null. null nullnullnullbs could be faced with difficult decisions when they request a dig-to-clean cleanup but receive an Rnullnullcleanup. null nulltice null-null, null httpnullnullww.hud.govnullfficesnulldmnulludclipsnulloticesnullsgnullnullsgnotices.cfm.

79Cityscape Field Survey onullnullnullSite Contamination Policy null nullch standard undermined the other. null The nullD standard pr ovided a potentially unfair tool for future litigants. nullme time in the future, a resident could allege that he or she is suffering ill effects from buried contamination and claim the developer was negligent. Negligence generally means culpable conduct that misses the legal standard nullf a reasonable personnullprotecting individuals against foreseeable risnull, harmful acts of other members of society. The nully question is usually, nullhat is the standard of carenull null a developer processed his or her site through and received an approval from a state nullnullP, that approval would be evidence that the owner met the requisite standard of care. nullseparate more restrictive policy from the agency in charge of federal housing policy opens the door to alleging that the standard of care was not met. null nullnullis the federal agency charged with protecting both the environment and the health and safety of this nationnulls inhabitants. null nullnullhas invested a great deal of time, effort, scientific study, and fieldwornullto determine what standard is acceptable for residential cleanups. nullD adopted its policy with little coordination with nullnull and the nullnull nullD study recommended modification and adoption of the nullnullapproach. nullntinued use of a different policy undermined nullDnulls credibility in both lending and transaction support, which is why this nullnull study recommended dialog and cooperation between nullD and nullnullon this issue. Recommendations nullthough the nullnulldig-to-clean policy differed significantly from nullnullpolicy, it was not an insurmountable barrier to brownfield participation by all local nullnulloffices for all but the sub - sidinulld nullction nullnulland nullction nullnullprograms for elderly people and people with disabilities. null

Exhibit 1 nullD Onullce nulllonull nullCnull Need nullaiver a nullCnullNot Pernulltted nulle of nullCA in nullD nullonullanull Before 2010 nullnullinnullnullnclnulles nullAnull nullsnullSnullrinnull nullrtnullnull insnullance processenullnull state nullAs nullrtnullnull insnullance processenullnull nullD Section 202 nulllnullrlnull peoplenullannullSection null1 nulleople nulltnull nullsanulllitiesnullsnullsinull pronullanull nullnullic annullInnullan nullnullinnull All pronullanull ConullnullitnullnullanninnullannullDevelopnullnt All pronullanull Fnull nullFederal nullusing AdministrationnullnullAs nullnullusing nullance agenciesnullnullnullnullnullpartment onullnullusing and nullban nullvelopmentnullRnullA nullrisnullbased cleanup approacnull a Some people tnullnnulltnullt tnulls nulliver must be approved by nullnullnulladnullarters and not tnull nullb nullrectornull null nullnullnulls mission is to protect human health and the environment. nullnce nullnull, nullnullhas been wornullng for a cleaner, healthier environment for the nullerican people. nullee httpnullnullww.epa.govnullpahomenullboutepa.htm.null null nullr nullction nullnulland nullction nullnull the nullnullnullcriteria do not allow for deviation.

Brownfields

80 Brownfields Goldnullrb Decentralinulld case-by-case decisionmanullng allowed many offices to approve brownfield pronullcts. null

The tools enullsted, but nullbs needed to be taught how to use them. nullter the nullb recogninulld that Rnullnullcleanup was a well-established, reputable choice, null the nullb was free to decide what best fit the needs of their local marnullt. nullbs can be educated regarding what choices are open to them and trained to develop sensitivity on when and how to apply each choice. nullD is always reluctant to erode its environmental standards. null todaynull post-industrial society, housing is often perceived as the best choice for land reuse. nullny cities have a strong demand for housing near their centers and, given the right price nullor enullmple, subsidinulld substandard housing with lower rentsnull people will accept a location that might not survive a marnullt test. nullD has striven to develop and implement standards that guarantee everyone, even the disadvantaged, a nullecent home and suitable living environment.null null nullvironmental nullstice demands we remain vigilant regarding what is acceptable, especially to those needing affordable housing and faced with more limited choice. null The strict site contamination policy has made it easier for nullbs to renullct sites that local nullD decisionmanullrs felt were not viable pronullcts. The nullptember nullnull nullP revisions attempt to approach this issue with sensitivity so as not to upset this balance and to allow nullbs to renullct contaminated sites when they thinnullthe risnullis too great. null Policy Coordination This report underlines the need for further dialogue and cooperation between nullD and nullnull on site-contamination policy and practice. The original mandate of nullD nulltice null-null called for close coordination of policy and practice with nullnull The nullnull report noted the subsequent divergence and called for nullD to bring its policy in line with nullnulls. One federal standard would be less confusing to the public, state and local government, and the development com- munities. nullD would improve its capacity to review the technical merits of cleanup plans by using the state nullPsnullenullertise, insisting that pronullcts be approved by the state nullP, and asnullng for technical assistance from nullnullstaff. null Processing and nullraining nullen though nullnullhas altered its policy, nullD staff still need to be better educated on the issues presented by brownfield redevelopment. Training may be provided to the field on various brownfield topics, including state nullPs and processing alternatives that may enable the use of null nullnullnullbs issue commitments for millions of dollars on new pronullcts every day without nullD nulladquartersnullinvolvement. nullbs handle most of the issues that arise with the processing locallynullthey decide if the site locations are appropriate, and they nullow the marnullt and manull determinations about marnullt, location, demand, and so on. nullbs nullow their geographic areas and what is being developed outside the nullD programs. They nullow that different nullnds of brownfields enullst and that a contaminated site in the middle of a neighborhood, which might have been providing housing for generations nullublic housing sitesnull are good locations for redeveloping and pose minimal risnullto the government. nullbs also approve transfers of physical assets, rent increases, and partial release of security in some cases. nullbs go to court and represent nullD, enter into contracts, enter into nullusing nullsistance Payments contracts, tanull enforcement action against owners, and so on. null Rnullnullcleanup was bacnulld by those parts of the federal government that are responsible for protecting public health and the environment, such as nullnulland the nullnters for Disease nullntrol and Prevention, nullency for Tonullc nullbstance and Disease Registry. null nulltional nullusing nullt of nullnull. null nullecutive Order nullnullnullof nullbruary null, nullnull. nullederal nulltions To nulldress nullvironmental nullstice in nullnority Populations and nullw-nullcome Populations,nullcommonly nullown as the nullvironmental nullstice nullecutive Order.

81Cityscape Field Survey onullnullnullSite Contamination Policy Rnullnullcleanups, as well as the environmental benefits of promoting minulld-use, walnullble neigh - borhoods in efficient locations with access to nullbs, shopping, and mass transit. This training will enable field offices to support brownfield development in those areas where they thinnullit is appropriate. null should be clear to everyone that the regulatory standard for site contamination cannot be waived, null but that sites that come through state nullPs, even if they use engineering barriers and institutional controls, clearly meet this standard. nulleld offices should decide whether to participate in brownfield pronullcts based on the factors such as marnulltability and long-term pronullct viability. nulldgment concerning public health is best left to those agencies with that enullertise, nullst as nulldgment regarding pronullct viability is best left to the local nullb. nullnullowledgments The author thannulls all those at the null.null. nullnvironmental Protection nullgency nullnullPnullnull who have wornulled with him on brownfield issues, particularly nullm nulln der nulloot and nulle Dufficy of Region null Dave Doyle of Region null and nullarles nullrtsch at nullnullnulladquarters. null also is grateful for the help of those at the null.null. Department of nullousing and nullrban Development nullnullnullDnull, particularly nulld nullinsberger and nulleve nullhl in nullicago and null nullromberg and Danielle nullhopp at nullD nulladquarters. nulltnullr nullgene nullldfarb was a nulldwest environmental officer at the nullnull Department of nullusing and nullban Development and is now an adnullnct assistant professor of environmental and occupational health sciences in the nullhool of Public nullalth at the nulliversity of nulllinois at nullicago. Renullrences nullTnullnullternational nullnullnull. nullnull. nullandard nullide for nullsnullnullsed Correctinull nulltion for nullotection of nullological nullsourcesnull nullTnullnullnullnullnullnullnull-nullnullnullnullenull nullst nullnshohocnulln, Pnull nullTnull nullternational. nullrtsch, nullarles. nullnull. nullrogress on nullownfields Restoration,null Issues nullline in nullience and nullchnologynullRichardson, Tnull nulliversity of Tenulls at Dallas. httpnullnullww.issues.orgnullnullnullupdate.htm nullccessed nullring nullnullnull nullnull nullnull nullprilnull nullnnullng nullownnullld nulldenulllopment and nullusingnullnullshington, Dnull nullrtheast- nulldwest nullstitute. httpnullnullww.nemw.orgnullmagesnulltoriesnullocumentsnullrownfieldnullousing.pdf nullccessed nullring nullnullnull nullrtsch, nullarles, and nullidget Dorfman. nullnull. nullownnulllds and nullusingnullnullw nulle nullate VCnull nullcouraging nullsidential nullnulllopmentnullnullshington, Dnull nullrtheast-nulldwest nullstitute. null The regulatory standard, is contained in null nullR null.nullinulland provides, in part, nullall property proposed for use in nullD programs be free of hanullrdous materials, contamination, tonullc chemicals and gasses, and radioactive substances, where a hanullrd could affect the health and safety of occupants or connullct with the intended utilinulltion of the property.null

82 Brownfields Goldnullrb nullnnullsnull, nullcnull nullnull nullarch null. Personal communication nullelephone interviewnull Retired housing environmental officer. nullnter for nullighborhood Technology nullnullnull nullnull. nullrban nullving nulllps nullrb nullobal nullrming, nullile nulltting Personal Transportation nullsts.nullPress release. nullicagonullnullnter for nullighborhood Technology. httpnullnullww.cnt.orgnullewsnullnullnullnullnullnullnew-maps-show-that-urban-living-helps-curb- global-warmingnull nullccessed nullring nullnullnull nullnullnullnsulting. nullnull. nulludy of nullnulls nullte Contamination nullliciesnullnullshington, Dnull nullnull Department of nullusing and nullban Development, Office of Policy Development and Research. httpnullnullww.huduser.orgnullublicationsnullestechnulludnulltenullntamination.html nullccessed nullring nullnullnull Office of nullnagement and nulldget nullnullnull nullnulla. nulltailed Information on the nullnullnullltinullamily nullrtgage Insurance nullsessmentnullhttpnullnullww.whitehouse.govnullmbnullnullectmorenulletailnull nullnullnullnull.nullnull.html nullccessed nullring nullnullnull nullnull nullnullb. nulltailed Information on the nullnullnullltinullamily nullrtgage Insurance nullsessmentnull nullction nullnull Program nullde nullnullnullnull. httpnullnullww.whitehouse.govnullmbnullnullectmorenulletailnull nullnullnullnull.nullnull.html nullccessed nullring nullnullnull nullnull nullnullc. nulltailed Information on the nullnullnullltinullamily nullrtgage Insurance nullsessmentnull nullction nullnull Program nullde nullnullnullnull. httpnullnullww.whitehouse.govnullmbnullnullectmorenull detailnullnullnullnullnullnullnull.html nullccessed nullring nullnullnull nullnull nullnulld. nulltailed Information on the nullnullnullltinullamily nullrtgage Insurance nullsessmentnull nullction nullnull Program nullde nullnullnullnull. httpnullnullww.whitehouse.govnullmbnullnullectmorenulletailnull nullnullnullnull.nullnull.html nullccessed nullring nullnullnull Real nulltate Research nullrporation nullnullnull. nullnull. nulle Costs of nullrawlnull Report prepared for the nullvironmental Protection nullency. nullicagonullReal nulltate Research nullrporation. nullhopp, Danielle. nullnull. nullom nullownnulllds to nullusingnullnullportunities, Issues, and nullswersnull nullshington, Dnull nullrtheast-nulldwest nullstitute. nullnull Department of nullusing and nullban Development nullnullnull Office of nullmmunity Planning and Development nullPDnull nullnull. Cnullnullnullpenditure nullportnull nullshington, Dnull nullnull Department of nullusing and nullban Development, Office of nullmmunity Planning and Development. httpnullnullww. hud.govnullfficesnullpdnullommunitydevelopmentnulludgetnullisbursementreportsnull nullccessed nullring nullnullnull nullnull Department of nullusing and nullban Development nullnullnull Office of nullusing nullousingnull nullnull. nullltifamily nullcelerated nullocessing nullnullnullnullidenullnullshington, Dnull nullnull Department of nullusing and nullban Development, Office of nullusing. httpnullnullww.hud.govnullfficesnullsgnullfhnullapnullapguidenull mapguide.cfm nullccessed nullring nullnullnull nullnull nullnull. nullusing nullnance nullency nullsnullnullaring. nullshington Dnull nullnull Department of nullusing and nullban Development, Office of nullusing. httpnullnullww.hud.govnullfficesnullsgnullfhnullrogdescnull risnullharenullnull.cfm nullccessed nullring nullnullnull

83Cityscape Field Survey onullnullnullSite Contamination Policy nullnull Department of nullusing and nullban Development nullnullnull Office of nullusing nullousingnull nullderal nullusing nullministration nullnullnull nullnull. nullnullnullnual nullnagement nullportnullnullscal nullar 200null nullshington, Dnull nullnull Department of nullusing and nullban Development, Office of nullusing, nullderal nullusing nullministration. httpnullnullww.hud.govnullfficesnullsgnullhafynullannualmanagementreport.pdf nullccessed nullring nullnullnull nullnull Department of nullusing and nullban Development nullnullnull Office of Policy Development and Research nullDnullnull nullnull. nulludy of nullnulls nullte Contamination nullliciesnull nullshington, Dnull nullnull Department of nullusing and nullban Development, Office of Policy Development and Research. httpnullnullww.huduser.orgnullublicationsnullestechnulludnulltenullntamination.html . nullnull nullvironmental Protection nullency nullPnull, Office of nulllid nullste and nullergency Response nullnullnullnull nullnull nullarch null. nullmorandumnullnulle of Risnullnullsed Decision-nullnullng in nullT nullrrective nulltion Programs. Onullnull Directive nullnull.null. nullshington, Dnull nullnull nullvironmental Protection nullency, Office of nulllid nullste and nullergency Response. httpnullnullww.epa.govnullustnullirectivnull odnullnullnull.htm.

84 Brownfields

85nulltyscapenullnullnullurnal of nulllicy Development and Research • Volume 12, Number 3 • 2010 U.S. Department of Housing and Urban Development • Office of Policy Development and Research Cityscape Brownfields Uncertainty: A Proposal To Reform Superfund nullvid Slutnully nulliversity of nullirginia nullnull Frey nullashington and nulle nulliversity nullstract nullor decades nullmericans hanulle been trying to renullerse the momentum of urban declinenull In an effort to ensure that abandoned, contaminated properties were cleaned up, Congress enacted the Comprehensinulle nullnnullironmental nullesponse, Compensation, and nulliability nullct of 1nullnull0, or CnullnullCnullnull, also nullnown as the nulluperfund nullctnull nullith the creation of the nulluperfund program, a liability scheme was put in place to manulle sure that brownnullelds would be cleaned up so they could be put into productinulle reusenull nullnfortunately, the uncertainties associated with this liability framewornull hanulle been declared by some to be the primary impediment to brownnulleld redenullelopmentnull nullrinullate denullelopers, who might otherwise pronullide the resources needed for redenulleloping brownnullelds into nullital comnull munity assets, are drinullen away from purchasing or innullesting in brownnulleld sites by the potential for catastrophic federal and state regulatory and tort liabilitynull nulls a result, many brownnullelds continue to sit nullacant or underutilizednull nullhis article offers a solution to the risnull and uncertainty resulting from federal and state cleanup and thirdnullparty tort liability often associated with brownnulleld sites, while presernulling the current liability scheme as it pertains to parties actually responsible for the contaminationnull nullo mitigate the liability and tort concerns of potential brownnulleld renull denullelopers, this article proposes the creation of an absolute wainuller of federal and state cleanup and thirdnullparty tort liability for truly innocent prinullate parties that undertanulle to redenullelop brownnulleld sitesnull nullur proposed federal legislatinulle reforms, coupled with innull centinulles for statesnull participation, should sernulle as a catalyst for prinullatenullparty brownnulleld redenullelopment while strengthening the nullscal nullitality of the nulluperfund program without reliance on tanullpayer dollarsnull

86 Brownfields Slutnully and Frey Brownfield Redevelopment: Why Is It Important and Why Is It Not Happening? null you drive around any city in the nullited nullates, it will not tanull long before an abandoned gas station, shuttered steel mill, or long-defunct factory comes into view. These often-polluted urban properties, the vacant and abandoned relics of nullericanull industrial past, are commonly referred to as brownfields, and they are emblematic of the urban blight plaguing nullnull cities today. nullcording to statute, a nullrownfield sitenullis any nulleal property, the enullansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hanullrdous substance, pollut - ant, or contaminant.null null The nullnull nullvironmental Protection nullency nullPnull estimates that more than nullnullnullnullbrownfield sites currently enullst in the nullited nullates, but other sources put the number at well over nullmillion nullPnull nullnullnull Ranging in sinull from less than nullacre to hundreds of acres, brownfield sites enullst in cities and towns all over the country, where they drain local resources, waste vital urban space, and often provide a breeding ground for crime nullee nullsen, nullnullnull The label brownnulllds distinguishes these sites from their counterparts, greennulllds, which are un- developed suburban and rural parcels of land that real estate developers often prefer for their seemingly low development costs and freedom from environmental contamination and accompa- nying liability concerns. null actuality, the costs associated with the neglect of brownfields in favor of greenfield developments are quite high, but those costs are borne by the community as a whole rather than by individual developers. nullen the urban landform enullands into greenfield sites, the resulting sprawl contributes to a litany of unwelcome consequences, such as increased vehicle miles traveled, which in turn leads to increased automobile emissions and longer commutes nullDavis, nullnullnullnullnull. Of even greater concern is the degradation of valuable ecological systems that provide essential service value to communities. The degradation results from lost farmland and open space when urban areas enullerience sprawl. Throughout the past few decades, much attention has been focused on the importance of public policy in stemming the tide of urban sprawl. nullch of this interest has manifested in the promotion of nullivable communitiesnullto attract people into urban centers and away from the periphery of the urban landform. nullome localities have implemented policies designed to encourage more of a minulled- use, neighborhood feel to new urban developments, and others have included encouraging state- ments of intent in their comprehensive plans that suggest development be limited to designated growth areas nullee, for enullmple, nullnull nullnference of nullyors, nullnullnullnulltional nullvernornull nullsociation, nullnullnull nullfortunately, brownfield sites continue to persist within the urban ring, and most efforts to reduce or prohibit further growth in rural greenfields have been ineffective. null nullcalities have relied on policies of persuasion and the enticement of the promise of livable urban neighborhoods rather than tanullng definitive steps to limit rural area development and to address obstacles to brownfield redevelopment. null nullall nullsiness nullability Relief and nullownfields Revitalinulltion nullt, null nullnullnull nullnullnullnullnullnullnull null The authors acnullowledge that significant efforts and manullr investments have been made to reduce the number of brownfield sites, particularly by nullnulland nullD, but it is our contention that, for the most part, these efforts have proved to be insufficient.

87Cityscape nullonullnulllds nullcertainty: A Proposal nullo Renullrm Supernullnd null response to several notorious hanullrdous waste catastrophes enullosed in the nullnulls, nullngress passed comprehensive legislation designed to address growing public concern about the tonullc legacy of our industrial past. The Resource nullonservation and Recovery nullct of nullnullnullnull nullRnullRnullnull provided a complenullstructure of cradle-to-grave rules governing the treatment, transportation, storage, and disposal of hanullrdous waste. null To provide further incentive for industry to comply with the man- dates of Rnullnulland to address properties that became contaminated before the enactment of Rnullnull by imposing a comprehensive cleanup liability framewornull nullngress passed the nullmprehensive nullvironmental Response, nullmpensation, and nullability nullt of nullnull nullnullnullnull, commonly nullown as the nullperfund nullt. null nullthough these hanullrdous waste statutes in tandem provide much needed incentive for industry to avoid contaminating our lands and are therefore remarnullbly effective in protecting nullericans from enullosure to hanullrdous waste, their liability provisions provide powerful disincentives for potential redevelopment of urban properties. null fact, many would argue that the threat of nullperfund liability is the single greatest impediment to the redevelopment of brownfield sites nullee, for enullmple, Davis, nullnullnullRubenstein, nullnullnullnullderson, nullnullnull nullattered within and among some of the most commercially desirable urban centers in the country, brownfield sites are suspended in a sort of regulatory limbonullalthough not specifically designated as nulluperfund sites and listed by nullPnull on the nullational Priority nullist nullnullPnullnull, they are nonetheless tarred by their potentialnullreal or perceivednullfor costly environmental regulatory and third-party tort liability. nullncertainty is the enemy of economic activity. nullrban redevelopment activities are stymied in the face of uncertainty, and nullRnullnullliability represents great uncertainty. nullfore a developer will move forward with a pronullect, he or she must be convinced that the effort will provide a favorable financial outcome. The potential for hanullrdous waste cleanup or third-party tort liability represents a signif - icant uncertainty for a brownfields redeveloper. nullcause most development requires significant debt capital, and because lenders are notoriously risnulladverse, it is no wonder that brownfield sites regularly fall victim to the uncertainties associated with nullRnullnullliability. nullthough many sites are only nominally contaminated, or indeed contamination free, the perceived stigma and uncertainty over regulatory and third-party tort liability attached to ownership of such sites nullep otherwise desirable redevelopment opportunities off the marnullt or off the radar of potential purchasers. This article will attempt to offer a solution to what is possibly the most tenacious challenge facing brownfield redevelopmentnullhe risnulland uncertainty surrounding federal and state cleanup and third-party tort liability for private parties who wish to acquire and revitalinull brownfield sites. This article proposes to mitigate the perils of brownfields redevelopment by allowing for an absolute waiver of federal and state regulatory and tort liability for truly innocent private parties that under- tanull to redevelop brownfield sites. The argument rests on the premise that the related obnullctives of nullnullreducing barriers to urban redevelopmentnullnullnullpromoting livable, affordable urban housingnull and nullnullreducing the rate and intensity of rural and suburban greenfield development are norma - tively positive goals that ought to be vigorously pursued. This article focuses on the first obnullctivenull the reduction of barriers to urban redevelopment. null is important to recogninull, however, that all null null nullnullnull nullnullnull. null null nullnullnull null nullnull-nullnull.

88 Brownfields Slutnully and Frey three obnullctives are interconnected and indispensible to one anothernullfacilitating one obnullctive furthers them all. Understanding Superfund Liability and Its Impact on Brownfields RnullRnull was enacted to provide a structured approach to the private management of hanullardous waste in an effort to ensure that such tonullc byproducts of industry did not come into contact with people or sensitive ecological systems. Through nullRnullnull however, nullnullwas given a mandate to respond to and ensure the cleanup of those properties that nevertheless have become the nationnull worst hanullrdous waste sites. null a property has enullerienced a release of hanullrdous waste and is contami - nated such that nullnulldetermines that it must be cleaned up, the agency lists the site on the nullnulland may then tanull action to ensure that the responsible parties clean it up. The nulleleasenullof hanullrdous substances includes the nullpilling, leanullng, pumping, pouring, emitting, emptying, discharging, innullcting, escaping, leaching, dumping, or disposing into the environmentnullof any hanullrdous mate - rial. null On the state level, many legislatures have given their state environmental protection agencies similar powers under state statutory versions of nullRnullnull nullthough the particulars of hanullrdous waste cleanup legislation vary from state to state, many of the state cleanup liability provisions are similar to those of nullRnullnull nullhen nullPnull begins a cleanup of hanullardous waste pursuant to nullnullRnullnullnull, it endeavors to identify those parties potentially responsible for the release pursuant to nullRnullnulls liability provisions. These potentially responsible parties nullRPsnullinclude the individual or corporate owners of contaminated property, both past and present. They can also include site operators and managers, tenants, investors, people who transported hanullrdous substances to the site, or any other party found to have created or contributed to a hanullrdous substancenull release on the site. nullRnullnullgives nullnullthe authority to require PRPs to undertanull a cleanup to protect human health and the environment. nullternatively, nullnullcan proceed to clean up the site itself and then order PRPs to reimburse the government for the response actions. nullRnullnullimposes enullraordinary liability, in the form of nullint and several as well as strict liability on PRPs. null a PRP meets the statutory standard for responsibility, it is potentially responsible for the entire cleanup by itself. nullcause this liability is retroactive, developers who purchase the property after all contaminating activities have ceased can still be held responsible for cleanup costs. nullrther, potential liability is not a function of negligence on the part of the PRP. nullt surprisingly, the liability provisions of nullRnullnulland similar state hanullrdous waste cleanup statutes have had a profound chilling effect on brownfield redevelopment efforts, owing to concerns that the redevel- opment of these sites might enullose the property owner to potentially limitless cleanup liability. nullcore principle behind nullRnullnulls tough liability provisions is the notion that polluters should be responsible for cleaning up contaminated sites. nullth the enactment of nullRnullnull this polluter pays principle was enullressed in two ways. nullrst, parties that caused the contamination were held liable null null nullnullnull nullnullnull.

89Cityscape nullonullnulllds nullcertainty: A Proposal nullo Renullrm Supernullnd for its cleanup. nullcond, producers of chemicals and petroleum were required to pay a tanullthat was put into a special trust fund to be used to support cleanup efforts at sites where no financially viable PRP could be identified. During the early years of the nullperfund program, this polluter tanull provided a significant portion of the funds needed to clean up sites on the nullnull null nullnull, however, the polluter tanullon chemical and petroleum producers was allowed to enullire and has not been subsequently renewed. null a result, the fund has effectively run out of money and thus the cost of continued cleanup for those sites where the PRPs are either gone or insolvent comes out of nullnulls yearly appropriations, giving nullPnull even more incentive to pursue and obtain cleanup costs from PRPs. nullth the threat of liability hanging over these properties, developers are reluctant to buy them, even at discounted rates, and risnullaverse lenders are even more reluctant to fund such pronullcts for fear of losing their collateral in the event of manullr environmental liability. The disincentives created by federal and state cleanup liability affect both municipalities and private industry. nullties are rendered powerless to curtail sprawling greenfield development because they cannot offer cost- effective urban alternatives. They are forced to watch their tanullbases languish as urban properties sit unused and development nulles to the countryside. The otherwise willing private sector, which would seem to favor developing brownfields due to their pronullmity to enullsting infrastructure such as access to utilities and transportation corridors, is nullpt from innullcting needed capital into urban development because of uncertainty over harsh environmental cleanup and tort liability. The Innocent-Purchaser Defense to CERCLA Liability: Is It Enough? nullnce nullRnullnullwas enacted, concerns about its chilling effect on brownfield redevelopment have resulted in numerous efforts to modify the statute and its implementation. nullginning with the nullownfields nulltion nullenda initiated in nullnull, nullnulland interested stanullholders have tried to com - promise the liability provisions of nullRnullnulland reassure lenders and prospective purchasers of brownfield sites in the hope of stimulating urban revitalinulltion. null an effort that has proven to be only nominally helpful, nullnullidentified sites that appeared in the nullperfund programnull nullRnullnull database, but that had been evaluated by nullnulland determined to be of no further federal interest, and placed them into an archive database in the hope this would destigmatinull these sites. nulloth nullongress and nullPnull have recogninulled the impediment that nullnullRnullnullnull liability presents to brown- field redevelopment and have attempted to remedy the situation. null nullnull, nullngress passed the nullset nullnservation, nullnder nullability, and Deposit nullsurance Protection nullt nullender Protection nulltnull null The act was meant to limit the liability of lenders who financed brownfield developments that were later foreclosed on. This amendment to nullRnullnulls liability structure finulld a problem that lenders had been having, wherein they were being held liable as PRPs under nullRnullnullfor cleanups of properties that they did not actively manage, but which they became owners of by virtue of foreclosure. nullr those lenders who did not actively manage a contaminated property but merely held the property to protect their security interests, the nullnder Protection nullt amended nullRnullnull to enulllude them from the statutenull definition of owner or operator. null null nullnullnull nullnullnullnullnullnull.

90 Brownfields Slutnully and Frey nullthough the nullnder Protection nullt to some enullent protects lenders from the grasp of nullperfund liability, lenders can still find themselves suffering significant financial consequences. nullnders are still vulnerable to loss of value of the asset securing their loan and the uncertainties associated with the requirements of the nullnder Protection nullt. null addition, efforts have been made, both on the national and the state level, to attempt to mitigate liability for developers of brownfield sites who would not otherwise be liable for claims arising from the potentially hanullrdous condition of the properties. These efforts, however, have not proven to be effective enough to attract most redevel- opment players into the brownfield marnullt. nullre is still needed to ensure that private parties who voluntarily undertanull to clean up and develop brownfield sites can achieve complete insulation from the uncertainties of cleanup and third-party tort liability. nullortly after the enactment of nullRnullnull the commercial real estate industry began to focus on a category of nullnullRnullnullnull defenses to liability based on the nullact or omission of a third partynull as a potential way to reduce liability uncertainty. The nullinnocent landownernull defense, which was enhanced through the nullperfund nullendments and Reauthorinulltion nullt nullnullnull of nullnull, null granted liability relief to parties who could show that, prior to purchasing a contaminated property, they nullid not nullow or have reason to nullownullthat any hanullrdous substances had been or were being released on it. null property owner could show that he or she had nullno reason to nullnownull of the sitenulls condition if he or she had conducted nullll appropriate inquiriesnullinto the history and condition of the property prior to purchase. This nullall appropriate inquiriesnull nullnullnullnullnull standard, although left undefined by nullnullRnull, became increasingly important in determining whether landowners could be considered PRPs in cleanup actions for contamination they had no part in causing. Tracnullng the statutory requirements of the innocent landowner defense, the commercial real estate industry collectively established a risnull mitigation process nullnown as a Phase null nullnvironmental nullite nullssessment nullPhase nullnull, which was intended to satisfy the nullnullrequirement. The implementation of the Phase nullassessment process was a great success, and within a few years of nullRnullnulls enactment, the industry had put in place institutional requirements for a Phase nullon nearly every transaction in enulless of null million. nullfortunately, much of the uncertainty associated with cleanup liability remained. null an attempt to manull access to the defense more effective, the commercial real estate industry nullined forces with the emerging environmental consultant industry to create a standard definition for nullnullthrough the nullerican nullciety for Testing and nullterials nullnullnull. null nullnull, nullTnullpublished nullnullnull nullandard nullactice for nullnullronmental nullte nullsessmentsnullnullase I nullnullronmental nullte nullsessment nullocess . null its best, this standard provided consistency to what level of due diligence would qualify for a defense, but liability was not necessarily avoided and the uncertainty from nullRnullnullliability, as well as state cleanup liability and third-party tort liability, remained an impediment to brownfield redevelopment. nullngress again attempted to address some of this uncertainty with the passage of the nullall nullsiness nullability and nullownfields Revitalinulltion nullt nullrownfields nulltnullin nullnull. null The act further clarified the standard of due diligence required for the innocent-purchaser defense, introduced the concept of the bona fide prospective purchaser nullnullPnull and also clarified the situations in which liability applies to owners of properties contiguous to a nullperfund site. The nullownfields null null nullnullnull nullnullnullnullnullnullnullinull null null nullnullnull nullnullnullnullnull.

91Cityscape nullonullnulllds nullcertainty: A Proposal nullo Renullrm Supernullnd nulltnull clarification of these two important defenses, the innocent-prospective purchaser defense and the contiguous-property-holder defense, marnull the most significant step yet toward eliminating liability barriers to brownfield redevelopment. The contiguous-property-holder defense evolved, in part, out of a policy directive that nullnull originally issued in nullne nullnull. Recogninullng the need to grant liability relief to property owners whose ground water became contaminated by hanullrdous substance releases on nearby properties, nullnullissued a policy memorandum that stated that nullubnullct to certain conditions, where hanullrdous substances have come to be located on or in a property solely as a result of subsurface migration in an aquifer from a source or sources outside the property, nullnullwill not tanull enforcement actions against the owner of such propertynullnulliamond, nullnullnull Property owners had to meet certain condi - tions to be eligible for contaminated-aquifer protection. They could not have caused or contributed to the release, been affiliated with or been in a direct or indirect contractual relationship with the party or parties responsible for the release, and could not be otherwise potentially liable for the release. null addition, nullnullcould, at its discretion, accept payment of a de minimis settlement from a contaminated-aquifer owner in enullhange for a grant of immunity from third-party contribution. The bona fide prospective-purchaser defense, perhaps the most important feature of the nullnull nullrownfields nullct, was an effort to clarify and enullpand the innocent-purchaser defense and encourage private parties to undertanull brownfield redevelopment. nullder the statute, as amended, if a party satisfies the following conditions, they are considered eligible for the prospective-purchaser defensenull null The property must have been purchased after nullnuary null, nullnull. null The purchaser must show that all disposal of hanullrdous waste occurred before the purchaser acquired the property. null The purchaser must undertanull nullnullinto the sitenulls nullrevious ownership and uses.null null The purchaser must provide nullll legally required noticesnullof any future hanullrdous substance releases on the property. null The purchaser must nullnullrcise appropriate care with respect to hanullrdous substances found at the facilitynullby tanullng reasonable steps to nulltop the release, prevent future releases, and limit enullosure to released substances.null null The purchaser must not be nullotentially liable, or affiliated with any other person that is potentially liable, for response costs at a facility.nullnullfiliation, under the act, can be familial, contractual, financial, or corporate. null The nullownfields nullt officially mandated that nullnullpromulgate a rule to define the previously vague nullnullstandard within nullyears of the actnull passage. nulltil such time as nullnullissued its rulemanullng, the nullownfields nullt established that the nullnull revision of the nullTnullnullnullnullwould constitute the standard for nullnull. null nullnull, nullnullcompleted its rulemanullng process, issuing nullandards and Practices for nulll nullpropriate nullquiries, null Dnull Part nullnullnullovember nullnullnullnullhe nullnullRulenull nullrrently, this is the operative definition of nullnullwith respect to the innocent-purchaser defense under nullRnullnull null null nullnullnull nullnullnullnullnull.

92 Brownfields Slutnully and Frey nullthough it is a welcome clarification for potential brownfield redevelopers and their lenders, this standard is still difficult to satisfy, because it requires, as a condition precedent to establishing the innocent-purchaser defense, that the Phase nullnot contain any data gaps. nullder the definitions set forth in the nullnullRule, it is often quite difficult to avoid having at least some data gaps. The Unavailable Solution to the Problem of Uncertainty nulleally, the developer of a hypothetical brownfield site would be able to reduce the uncertainty associated with nullRnullnullliability nulls well as state cleanup liabilitynullif, after performing a Phase null the developer could asnullnullnullto review the report and then have the nullency issue a letter stating that the Phase nullsatisfies the nullnullRule and that the developer is not liable for any future cleanup costs attributable to prior activities at the site. nullmilarly, if some level of contamination was discovered at the site, the developer might still be willing to remediate the site. null this case, the developer would want to asnullnullnullto review the final cleanup documentation to confirm that the site has been cleaned up to the satisfaction of the nullency, and that no liability for future cleanup remains. null the remediation is enullensive, the developer would want to asnullnullnullto review the remediation wornullplan before performing the cleanup to ensure that it is appropriate and then asnullnullnullto perform oversight and review of the final documentation of the remediation, again establishing that no further liability enullsts. nullfortunately, nullnullis unable to provide these services to the private sector. One reason is that the review of these efforts would require significant staff time. nullthough the development community would be pleased to pay for that time, under current law nullnullcannot accept payment, because it would be considered a supplemental appropriation. nullnullwould be required to remit the payments received to the Treasury, and the money would not be returned to nullnullto cover the cost of the staff time. nullrther, no current mechanism enullsts through which nullnullcan routinely guarantee the developer that no further liability enullsts. null addition to concerns about federal cleanup liability, further uncertainty is associated with state cleanup mandates and third-party tort liability, and no available mechanisms enullst to address these concerns. A Proposal for Superfund Reauthorization null previously discussed, the current nullperfund regime suffers from two manullr problems. nullrst, significant uncertaintynullattributable to the liability provisions of nullRnullnull state cleanup liability, and third-party tort liabilitynullrepresents a manullr disincentive for urban redevelopment. nullcond, what is now nullown as the nullperfund Trust nullnd, which is used for remediating sites where no financially viable PRP enullsts, is chronically underfunded. nulle propose that nullongress reauthorinulle nullnullRnullnullnull in a manner designed to address these two concerns. nullirst, the proposal aims to reduce and, in time, eliminate the cleanup liability risnulls that accompany voluntary, private-party brownfield redevelopment pronullcts. nullcond, the proposal aims to provide a renewed and continuous nullw of funding to the nullperfund Trust nullnd, which has been steadily diminishing since the suspension of the polluter tanull null manullng contributions to the fund volun -

93Cityscape nullonullnulllds nullcertainty: A Proposal nullo Renullrm Supernullnd tary and by spreading the responsibility for sustaining the fund to many more private actors, the proposal will ensure the continuing vitality of the nullperfund Trust nullnd, establishing a sustainable funding source for the nationnull most serious nullperfund cleanup responses. The proposal consists of four elementsnull null nulleating a new nullperfund Trust nullnd, called the nullperfund nullrtification Trust nullnd, to be managed by nullnullfor the purpose of receiving contributions from private parties to cover the staff needed to review Phase nullnulls, cleanup wornullplans, and remediation closure documents on behalf of parties who wish to purchase and redevelop brownfield sites. null nullthorinullng nullnullto issue a nullrtificate of nulligibility for null aiver of nullability to a party purchasing real property, upon request, based on a review by nullnullof the satisfactorily completed Phase null and site cleanup, if necessary. null nulluthorinulling nullPnull to issue a nullaiver of nulliability to a purchasing party who nullanull acquires a nullertificate of nullligibility for nullaiver of nulliability and nullbnull manulles a small nullde minimisnull contribution to the original nullperfund Trust nullnd, now called the nullperfund nulleanup Trust nullnd. The nullaiver of nullability grants immunity from federal nullRnullnulland third-party tort liability potentially arising from pre-enullsting hanullrdous environmental conditions on the site in question. null Delegating to state environmental agencies the authority to administer the new oversight and certification programs, subnullct to the condition precedent that states seenullng delegation enact comprehensive legislation granting immunity from state regulatory and state third-party tort liability to holders of nullnullissued nullaivers of nullability. To illustrate how the proposal would wornullin practice, envision a hypothetical scenario in which a real estate developer is considering investing in a brownfield redevelopment pronullct. The brown - field sits in an urban area with potential for growth and redevelopment. The developer wants to build a minulld-use residential and commercial complenullon the site and estimates that the pronullct would yield a reasonable return on investment, but for the cost of the uncertainties attributable to environmental liability. The site is a former industrial plant, which, based on its previous use, may be contaminated with hanullrdous waste, although no environmental site assessment has been completed for the site. The developer may be driven away by the environmental uncertainties, or, if not, may have limited access to development capital due to potential lendersnulltraditional intolerance of risnull The developer cannot purchase and redevelop the property while the risnullof potentially ruinous environmental response and third-party tort liability hangs over his or her head. null a result, the property remains vacant and unused. nullth the proposalnull amendments to nullRnullnullin place, the developernull situation becomes much dif - ferent. The developer begins the process by commissioning a Phase null nullst as is done today. null the report reveals no indications of potential contamination, the developer submits the report to nullnull along with a request for review and a checnullfor a predetermined amount, payable to the nullperfund nullrtification Trust nullnd. null nullnullnullr the state, if it has qualified for delegation of authority to null nulle enullect the price of the nullrtificate to be about nullnull, based on the anticipated cost of review time, including the reviewernulls salary and associated overhead.

94 Brownfields Slutnully and Frey administer the program by adopting appropriate state legislation and requesting delegation from nullnull then reviews the report and determines if it satisfies the standards of the nullnullRule and reveals no indications of environmental concern. null the report is satisfactory, nullnullthen issues a nullrtificate of nulligibility for a nulliver of nullability. nullt is possible that the developer will be satisfied with the nullertificatenull however, the developernulls lender may require the developer to proceed to seenulla nulliver of nullability for the site. This waiver would be automatically provided upon receipt of a predetermined contribution to the nullperfund nulleanup Trust nullund. nullnull The nullaiver would be written in such a way that it protects the purchaser of the property and the purchasernull lendernullhowever, it would not protect subsequent parties. The nulliver would be structured to enullmpt the developer from liability associated with any subsequently discovered contamination that occurred before his or her ownership, but the developer would be nullept on the hoonullnull for any contamination that clearly occurs after he or she tanulles ownership. The developer must be nullpt on the hoonullto ensure that any intervening contamination events at the site are identified and, further, that the party in ownership of the property who was in a position to avoid this con- tamination event is now responsible for its cleanup. This provision would prevent the nulliver from becoming a license to allow subsequent contamination of the site. nullen a property subnullct to a nullaiver is sold, the purchaser would need to go through the same process if they were to avail themselves of a nulliver, which would have the beneficial result of additional revenue for the nullper- fund nulleanup Trust nullnd. null the Phase nullreveals a potential contamination issue, then the developer commissions a Phase null nullvironmental nullte nullsessment, seenullng to determine if contamination enullsts. This assessment may result in a clean report or a report that recommends cleanup. nullclean report would result in the issuance of a nullrtificate of nulligibility for a nulliver of nullability. null the report identifies the need for remediation activities, the property owner could pay nullnullto review the proposed wornullplan and then review the documentation demonstrating the results of the cleanup activities. This way, the cleanup activities would be conducted subnullct to nullnullreview and, in some cases, oversight, which should result in greater uniformity of cleanup standards across the country and better assurance that wornull is performed correctly. nulln all cases, after the property owner has adequate documentation that the site is indeed clean, the site would earn a nullrtificate of nulligibility for a nulliver of nullability. The nullrtificate of nulligibility for a nulliver of nullability would not in itself grant any immunity to the developer. null effect, it is a record establishing that the developer has met the requirements for nullPP status. null the developer stops the process here, the nullrtificate provides strong evidence to present in court that he or she has undertanulln nullnull in the event that the developer must defend himself or herself against an nullnullcleanup enforcement or contribution action. The developer, however, now has a further step he or she can tanull to ensure immunity. null, after receiving the nullr - tificate, the developer manulls a de minimis contribution to the nullperfund nulleanup Trust nullndnull in effect, a settlement with nullnullto limit his or her liability for any future discovery of hanullrdous releases previously occurring on sitenulle or she would be granted a nulliver of nullability. The null nullr a property valued at between null million and nullnullmillion, we anticipate that the waiver will be priced between nullnullnullnulland nullnullnullnullnullignificantly below the marnullt value of the reduction of risnullassociated with the waiver nullee, for enullmple, nullernstedt et al., nullnullnull

95Cityscape nullonullnulllds nullcertainty: A Proposal nullo Renullrm Supernullnd nulliver would grant the developer immunity from cleanup and third-party tort liability arising from future response actions on the site, provided, of course, that the developer had no part in causing the hanullrdous release in question. null this way, the developer would be insulated from liability arising from any unanticipated hanullrdous conditions on the site, which he or she has had no part in creating and which he or she has made every reasonable effort to locate and clean up. nullnully to the effectiveness of this process is the willingness of states to tanull on delegated authority to oversee site assessments and cleanups and to issue nullrtificates and nullivers. null a condition of having this authority delegated to state agencies, state legislatures would need to pass legisla- tion giving the federal nulliver of nullability full force and effect on the state level and declaring that a nulliver of nullability relieves the holder of any potential state regulatory or third-party tort liability connected to environmental conditions on the site, as long as the holder is not otherwise responsible for creating such conditions. nullates would have an incentive to tanull on this oversight and certification authority because it would give them a role in the cleanup of brownfield sites and would generate nullbs either in state government or in the private sector, because state agents or private contractors would be needed to perform the review, oversight, and processing of requests for nullrtificates and nullivers. Evidence of Market Demand for CERCLA Liability Reform: The Price of Uncertainty The proposalnull success relies on a demand for increased certainty in the field of environmental liability for private parties. null the value of acquiring an official nulliver of nullability is less than the perceived cost of the risnull then developers and, more importantly, lenders will not tanull advantage of the changes in nullRnullnulls liability framewornull nullthough further research is needed to establish enullctly what price the marnullt will put on the nullivers of nullability, enullsting research supports the enullistence of a general demand for such protection. nulln a nullnullnullnull discussion paper published by Resources for the nullture, a nullshington, D.null thinnulltannull nullis nullrnstedt, nulluren nullberle, nullna nullberini, and Peter nullyer enullmine the relative interest to private developers of various public interventions to promote brownfield redevelopment. They conclude that, of a number of options offered to developers in a written survey, nullelief from liability for future cleanup at the nullrownfieldnullsitenulland nullelief from liability claims by third parties such as site wornullrs and adnullcent land ownersnullare the most highly valued by developers in assessing the effect on a hypothetical brownfield redevelop- ment pronullct nullernstedt et al., nullnullnullnullnullnull. The survey was sent to a sample of more than nullnullnull real estate developersnullsome specialists in brown- field redevelopment, some generalists. They were asnulld to assess a hypothetical contaminated site where they would be building a residential complenull. nulln addition to financial figures, such as nullenullpected land purchase, investigation, remediation, and redevelopment costs and enullected gross returns on the property,nullthe survey offered null number of different public interventions that developers could choose to improve their enullected return on the site.nullThe study estimated the relative value of different public incentives based on analysis of the respondentsnullchoices. The results of the survey show that the value to developers of liability relief for future cleanups and third-party tort liability is significant. The average monetary value that the survey respondents placed on relief from future

Brownfields

96 Brownfields Slutnully and Frey cleanup liability risnullwas nullnullpercent of the pronullctnull total cost and null.nullpercent of enullected profit. The average value that respondents placed on relief from future third-party liability risnullwas nullnull percent of total pronullct cost and null.nullpercent of profits nullernstedt et al., nullnullnull The message of the nullrnstedt survey is clearnulldevelopers value and desire relief from liability risnull in the contenull of brownfield redevelopment. null fact, they value it significantly. nullplied to the enullected costs and profits from the surveynull hypothetical brownfield redevelopment pronullctnullhe enullected value of the pronullct at completion was nullnullmillionnullhe respondentsnullvaluation of the immunity from cleanup liability risnullnull.nullpercent of cost and null.nullpercent of profitnullwas nullnull,nullnull and their valuation of the immunity from third-party tort liability risnullnull.nullpercent of cost and null.null percent of profitnullwas nullnull,nullnullnullernstedt et al., nullnullnull These values are not insubstantial, and, although the survey offers nullst one estimate of the marnulltnull valuation of a hypothetical liability waiver, it provides a starting point and confirms the idea that the elimination of cleanup liability and third-party tort liability risnullfor developers will have a positive effect on their decisions to undertanull brownfield pronullcts. Responding to Questions and Concerns The elegance of the proposal is encapsulated in the idea that the only parties nulllet off the hoonullnull under the new framewornullare those that are not nulln the hoonull currently and are not linullly to allow them- selves to get on the hoonull. Polluters currently liable for contamination would still be held responsible for all future cleanups nullust as they currently are, but voluntary private purchasers who did not cause the enullsting contamination but who want to redevelop brownfield sites would not be liable. The same people who are PRPs today will be PRPs tomorrownull however, innocent parties who wish to contribute to the revitalinulltion of urban landscapes but are unwilling to do so in the face of current liability uncertainty would be able to proceed without concern. The nulliver of nullability would apply only to hanullrdous releases occurring before the redevelopernull tanulling title. nullt would not enullempt even a good-faith voluntary redeveloper from liability for contamination he or she creates or contributes to. nullch linull the current liability framewornull parties who are in any way related to potential PRPs through business, familial, or contractual ties, would not be eligible for a nulliver of nullability. nullrthermore, each new owner of the property would be required to obtain a new nullrtificate of nulligibility and nulliver of nullability, ensuring that the site is periodi - cally reenullmined and that contributions continue to nullw to the nullperfund nulleanup Trust nullnd. The standards that private parties must satisfy in performing environmental due diligence and in remediating contaminated property would remain as they are today. nullon successful completion of these efforts, however, potential brownfield redevelopers would be able to reduce their uncer- tainty and obtain a nulliver of nullability pertaining to federal, state, and third-party tort liability. nullrtificates of nulligibility need not vary significantly from current nullnullstandards for undertanullng nullnull nullwever, nullnullwould, in effect, waive the current data-gap enulleption in the nullnullstandard. null is unreasonable to enullect private parties to be able to provide data for the sitenull entire history of use and ownership. nullsuming a proper and thorough environmental site assessment is conducted according to nullnullstandards, unavoidable missing pieces in the sitenull history should not stymie the

97Cityscape nullonullnulllds nullcertainty: A Proposal nullo Renullrm Supernullnd granting of a nullrtificate, provided that reasonable efforts are made to fill in all data gaps. nullain, the parties that would be absolved of liability in these instances are parties that would not otherwise subnullct themselves to the liability under the current nullperfund regulatory regime. null number of values would need to be established by the marnullet for the new system to wornull properly. The amount that private developers would be required to contribute to the nulluperfund nullleanup Trust nullnd in order to receive a nulliver of nullability would be significantly below the nullivernull marnullt value but would need to be determined. nullnders, eager to miniminull or eliminate the risnullof their investment collateral being diminished in value by environmental liability, would be willing to discount interest rates for brownfield developers who can provide nullaivers of nulliability for their sites. The marnullet would determine the value of this discounted rate. nullt is linullely that lenders would require that developers obtain nullivers of nullability before financing brownfield redevelopment pronullcts, much as they require a Phase nullon all commercial real estate transactions greater than null million. The contribution to the nullperfund nulleanup Trust nullnd would in essence operate linull a premium for a liability insurance policy that protects the owner and lender from the uncertainties of environmental liability. nullmilarly, the revenue streams contributed annually to the nullperfund nulleanup Trust nullnd would be a function of the number and sinull of commercial real estate transactions made each year. null is enullected, however, that these amounts would be significantly larger than the current level of ap - propriations allocated to nullperfund cleanup actions, and the funding would, in effect, be entirely voluntary on the part of the contributors. nullsentially, this proposal provides potential redevelopers of brownfield sites a mechanism by which they can reduce or eliminate the uncertainties associated with environmental liability that currently operate as disincentives to such redevelopment activity. null the real estate industry can get nullnullto absolve them of cleanup liability and third party tort liability, and that absolution is effective at both the federal and state level, a manullr increase in the redevelopment of brownfield sites should occur nationally. This increase is possible, however, only if the certainty of the nulliver of nullability is available. The nulliver would function in a manner not unlinull an insurance policy, which transfers risnullaway from the policyholder to another party. null this proposal, the nullperfund nulleanup Trust nullnd would become the recipient of the transferred risnull and the payment by the nulliver holder into that fund would be not unlinull the payment of an insurance premium. The public would suffer no additional burden, because the parties obtaining nullivers are, for the most part, parties that would not have subnullected themselves to liability without the nullaiver, and thus would not have been PRPs. The public, however, would benefit greatly by increasing the opportunity for brownfield sites to be redeveloped. null allowing the states to participate in the nulliver process, this proposal creates an incentive for states to enact legislation that would include state cleanup and third-party tort liability in the nulliver. nullate participation allows for devolution of the administrative implementation of the nulliver process, which reallocates some of the revenue streams associated with the nullperfund nullrtification Trust nullnd to the states, which in turn provides an opportunity for states to distribute their agency overhead costs across a larger universe of activities.

98 Brownfields Slutnully and Frey null is important to note that this proposal has many very specific dimensions that this article does not thoroughly address. nulllthough many would say that the devil is always in the details, this proposal represents the framewornull for a significant solution to one of the greatest impediments to brownfield redevelopment. The authors plan to provide more details of this proposal in a future article. Final Thoughts Of perhaps the greatest importance for the cleanup of our nationnull worst hanullrdous waste sites, this proposal is enullected to provide significantly greater resources to the nullperfund nulleanup Trust nullund than are currently available. nullnull nulluch has been written about the cost of the nulluperfund program, in terms of money spent on cleanup activities by the government and PRPs, but the benefits of cleanup are also significant. nullving a funding mechanism in place that provides possibly several billion dollars of funding for cleanup activities annually, without those funds coming from tanulls, represents a good bargain for tanullayers, who are among the ultimate beneficiaries of the cleanup of these sites. nullother benefit of this proposed regulatory reform is that a larger number of private site-cleanup efforts will come under the scrutiny of nullnulland the states. nullder the current nullRnullnullapproach, many private sector remediation efforts are undertanulln without any government oversight, or they are done under state oversight with differing cleanup standards being applied, because state standards vary. nullth the proposed process in place, many more remediation efforts at brownfield sites will be done with nullnulloversight and will be subnullct to uniform standards. The uncertainty of environmental liability has served as a manullr impediment to urban revitalinull - tion efforts. These proposed reforms would remove this obstacle and serve as a manullr catalyst for brownfield redevelopment, tanullng development pressure off rural lands at the periphery of the urban landform, and thus reducing sprawl. The locational benefits of brownfield redevelopment are potentially enormous. Perhaps, most importantly, the preservation of rural ecosystems will be sustained as a result of this reform effort. nullnullowledgments The authors thannullthe students of Professor nullutnullynull nullownfields Redevelopment class at the nulliversity of nullrginia for their thoughtful insights regarding our proposed nullperfund reforms. The topic has been discussed in the class for the past several years, with the result that studentsnull insights provided the foundation for several of our ideas. null nullsed on data provided by nullrenullgic, nullnullnullnullcommercial real estate purchase transactions, on average, occurred in the nullited nullates during each of the years nullnull through nullnull. These data do not include multifamily residential properties with fewer than null units, and they do not include loan-refinancing transactions. null the price of the nullaiver were to be nullnullnullnullper nullaiver, and if the commercial real estate industry were to routinely require a nullaiver much as Phase nullis currently required on nearly all transactions in enulless of null million, the nullperfund nulleanup Trust nullnd would receive about null.nullbillion per year, enullluding loan renullancing and smaller multifamily transactions. null comparison, fees generated by the polluter tanullprovided about null.nullbillion per year to the nullnd until nullnull, when the tanullenullired.

99Cityscape nullonullnulllds nullcertainty: A Proposal nullo Renullrm Supernullnd nulltnullrs David nullutnully is a member of the faculty in the Department of nullban and nullvironmental Planning at the nulliversity of nullrginia. nullnull nulley is a second-year law student at nullshington and nulle nulliversity nullhool of nullw. Renullrences nullderson, nullrnullD. nullnull. nullhe nullate nullluntary nulleanup Program nullternative,null Natural nullsources and the nullnullronment null nullnullnullnternull nullnull Davis, Todd null nullnull. nullefining the nullownfields Problem.nullnull nullownnullldsnullnullComparatinull nullide to nulldenullloping Contaminated nulloperty, edited by Todd null Davis. nullicagonullnullerican nullr nullsociationnull nullnull. Diamond, nulluce null nullnull nullay nullnull nullinal Policy Toward Owners of Property nullntaining nullntaminated nulluifers.nullnullmorandum, nullnull nullvironmental Protection nullency, Office of nullte Remediation nullforcement. nullisen, nulloel null. nullnullnullnull. nullnullrownfields of Dreamsnull nullhallenges and nullimits of nulloluntary nullleanup Programs and nullcentives,null1nullnullnullinullrsity of Illinois nullw nullnullew nullnull nullnullnullnull nullirsch, nullaurence null., and nulleraldine null. nulldens. nullnullnullnull. nullnullederal nullnvironmental nulliability,null nullnnullironmental nullpects of nullal nulltate nullansactions null nullnull nullnullnull nullnullnull nulltional nullvernorsnullnullsociation. nullnull. nullew nullssion for nullownfieldsnullnulltacnullng nullrawl by Revitalinullng Older nullmmunities.nullnull nullere null null nullnull nullom nullrenullnullshington, Dnull nulltional nullvernorsnullnullsociationnullnullnull, nullnullnull Rubenstein, nullrah null nullnull. nullnullnullnulls nullntribution to the nullderal nullownfields Problemnullnull Proposal for nullderal Reform ,nullnullnullinullrsity of Chicago nullw nullhool nullundtable nullnull nullnull nullnullnull nullnull nullnference of nullyors. nullnull. nullcycling nullericanull nullndnullnullNational nullport on nullownnulllds nulldenulllopment, nulll. null, null httpnullnullsmayors.orgnullnullhnullnualnulletingnullrownfieldsreportnullnullnullnullpdf nullccessed nullne null, nullnullnull nullnull nullvironmental Protection nullency. nullnulla. nullbout nullownfields.null httpnullnullww.epa.govnull brownfieldsnullbout.htm nullccessed nullne null, nullnullnull nullnull nullnullb. nullPnulls nullownfields and nullnd Revitalinulltion Programsnullnullanging nullerican nullnd and nullves.nullhttpnullnullww.epa.govnullrownfieldsnullbout.htm nullccessed nullne null, nullnullnull nullrdstedt, nullis, nulluren nullberle, nullna nullberini, and Peter nullyer. nullnull. nulle nullownnulllds nullenomnull enonnullnullch nullo about nullmething or the nullming of the nullrewdnull Discussion Paper nullnullnull nullshington, Dnull Resources for the nullture.

100 Brownfields Slutnully and Frey nullditional Reading nullartsch, nullharles, and Rachel Deane. nullnullnullnull. nullrownnullelds nulltate of the nulltatesnull nulln nullndnullofnullnullession nullenulliew of Initiatinulls and nullogram Impacts in the null nullatesnull nullshington, Dnull nullrtheast-nulldwest nullstitute. nullsen, nullel null nullnull. nullrownfields Developmentnullnullom nulldividual nulltes to nullart nullowth.nullnull nullenda for a nullustainable nullmerica, edited by nullohn null. Dernbach. nullashington, Dnullnull nullnvironmental nullaw nullnstitutenull nullnullnull nullnvironment nullalifornia Research null Policy nullenter. nullnullnullnull. nullnullleanup nulllowdownnull nullow nullnder-nullunding the nullperfund Program nullrms nullmmunities nullross nullerica.null httpnullnullww.environmentcalifornia. orgnulluploadsnullnullnullnullnullqnullnullnullnullqnullnullnulldnullnullnullpnullnulldanullnullnullmnullwnullnullleanupnullnulllowdown.pdf nullaccessed nullune nullnull, nullnullnullnullnull. nulltional nullvironmental Policy nullstitute. nullnull. nulleyond nullownfieldsnullnullle nullnd, nullburban nullrawl, and the nullw.nullnull nulloceedings of the National nullnullronmental nulllicy Institutenull nulltober 1null 1nullnullnullrum null nullnull. nullgner, nullndy null nullnull. nullverview of nullderal and nullate nullw nullverning nullownfields nulleanups.null null nullownnullldsnullnullComparatinull nullide to nulldenullloping Contaminated nulloperty, edited by Todd null Davis. nullicagonullnullerican nullr nullsociationnullnullnullnull

101nulltyscapenullnullnullurnal of nulllicy Development and Research • Volume 12, Number 3 • 2010 U.S. Department of Housing and Urban Development • Office of Policy Development and Research Cityscape The Prospects for Guiding Housing Choice Voucher Households to High- Opportunity Neighborhoods nullrnullnullClure nulliversity of nullnsas nullstract nulle nullusing Choice Voucher nullogram seenull to do more than help poor households lease goodnulluality rental housingnullnulle of the programnulls goals is to help poor households breanull out of the cycle of ponullrty by locating in neighborhoods with numerous opportunities for gainful employment, good schools, and racial and ethnic integrationnullnulle nullnullng to nullportunity nullnullnullfor nullir nullusing program showed that, with constrained choice, households will locate in lownullonullrty neighborhoodsnullIf the nullnullmodel were to be used on a larger scale, would enough neighborhoods be anullilable to offer good housing, emnull ployment, and educational opportunitiesnull nullamination of census blocnullgroups across the nation suggests that the supply of highnull opportunity neighborhoods may not be as large as desirednullthere are simply too few ideal neighborhoods and affordable unitsnullnull relanullng the obnullctinulls, howenullr, and focusing on ponullrty deconcentration and perhaps enullanding the use of nullnulls procedure that grants enulleption rents abonull the nullir nullrnullt nullnt limits, a more ample supply of target neighnull borhoods and rental units could become anullilablenull Introduction One goal of housing mobility programs at the nullnull Department of nullusing and nullban Develop - ment nullnullnullis the deconcentration of poverty nullnull, nullnullnull which is valuable because it can reduce the high concentrations of poverty that create distress within the affected neighborhoods. null households are moved from areas with high-poverty concentration to areas of low concentra - tion, benefits will hopefully accrue beyond the provision of affordable housing. These benefits include providing the households access to opportunities for better employment, education, and shopping in addition to higher quality housing in safer neighborhoods.

102 Refereed Papers nullClure The nullusing nulloice nullucher nullnullnullProgram is designed to provide very low-income households with spatial mobility nullinnicnull nullnullnull nulldly, the nullnullProgram has been unable to generate the spatial mobility that researchers and housing advocates hoped it would achieve nullDevine et al., nullnullnullnullnull nulloering et al., nullnullnullnullnull. nulln general, although the recipients of vouchers use them to reduce the burden of housing costs, they have not used the vouchers to move to demonstrably better neighborhoods in proportion to the availability of affordable units and are, in fact, confronting increasing difficulties in gaining access to good neighborhoods nullarady and nulllnullr, nullnullnull null the nullnullProgram is going to improve the level of economic and racial integration in the nationnull neighborhoods, program administrators need to enulllore mechanisms that will encourage, and perhaps even require, participating households to locate in neighborhoods that offer better oppor- tunities than those that are found in the neighborhoods plagued by highly concentrated poverty. nulleveral housing advocates and researchers have called for this approach. Polinulloff nullnullnullnullnullnull specifically recommended that a nullutreaunullstyle program, which linnull acceptance of nullutreaunullvouchers to movement to neighborhoods with low levels of racial minorities and other assisted households, be implemented at a national scale, with null,nullnullvouchers earmarnulld for poverty deconcentration each year for a decade. nulliggs and Turner nullnullnull outlined the logic of poverty deconcentration efforts that use vouchers. They suggested that the implementation and administration of the nullnull Program be revised to pursue this goal. They proposed identifying high-opportunity neighborhoods to which voucher households would be guided, which may not be as easy as it appears. nulliggs and Turner cautioned that we do not nullow a great deal about how to define nullpportunity rich neigh - borhoods.nullThey suggested that simple pronulles measuring a neighborhoodnull racial composition or its incidence of poverty are incomplete. nullen identifying a high-opportunity neighborhood, researchers should assess the neighborhoodnull safety, the quality of its schools, and its access to nullbs suitable to the assisted households. Debate is growing around this concept of restricting the choice of any nullnullhousehold to nullst high- opportunity neighborhoods. nullbroscio nullnullnull challenged the use of vouchers to disperse poor households, calling it a misconceived version of freedom of choice. nulletnulland nullapple nullnullnull avoided the normative issues and simply found that households that moved out of high-poverty areas, whether involuntarily or voluntarily, realinulld too few benefits. nulllthough the debate over the benefits of dispersal continues, the calls for a national poverty decon- centration effort raise the questionnullnulle enough neighborhoods available to provide affordable housing in low-poverty, high-opportunity neighborhoodsnull This article attempts to answer this question. Literature Review The neighborhood outcomes of the nullnullProgram are unimpressive. The nullnullProgram does provide some opportunities for a household to move to low-poverty neighborhoods, and many households are able to locate in neighborhoods with modest levels of poverty, but many remain in neighborhoods with high concentrations of poverty. null study by Devine et al. nullnullnullnullnullnull of the nullnull largest metropolitan marnullts in the nation found that more than null percent of participants in the nullnull Program are living in neighborhoods with poverty concentrations of less than null percent, and close to null percent of participants are living in neighborhoods with a poverty rate below null percent. nullt

103Cityscape nulle Prospects nullr Guiding nullusing Cnullice Voucnullr nullusenulllds to nullgnullnullportunity nullignullornullods null percent of nullnullhouseholds live in neighborhoods with poverty levels at null percent or more. null central cities, more than one-third of nullnullhouseholds live in neighborhoods with poverty rates at or above null percent. null general, households participating in the nullnullProgram are free to choose the neighborhood in which they rent a unit. nullth only a few enulleptions, the household chooses the location unen - cumbered by any programmatic constraints, and the issue of poverty deconcentration does not drive the processnullhowever, the nullnullProgram is not completely without guidance in terms of the neighborhoods in which households locate. nullrelatively passive incentive guides nullnullhouseholds to neighborhoods with greater opportunities. nullD uses a nullction nullnullnagement nullsessment Program to evaluate the administrative performance of the housing authorities that manage the nullnullProgram. The percentage of program participants who locate in neighborhoods with below- average levels of poverty is one criterion used to evaluate the housing authorities nullnull, nullnullnull Previous Experience in Poverty Deconcentration Two previous initiatives in poverty deconcentrationnullhe nullutreaunulland nullving to Opportunity nullTOnullprogramsnullrovide instructive enullerience to the nullnullProgramnull effort to move poor households to better neighborhoods. nullutreaunullwas a quasi-enullerimental program born out of a court action tanulln against the nullicago nullusing nullthority and nullD. nullD gave vouchers and counseling assistance to a set of households on the condition that they move to neighborhoods with low levels of minority racial concentration. nulluseholds had to agree to move to census tracts with a minority population comprising less than null percent of the total nulleels et al., nullnullnull nullven the high correlation between racial concentration and poverty concentration, the nullutreaunullprogram was, in many ways, the initial foray into the use of housing vouchers as a method to relocate households out of impoverished neighborhoods and into racially and economically minulld neighborhoods. The research on the nullutreaunullprogram compares outcomes for participants who moved to predominantly nullite suburbs with those for participants who located in predominantly nullrican- nullerican neighborhoods in the inner city. Participant surveys indicate that those participants who moved to suburban locations were more linullly to have a nullb than those who remained in the urban locations nullith a differential of null percentage pointsnull although they did not wornullmore hours or earn higher wages nullosenbaum, nullnullnull nullrvey results also indicate that the children of those who moved to the suburbs were more linullly to stay in school, to be employed after graduation, and to go on to nullyear colleges or universities nullopnulln et al., nullnullnull nullutreaunullspawned nullO, which is an enullerimental version of the voucher program nulloering, nullins, and Richardson, nullnullnull The nullO program gave vouchers to an enullerimental group who were constrainednull to get the voucher, they had to move to a low-poverty neighborhood. Researchers compared this enullerimental group with a control group that received vouchers that did not limit where they could choose to live. The researchers found that dispersing impoverished households through housing programs may reduce the social problems that result from the concentration of this population, but our understanding of the linnullges between neighborhood and life outcomes is very limited. nullthough incomplete, evidence is growing that neighborhood conditions innullence

104 Refereed Papers nullClure the outcomes a household will enullperience. Research reviews on this topic are found in nullroonulls-nullunn, Duncan, and nuller nullnullnullnullnulllen and Turner nullnullnull nullnullnull van nullmpen nullnullnullnullnulliedrichs nullnullnullnull nulllster and nullebel nullnullnullnullnullventhal and nulloonull-nullnn nullnullnullnulland nullmpson, nullrenoff, and nullnnon-Rowley nullnullnull. nullecifically addressing the nullO program and its movement of house - holds to low-poverty neighborhoods, nullering and nullins nullnullnull collected studies from all five cities where the nullO program was implemented. nullins with the nullO program are found among chil - dren in terms of reduced criminal behavior, higher school performance nulllthough more so for girls than boysnull and improved mental health nulludwig, Duncan, and nullrschfield, nullnullnullnulldwig, nulldd, and Duncan, nullnullnullnullventhal and nulloonull-nullnn, nullnullnull nullults enullerience modest but statistically significant reductions in welfare usage, although these reductions may evaporate quicnully nulludwig, Duncan, and Pinnullton, nullnullnull Overwhelmingly, the households enullerienced increased safety because the crime levels around them were reduced compared with those around the households that did not move to low-poverty areas nullrr et al., nullnullnull nullfortunately, the nullO program did not find significant improvements in employment levels nulleventhal and nulloonull-nullnn, nullnullnull Orr et al. nullnullnull summarinulld the nullO enulleriment, stating that the program had tangible positive effects on the lives of the participating households in terms of housing and neighborhood quality and the characteristics of the schools attended. They also stated, however, that they found no convincing evidence of gains in educational performance, employment, income, or self-sufficiency. They concluded that the poverty rate is an important neighborhood characteristic but that residential environments are multidimensionalnullno single measurement is able to capture all the attributes that are important to the lives of low-income families. This research suggests that, when identifying opportunity neighborhoods, we must loonullbeyond nullst the poverty level in the receiving neighborhood and that we should enullmine the potential for higher educational attainment, more safety from crime, and better opportunities for gainful employment. Trends in Poverty Concentration The number of neighborhoods with high concentrations of poverty actually decreased during the nullnulls. The spatial concentration of poverty worsened during the nullnulls, with nullacnullhouseholds faring worse than nullite households nullasarda, nullnullnull During the nullnulls, this spatial concentration of those living in poverty lessened. null nullnull, the number of census tracts with high poverty nullreater than null percentnullfell by null percent, affecting nullnullmillion people nullargowsnull, nullnullnull This reduction in the number of high-poverty tracts has not meant that the number of low-poverty tracts has decreased. Rather, the number of low-poverty tracts nulless than null percentnullremained roughly constant while the number of tracts with moderate poverty nulletween null and null percentnullincreased nullalster, nullnullnullnullngsley and Pettit, nullnullnull null will not nullow the spatial concentration of poverty for the first decade of this century until the nullerican nullmmunity nullrvey begins to release those data at the tract level, and even these will be rolling averages that may tanull some time to stabilinull. Overall poverty, however, has again risen to enulleed the nullnull level. The percentage of the population that lives below poverty fell during the nullnulls, from null.nullto null.nullpercent nullensus, nullnull, nullnullnullbut rose to null.nullpercent in nullnull nullensus, nullnullnull This increase means that some neighborhoods with low levels of poverty in nullnull may have suffered from a rise in the incidence of poverty. null increase in poverty could move the neighbor -

105Cityscape nulle Prospects nullr Guiding nullusing Cnullice Voucnullr nullusenulllds to nullgnullnullportunity nullignullornullods hood out of the low-poverty category and into a different category suggesting that it should no longer be considered a high-opportunity neighborhood. This changing level of poverty and its changing spatial concentration implies that the search for high-opportunity neighborhoods should enullmine more than nullst the most recent level of poverty in a neighborhoodnullit should also enullmine the changes in the level of poverty over time to prevent targeting a neighborhood as high opportunity when it is trending toward higher poverty. Effect on Receiving Neighborhoods nulllster nullnullnull nullnullnullenullmined whether programs to relocate poor households result in a net social gain. nulle investigated alternative models and compared the social costs and benefits of deconcentrating poor households. null suggested that the conditions necessary to nullstify programs designed to de - concentrate poor households may be more stringent than are commonly understood. Proponents of spatial mobility often frame arguments only in terms of the benefits to the participating house- holds, neglecting to consider the costs imposed on the receiving neighborhoods. nullr the relocation to lead to a net social gain, the gain from moving the low-income residents away from areas with high levels of poverty must be greater than the loss enullerienced by the receiving neighborhoods. nullme level of deconcentration of the moderate-poverty neighborhoods would be desirable, because they already suffer from above-average poverty. null is important that those identifying opportunity neighborhoods do not consider these moderate-poverty neighborhoods as destination neighborhoods enullected to absorb additional impoverished households. nulllster nullnullnull suggested that a net social gain can be generated only if the deconcentration results in fewer neighborhoods with high poverty, more neighborhoods with low poverty, and no additional neighborhoods with moderate poverty. The implication of nulllsternull suggestion for identifying high-opportunity neighborhoods is that the process should enullmine not nullst the level of poverty in a neighborhood before an innullnullof assisted households, but it should monitor the effect that the in-moving assisted households will have on the level of poverty there. nullny efforts to deconcentrate poverty should nullnullnull reduce poverty in the high- poverty neighborhoods, nullnullnot increase poverty in the moderate-poverty neighborhoods, nullnullmove households to the low-poverty neighborhoods, and nullnullnull not boost poverty in the receiving neighbor- hood in such a way that the neighborhood moves out of the low-poverty category nullalster, nullnullnull nullwever, not all researchers are in agreement with this approach. nullrgowsnull nullnullnull suggested that the incremental harm to receiving neighborhoods with moderate-poverty may be relatively small and outweighed by the benefits realinulld by moving households out of high-poverty areas and into the moderate-poverty neighborhoods. Categories of Poverty Concentration nulllster also suggested that a nonlinear relationship may enullst between the level of poverty in a neighborhood and measures of neighborhood condition, such as property values. nullch is unnullown about this relationship, but limited evidence suggests that a set of thresholds enullsts nullroonull-nullnn, Duncan, and nuller, nullnullnullnulliedrichs, nullnullnullnulllster, nullnullnull The first threshold may be found when about null percent of the population is living below poverty. nulllow this threshold, the problems resulting from the concentration of poverty may not significantly affect neighborhood

106 Refereed Papers nullClure condition. nullove this threshold, the problems with increased poverty may rise significantly, with each added increment of poverty imposing costs on the neighborhood. The second threshold may be found when about null percent of the population is living below poverty. nullove this threshold, the negative effects of concentrated poverty reach a manullmumnullincreased poverty above this second threshold may have no additional negative effects. The implication of the possible enullstence of a nonlinear relationship between poverty and neigh - borhood conditions for identifying high-opportunity neighborhoods is that the process should enullmine not nullst the level of poverty in a neighborhood but also whether the neighborhood is in the low-, moderate-, or high-poverty category and should target only low-poverty neighborhoods. Housing Availability and Condition nulltimately, the nullnullProgram is a housing program that uses the enullsting supply of rental dwell - ings. null can wornullonly where rental housing units are available that can be leased within the regula - tory constraints of the program. nullr the nullnullProgram to function property, the rental units must enullst in the marnullt and some of these units must be affordablenullthey must be offered at rents below the nullir nullrnullt Rent nullnullnulllimitations of the program. The nullR is the starting point for setting the manullmum rent on a unit that can be admitted to the nullnullProgram. Public housing authorities have some discretion to set payment standards between null and nullnullpercent of the nullR. The pay - ment standard dictates the manullmum amount of subsidy that an individual household can receive through the nullnullProgram. nullthough this nullnullbility is permitted, the number of units with rents below the nullR is a rough indicator of how many units could participate in the nullnullProgram . The implication of this administrative procedure for setting payment standards for identifying high-opportunity neighborhoods is that the process must enullmine the counts of rental units available with rents at or below the nullRs. Presence of Other Assisted Housing nully initiative that guides households to high-opportunity neighborhoods may need to consider the amount of assisted housing that already enullsts within the receiving neighborhoodnulltoo many assisted units or households may be harmful to the receiving neighborhood. nulleeman and nulltein nullnullnull reviewed the literature on the effect of pronullct-based housing on surrounding neighbor - hoods. They found many nullws in past analyses and found connullcting results in the efforts to evaluate the perception that subsidinulld pronullct-based housing results in negative neighborhood effects along dimensions such as property values, racial transition, poverty concentration, and crime. They found evidence that the effect can be positive, negative, or neutral. null a pronullct removes a disamenity, such as a deteriorated building or vacant and litter-strewn site, the effect can be positive. null the pronullct is poorly managed and fails to screen tenants, a negative effect can occur. nulllster et al. nullnullnull enullended this topic further into tenant-based housing assistance. They enullmined sales prices of single-family homes surrounding sites where nullction nullvouchers were being used in nullltimore nullunty, nullryland. They found that if only a few voucher households were located within nullnullfeet of a property, this limited number had a strong, positive effect on property value in higher value tracts, with predominantly nullite populations, which ennullyed real value

107Cityscape nulle Prospects nullr Guiding nullusing Cnullice Voucnullr nullusenulllds to nullgnullnullportunity nullignullornullods appreciation. They found that in low- or moderate-value neighborhoods enulleriencing declining values, however, nullction nullvoucher households have an adverse effect. The implications of the effects of assisted housing on a neighborhood suggests that any effort to use vouchers for poverty deconcentration should guide participants away from vulnerable neigh- borhoods that already have high incidences of pronullct-based units or tenant-based households. Employment, Education, and Crime nullgh-opportunity neighborhoods should provide households with access to good nullbs, access to good schools, neighborhoods that are free of crime, and good affordable housing. nullthough identification of these high-opportunity neighborhoods is easy in concept, it is harder in enullcution simply because of the limited data available. The nullnsus nullreau publishes counts of wornullrs in each neighborhood and indicates whether they are employed, but it does not publish counts of nullbs in each neighborhood by snullll level. The nullnsus nullreau publishes counts of adults in each neighborhood categorinulld by their level of educational attainment, but it does not publish the counts of schools or any measure of their quality. nullime is nullown to be declining, but it remains an issue in many neighborhoods. nullfortunately, the nullnsus nullreau does not publish any information on the level of crime. nulldly, no readily available, nationwide data sources enullst at the census blocnullgroup level on these three issues. Researchers will have to use pronulles, such as low unemployment as a pronull for good nullb prospects and high rates of high school completion for high-quality educational opportunities. Data at the Block Group Level The data for this study come from census data tabulated at the blocnullgroup level. nullr each blocnull group, both nullnull nullnsus and nullnull nullnsus data were assembled. Those blocnullgroups that enullerienced boundary changes during the nullnulls were reconciled through the use of data for all of the nullited nullates from nullonulltics, nullc. nullnullnull. null nullnull, nullD provided household-level data for participants in the nullnullProgram, coded by blocnullgroup location. The data were aggregated to the blocnullgroup level for analysis. Only those households in the regular tenant-based voucher program were included in the analysisnullthose households in the homeownership, pronullct-based voucher, enhanced vouchers, and the welfare-to- wornullsubprograms were not included because they may have had different incentives and limita - tions on their ability to move to a rental unit in a location of their choice. nullmilarly, nullD made available counts of other forms of assisted housing at the blocnullgroup level to assess the incidence of other assisted housing. nullocnullgroup data are a new unit of analysis for the study of poverty deconcentration. nullst of the previous wornullwas done at the tract level because the assisted household data were only available at that level. nullw that the data are available at the blocnullgroup level, however, the analysis will be improved. nullocnullgroups are smaller than tractsnulleach census tract contains about three blocnull groups. This smaller sinull manulls the unit closer to the generally held concept of a neighborhood nulloulton et al., nullnullnull

108 Refereed Papers nullClure The nullnsus nullreau has identified about nullnullnullnullblocnullgroups nationwide nullee enullibit null. nullch blocnullgroup contains about nullnullnullpeople divided among a little more than nullnullhouseholds. These households live in nullnullhousing units, nullnullof which are rental. Of the rental units, a little less than one-half are rented at prices that qualify them for the nullnullProgram, because they are offered at rents below the applicable nullR for the county where they are located. nulltionwide, these units with rents below the nullR total null.nullmillion units. nully of these units could be in the nullnull Program. They are not concentrated in nullst a small proportion of the blocnullgroups. nullre than null percent of all blocnullgroups contain at least some rental units, and about null percent of all blocnull groups contain at least some rental units offered below the nullR. Exhibit 1 Median nullveranull Total nullneral Cnullracteristics of Blocnullnullonulls nullpnullation 1null39 1null57 2nullnullnullnullnull nullnullenulllnull 430 509 10null741null2null nullnullinnullnullits 44null 52null 110nullnullnull04 nullntal nullnullinnullnullits 11null 1null 3null707null99 nullntal nullnullinnullnullits offerenullnulllonulltnull nullnull 43 90 1null575nullnull Total conullt of nullocnullnullonulls 209null7null Fnull nullFair nullrnullr Rentnull Source: nullSnullnullreau onulltnull CensusnullCensus nullnull Analysis nullhibit nullbegins the estimation of the number of high-opportunity neighborhoods by showing some very basic characteristics of the nationnull blocnullgroups. nullnsus data provide good counts of population and housing, but they provide only weanull indicators of the potential for snullill-appropriate employment opportunities for nullnullhouseholds. nullmilarly, the census data indicate neither the quality of the schools nor the level of crime in a neighborhood. nullcause of the limitations of census data, pronullies will have to be used. nullnemployment is used as a pronully for nullob opportunities. The high school completion rate is used as a pronull for educational opportunities. nullime data are not readily available at the blocnullgroup level, criminal activity must be assumed to correlate with the incidence of poverty. nulllthough these variables are closely correlated, they do not always predict neighborhood distress accurately, nor do they always predict trends in neighborhood distress nullnullalster et al., nullnullnullnullnull. They are, at best, pronulles for the social forces at wornull and as such introduce some level of mea - surement error into the analysis. nullnsequently, the results should be viewed with some caution. Other characteristics of the populations living in blocnullgroups also display some spatial concentra - tion. nullthin the typical blocnullgroup, minorities account for about null percent of the population. nullnorities are defined as anyone other than non-nullspanic nullites. nullnull those living in poverty, racial minorities are highly concentrated, with one-half of all neighborhoods containing less than null percent of minorities. null nullnull, the average blocnullgroup unemployment rate among all members of the wornullorce was nullnullpercent, but one-half of blocnullgroups ennullyed an unemployment rate under nullpercent. null the average blocnullgroup, null percent of adults did not complete high school, but one-half of the blocnullgroups have about null percent that did not graduate.

109Cityscape nulle Prospects nullr Guiding nullusing Cnullice Voucnullr nullusenulllds to nullgnullnullportunity nullignullornullods Distribution of Neighborhoods by Poverty Level Deconcentration of poverty is an obnullctive of the nullnullProgram. Typically, about null percent of a neighborhoodnull population lives below poverty. This group, however, is not distributed evenly. Rather, most neighborhoods tend to have a very low level of poverty. null more than one-half of all blocnullgroups, less than null percent of the households live in poverty, which is below the lowest estimates of the threshold below which incremental increases in poverty have no damaging effects on the receiving neighborhood. The threshold of null percent is chosen here for two reasons. nullrst, it is safely below the appronullmately null-percent level that nulllster identifies as the point at which a neighborhood is harmed by incremental increases in poverty. nulling the null-percent threshold should leave little concern that the neighborhood is threatened by the innullnullof low-income households. nullcond, using the null-percent threshold is consistent with the nullO enulleriment. nullth one-half of all neighborhoods below this level, low-poverty neighborhoods are abundant. null addition, with the threshold at null percent, no problems will result from identify - ing a neighborhood as a low-poverty area when it is above median as would be that case with a threshold between null and null percent. nullee enullibit nullnull Exhibit 2 Median nullveranull Standard Deviation nullpnullation Cnullracteristics of Blocnullnullonulls nullrcent of popnullation nulllonullpovertnullnull2000 9.null 13.7 13.2 nullrcent cnullnnull in povertnullnull1990 to 2000 null0.1 null0.4 nullnull nullrcent of popnullation nullnoritnull 1null9 30.9 32.0 nullrcent of nullrnullorce nullenulllonullnull 4.7 null5 null7 nullrcent of anulllts nullo nullnullnot conulllete nullnull scnullol 17.9 21.2 15.2 Source: nullSnullnullreau onulltnull CensusnullCensus nullnull 12,500 Frequency Percent of Population Below Poverty, 2000 10,000 7,500 5,000 2,500 0.00 20.0010.00 30.00 40.00 50.00 60.00 70.00 80.00 90.00 100.00 0 Exhibit 3 Distrinulltion of Blocnullnullonulls null nullrcent of nullpnullation Belonullnullvertnullin 2000nullnulltnull nullrnulll Cnullve Snullerinullosenull

110 Refereed Papers nullClure null the other enullreme, only about nullin null blocnullgroups have very high poverty nullhat is, greater than nullnull percentnull. nullbout two-thirds of all blocnull groups have below-average poverty, nullthat is, nullnull.null percentnull. These statistics indicate that poverty is highly concentratednull about null,nullnullnull blocnull groups have poverty levels in enulless of null percent, and another nullnullnullblocnullgroups have poverty levels between null and null percent. The data show that nullnullnullnullblocnullgroups with poverty levels below null percent can receive nullnullhouseholds, probably without measurable harm. The remaining null,nullnullblocnullgroups are the moderate-poverty neighborhoods nullhat is, poverty levels between null and null percentnull nullee enullibit nullnull Exhibit null nullvel onullPovertnull in the nullocnullnullonull nullocnull nullonulls Percent nullntal nullits nulllonullthe nullnull Percent Distrinulltion of Blocnullnullonulls annullnullntal nullits nulltnullnullnts Belonulltnull nullnull null nullvel of nullvertnullin tnull Blocnullnullonull nullss tnulln 10null 10null175 52 5null14null71 2null 10 to 19null 54null53 2null 5null75null53 31 20 to 29null 23null2null 11 3null50null24 19 30 to 39null 11null0null null 2null35null5null 11 40 to 49null 5null42 3 1null01null22 null 50nullor nullre 4null32 2 nullnull5null 5 Total 207null3null 100 1null575nullnull 100 Fnull nullFair nullrnullt Ratenull Source: nullSnullnullreau onulltnull CensusnullCensus nullnull Distribution of Rental Units Below the Fair Market Rent by Level of Poverty null a point of departure for enullmining the feasibility of any poverty deconcentration program, it is important to loonullat the availability of rental units in the low-poverty neighborhoods targeted for receipt of nullnullhouseholds, especially rental units offered at rents low enough for admission to the nullnullprogram. nullout one-half of all blocnullgroups are in low-poverty areas, but only null percent of the rental units offered below the nullR are located in these neighborhoods. null the level of very crude arithmetic, the fact that only null percent of all rental units are available in high-opportunity neighborhoods is not prohibitive. nullre than nullmillion rental units are offered at rents below the nullR in low-poverty neighborhoods. Those calling for greater poverty deconcentration efforts within the nullnullProgram do not seem to envision that more than a small portion of the nullnull households would be involved in an initiative to move households to low-poverty areas. Polinullff nullnullnull suggests allocating null,nullnullvouchers per year over a null-year term to a poverty deconcentra - tion initiative. Thus, even this ambitious effort would peanullat nullnullnullnullvouchers, which is only a small proportion of the available units in the marnulltplace. Distribution of Assisted Housing Units nullhibit nulllists assisted households in the nullnullProgram and units in other federally funded pronullct-based rental assistance programs. nulll programs listed in the enullibit suffer from some level of undercount. nullme units or developments could not be assigned to a specific location because of reporting errors or other problems. nullme pronullcts simply did not report. This lacnullof reporting is

Brownfields

111Cityscape nulle Prospects nullr Guiding nullusing Cnullice Voucnullr nullusenulllds to nullgnullnullportunity nullignullornullods especially true for the nullw-nullcome nullusing Tanullnulledit nullnullTnull Program. nullates are not required to report all developments to nullnullD, thus generating the data set depends on voluntary participation in survey analysis. Through nullnull, the portfolio of nullnullnulldevelopments contains about nullnullmillion units, but it is believed that null.null million units were in place through that year. nulllthough a difference of nullnullnullnullunits represents a sinullble loss of data, the remaining data represent a very large sample, which provides a good indication of the location of these units. The nullnullProgram serves about nullnullmillion households. null The average blocnullgroup has about null voucher households, but these households tend to concentrate in select neighborhoods. One- half of all blocnullgroups have three or fewer voucher households within their boundaries. null nullnull, the nullnullProgram assisted very low-income renter households in about nullnullnullnullblocnullgroups, or about null percent of all the blocnullgroups in the nation. Thus, about null,nullnullblocnullgroups did not house any nullnullhouseholds. Removing these null,nullnullblocnullgroups with nullro nullnullhouseholds from consideration, the average presence of voucher households rises to about null, with a median of only nullunits. This uneven distribution of voucher households means that in neighborhoods where voucher households are present, they typically lease well below null percent of the rental housing stocnull The distribution of pronullct-based programs is understandably different from the voucher programs because the assistance is tied to a specific building. Pronullct-based housing is concentrated in a subset of the nationnull blocnullgroups. The typical blocnullgroup contains no pronullct-based unitsnullthus, the median number of units in a blocnull group is nullero for all types of pronullect-based units. The nullnullnullTnull program averages fewer than null units per blocnull group, but the typical pronullect contains about nullnull units, and these developments are distributed across a little more than nullnull,nullnullnull blocnull groups or only about null percent of the blocnull groups nationwide. This concentration of nullnullnullTnull housing means that, where nullnullnullTnull developments are found, they comprise a significant share of the rental housing in the neighbor- hood, typically one-third to one-half of the rental housing in the blocnullgroup. Public housing, with a portfolio of more than nullnullmillion units, adds another nullunits per blocnullgroup, but the Exhibit null Median nullveranull Total Assistenullnullntal nullits annullnullonullnullr nullnullenulllnull in All Blocnullnullonulls Conullt of nullnullinnullCnullice nullonullnullrsnull200null 3.0 10.3 2nullnullnull9null Conullt of nullnullC nullitsnull200null 0.0 null7 1null02null99 Conullt of nullnullic nullnullinnullnullitsnull200null 0.0 5.3 1null1null427 Conullt of nullD nullltifanulllnullnullitsnull200null 0.0 nullnull 1null2null979 Conullt of all pronullctnullasenullnullits 0.0 1nullnull 3null4null405 Conullt of all assistenullnullits 4.0 29.1 null114null03 nullnullnullnullpartment onullnullusing and nullban nullvelopmentnullLInullC nulllonullincome nullusing tanullcreditnull Sources: nullSnullnullreau onulltnull CensusnullCensus nullnullnullnullSnullnullpartment onullnullusing and nullban nullvelopmentnullnullnulle onullPolicy nullvelopment and Researcnull null nullr purposes of this study, only regular tenant-based vouchers are included in the analysis. nullouchers were enullluded if they were used for homeownership, the nullelfare-to-nullornullprogram, pronullct-based housing, or the enhanced voucher program. Tenant-based vouchers account for more than null percent of all housing choice vouchers.

112 Refereed Papers nullClure average public housing development contains about null units, although one-half contain null or fewer units. nullmilarly, where public housing is present, it is a significant share of the rental stocnull nullnally, the portfolio of nullD-assisted multifamily housing is subsidinulld under the nullction nullnullw nullnstructionnullubstantial Rehabilitation Program, the nullction nullnullnullrtgage nullsistance Program, and a variety of other vintage programs that no longer actively produce units. These programs have a combined portfolio of more than nullnullmillion units. These nullD multifamily units add an average of about nullunits per blocnullgroup, but they add more than null units to those neighborhoods where they are present. nullthough all of these programs comprise only a small part of the rental housing marnullt, it is important to enullmine the enullent to which they facilitate the poverty deconcentration process. The nullnullProgram is mandated to help poor households surmount the price barriers that prevent them from leasing good quality housing in decent neighborhoods. nullhibit nullenullmines the enullent to which nullnullhouseholds are able to move into low-, moderate-, or high-poverty neighborhoods. The distribution of nullnullhouseholds in each of the three categories of neighborhood poverty is roughly the same as the distribution of rental units offered at or below the nullR. The nullnullProgram is able to locate null percent of its households in low-poverty blocnullgroups. This rate closely corresponds to the null percent of the rental units with rents below the nullR. nullmilarly, null percent of all nullnullhouseholds are found in moderate-poverty neighborhoods nulllocnullgroups with poverty ranging from null to null percentnull and this closely matches the null percent of the affordable rental housing stocnullfound in these neighborhoods. The data suggest that nullnullhouseholds are very much dependent on the presence of affordable units, even though the households lease only a small portion of the available units. nullether in the low- or moderate-poverty blocnullgroups, nullnullhouseholds lease between null and null percent of the available units offered below the nullR. Only in those neighborhoods where poverty afnullcts more than null percent of the population does the incidence of nullnullhouseholds decline to nullpercent. This decline suggests that the nullnullProgram is helping households to move away from areas with high concentrations of poverty and move to neighborhoods with lower levels of poverty. Exhibit null nullvel onullPovertnull in the nullocnullnullonull nullnullinnullChoice Vonullher nullnulleholds Percent nullntal nullits nulllonullthe nullnull Percent Distrinullnulltion of nullonullsinnull Cnulloice nullonullcnullers in 200null in Blocnull nullronullpsnull nullnull nullovertnull Catenullornull nullss tnulln 10null 5nullnull23 27 5null14null71 2null 10 to 19null null0null5null 31 5null75null53 31 20 to 29null 434null77 20 3null50null24 19 30 to 39null 2nullnullnull 12 2null35null5null 11 40 to 49null 12null55null null 1null01null22 null 50nullor nullre 75null1null 3 nullnull5null 5 Total 2nullnullnull9null 100 1null575nullnull 100 Fnull nullFair nullrnullt Ratenull Sources: nullSnullnullreau onulltnull CensusnullCensus nullnullnullnullSnullnullpartment onullnullusing and nullban nullvelopmentnullnullnulle onullPolicy nullvelopment and Researcnull

113Cityscape nulle Prospects nullr Guiding nullusing Cnullice Voucnullr nullusenulllds to nullgnullnullportunity nullignullornullods nullhibit nulldescribes the same issue for the pronullct-based housing. nullile the variation is greater, the result is roughly the samenullpronullct-based units are distributed across neighborhoods categorinulld by poverty in proportion to the availability of affordable housing which, in nearly all cases, includes this pronullct-based housing. nullote that in some blocnullgroups, the nullnullnullunits were added after the nullnull nullnsus.nullnullout null percent of pronullct-based housing enullsts in low-poverty neighborhoods, which is close to the null percent of affordable housing that enullsts in these neighborhoods. Pronullct- based housing is, however, heavily overrepresented in high-poverty neighborhoods. nullbout nullnull percent of all pronullct-based housing enullsts in high-poverty neighborhoods nullhose with null percent or more povertynull, but only nullnull percent of affordable housing enullists in these neighborhoods. These percentages indicate that this publically supported housing represents a disproportionate share of the rental stocnullin these distressed neighborhoods. nullamining the number of assisted units in a neighborhood is simplenulldetermining the proper measure of marnullt penetration by assisted housing units or voucher households is difficult. Out of the nullnullnullnullblocnullgroups nationwide, the incidence of assisted housing, either as pronullct- based units or through vouchers, is very low. null nullre than one-half of all blocnullgroups contain only four or fewer assisted households or housing units, but distribution includes null,nullnullblocnullgroups that have no voucher households or pronullct-based units at all. nullcluding those blocnullgroups with no assisted housing, the incidence of assisted housing remains low. nullmong those blocnull groups with some assisted housing, about one-half have fewer than null assisted units, which is only nullnullpercent of the housing stocnullin these blocnullgroups. nullny issues are involved in determining the level at which assisted housing in a neighborhood is viewed as a threat. The literature is large nullee nulleeman and nulltein, nullnull, for a literature reviewnull however, the bulnullof this literature addresses the effect of pronullct-based housing on the value of nearby properties. nullttle of this research addresses the effect of voucher households on receiving neighborhoods, but wornullby nulllster et al. nullnullnull addresses the issue directly. Exhibit null nullvel onullPovertnull in the nullocnullnullonull Pronullctnullased nullsisted nullits Percent nullntal nullits nulllonullthe nullnull Percent Distrinulltion of nullonullctnullasenullnullnullinnullin 200nullin Blocnullnullonullsnullnull nullvertnullCatenullrnull nullss tnulln 10null 1null21null7null 2null 5null14null71 2null 10 to 19null 9nullnullnull 25 5null75null53 31 20 to 29null null9null09 17 3null50null24 19 30 to 39null 499nullnull 13 2null35null5null 11 40 to 49null 339null51 9 1null01null22 null 50nullor nullre 425null05 11 nullnull5null 5 Total 3null4null1null 100 1null575nullnull 100 Fnull nullFair nullrnullt Ratenull Sources: nullSnullnullreau onulltnull CensusnullCensus nullnullnullnullSnullnullpartment onullnullusing and nullban nullvelopmentnullnullnulle onullPolicy nullvelopment and Researcnull null The incidence of assisted housing may actually be lower because the calculation here adds the count of nullnullhouseholds to the count of assisted units, but vouchers may occupy nullnullnullunits. nullere this possibility enullsts, the count of assisted units is too high.

114 Refereed Papers nullClure nulllster et al. found that a few nullnull in a strong neighborhood can be beneficial if they are small in number nullve or fewer within a nullnullfoot radiusnulland the neighborhood is strong nulligh marnullt value and values that are appreciatingnull nullnullnullfoot radius is not a big areanullit is appronullmately null acres. nulltypical residential development contains four to five households per acrenullthus, a nullnullfoot radius area would hold about null to nullnullhousing units. The typical blocnullgroup holds about nullnullunitsnull thus, the area defined in the wornullby nulllster et al. would be only a fraction of a blocnullgroup, with five or sinullof these null-acre areas in each blocnullgroup. The implications of the wornullby nulllster et al. is that null to null vouchers would be the manullmum desirable in a blocnullgroup with a strong marnullt. These voucher households would need to be dispersed throughout the area, not concentrated within a single null-acre area. nullocnullgroups typically contain about nullnullhousing units, suggesting that the manullmum desirable percentage of nullnullhouseholds is nullto nullpercent. This very crude arithmetic stretches the reach of the wornullby nulllster and his colleagues. Despite the lacnullof precision inherent in such simple calculations, this figure can provide some guidance. null the presence of nullnullhouseholds is greater than nullto nullpercent of all housing in neighborhoods with strong housing marnullts, it is linullly to be detrimental to the neighborhood. nullr purposes of this research, the criterion will be that nullnullhouseholds should be less than nullpercent of all housing in the neighborhood. nullmilarly, a reasonable limit on the manullmum number of assisted units desirable within a neighborhood may enullst. The literature is silent on this issue. The debate has yet to be resolved on whether assisted housing affects the surrounding neighborhood positively, negatively, or not at all. Researchers may never undertanull calibrating the effect as a function of the number of units, which is a more finely tuned issue. The typical blocnullgroup with pronullct-based housing, however, has a mean of null percent of all units assisted, but a median of only nullpercent. nulling these rates as guides, it may be best that any poverty deconcentration initiative avoid neighborhoods where the incidence of pronullct-based housing is more than null percent, both because this percentage represents a conservative level between the mean and the median and because it corresponds to the average level of poverty found in neighborhoods nationwide. nullnullhouseholds should not be guided to neighborhoods where the presence of pronullct-based assisted housing already creates a significant concentration of poor households. nullwell-designed poverty deconcentration program should guide nullnullhouseholds to desirable neighborhoods based on factors beyond nullst the presence of poverty and affordable housing. nullain, how the criteria should be derived for distinguishing desirable neighborhoods from less desirable is not entirely clear. nullst agree that desirable neighborhoods should provide opportuni - ties for gainful employment, good schools, and racial integration. nullcursory enullmination of measures of unemployment, educational attainment, and minority concentration could illustrate some criteria that could be used to identify desirable neighborhoods. The analysis presented in this article assumes that low unemployment in a neighborhood is a good pronull for the availability of nullbs in or close to that neighborhood. nullighborhoods with low unem - ployment are plentifulnullmore than one-half of all blocnullgroups enullerienced unemployment below nullpercent in nullnull. nullhe national unemployment rate was nullnullpercent in that year.nullnullfortunately, these low-unemployment neighborhoods appear to have smaller shares of rental units with rents

115Cityscape nulle Prospects nullr Guiding nullusing Cnullice Voucnullr nullusenulllds to nullgnullnullportunity nullignullornullods below the nullR than are found for blocnullgroups as whole. Those neighborhoods with unemploy - ment below nullpercent contain only about one-third of the rental units with rents below the nullR. These percentages suggest that an nullnullpoverty deconcentration effort may confront problems if the criteria identifying high-opportunity neighborhoods become too ambitious. To succeed, the effort may have to permit households to enter rental units with rents above the nullR. nullother obnullctive of poverty deconcentration is the movement of households, especially house - holds with children, to areas with good schools. The census does not have a mechanism to tabulate school quality, but it does measure the educational attainment of the resident population of each neighborhood. null is assumed that this stands as a pronull for school quality. The measure used here is the percent of the adults who have completed high school. nullusing units in areas with high educational attainment are distributed in a manner similar to housing in areas with low unemploy- ment. nullout null percent of blocnullgroups have below average levels of high school completion nullhat is, under null percentnull in nullnull, about null percent of all adults had not completed high school. These blocnullgroups, however, contain only null percent of the rental units available below the nullR. The level of minority concentration is the final issue regarding poverty deconcentration. Racial or ethnic minorities are defined here as all people enullept non-nullspanic nullites. nulling this definition, the median minority presence is null percent among all neighborhoods. nullven the high level of spatial concentration of minorities, the average presence, at null percent, is much higher. Develop - ing categories is problematic because there is little theory to guide the process. nullen it comes to poverty concentration, some guiding theories suggest that if the distribution of poor households can be nullpt below a low threshold, such as null percent, that the effect on the neighborhood will be negligible. null comparable guiding theory for racial minullng enullsts. nullidence shows nullites have a lower tolerance for non-nullites than non-nullites do for nullites. This tolerance differential leads to an ideal level of integration for nullites that contains a lower percentage of minorities than the ideal level of integration among minorities nullarley, nullnullnull null addition, minority concentration is subnullct to local conditions. null the nullnneapolis-null. Paul area, all minorities manull up null percent of the population, a figure close to the national average, but nullacnull manull up only nullpercent of the total area population compared with null percent of the na - tionnull population. nullspanics comprise only nullpercent of the total compared with null percent of the national population. nullmilarly, in nulln nulltonio, nullacnull comprise only nullpercent of the population, but nullspanics comprise null percent. These data suggest that analysis of minority concentrations at the national scale must be viewed with some cautionnullthe delineation of ideal levels of racial and ethnic integration are very different from one city to the nenull. nullhibit nullcombines the many criteria that can be used to identify desirable neighborhoods. null begins with all blocnullgroups that contain all null million rental units in the nation, of which null.nullmillion are offered at rents below the applicable nullR. The enullibit outlines the number of neighborhoods and rental units available as successive criteria are added to the definition of a high-opportunity neighborhood. nullginning with all nullnullnullnullblocnullgroups, this total is immediately reduced to nullnullnullnullwith the assumption that only blocnullgroups with poverty levels below null percent are desirable. nullcepting only low-poverty neighborhoods as potential high-opportunity neighborhoods results in a loss of

116 Refereed Papers nullClure null percent of the neighborhoods. The loss of affordable rental units is even greater. The null.nullmillion affordable rental units fall to only null.null million, a loss of nullnull percent of the units offered below the nullnullR. The order of adding additional constraints is somewhat arbitrary. nullch new constraint causes a loss of neighborhoods and units. The order used in enullibit nullsimply adds constraints with the least potential to cause a loss of neighborhoods and units as indicated with the analysis of the distribu- tions of assisted housing, educational attainment, unemployment, and minorities. The first two constraints added involve the incidence of pronullct-based housing and the presence of other nullnullhouseholds. nulliding nullnullhouseholds away from neighborhoods with above-average concentrations of pronullect-based housing does not cause a great loss of either neighborhoods or units. nulloiding neighborhoods that already have a significant concentration of other nullnullhouseholds also does not cause a great loss. null the high-opportunity neighborhoods have poverty levels below nullnull percent, pronullect-based housing below nullnull percent of the total stocnull, and voucher households leasing no more than nullpercent of the housing, then null,nullnullblocnullgroups remain with nullnullmillion units. nullding a constraint for low levels of adults who did not complete high school further reduces the number of neighborhoods and units. null the neighborhoods are also limited to nullst those where the failure to complete high school is less than null percent, then the available opportunity neighbor - hoods drop to null,nullnullblocnullgroups and nullnullmillion affordable units. null we limit the available blocnullgroups to nullst those with unemployment below nullpercent in nullnull, the count of available blocnullgroups falls to about null,nullnullwith nullnullmillion affordable units. nullding a constraint based on the presence of minorities has a significant effect. null the constraint calls for the presence of minorities to be less than null percentnull very modest levelnullhen the Exhibit null Povertnull nullnull Pronullctnull nullsed nullnullinnull nullnull nullnullinnull Choice Vonullhers nullnull nullnullts Not Conull pletinnull nullnull School nullnull nullenull plonulld nullornullrs nullnull Minoritnull Popnullation nullnull nullonullh in Povertnull nullnull nullocnull nullonull nullntal nullits nulllonull the nullnull nullntal nullits Distrinullnulltion of nullental nullnits nullitnull nullents Belonull tnulle nullnullnull annull All nullental nullnits in Blocnull nullronullps nullitnull nullovertnull Belonull 10 nullercent annull Cnullnullnullnulllativelnull Anullnullinnull nulltnuller nulleinullnullnullornulloonull Attrinullnulltes All nullocnullnullonulls 209null7null 1null575nullnull 3null707null99 null0 10null175 5null14null71 14null55null07 null0 null5 103null90 4null9null221 13nullnullnull07 null0 null5 null 9null321 4null02null29 12null4null599 null0 null5 null null0 nullnull14 3null51nullnull 10null04null44 null0 null5 null null0 null nullnullnull 2null73null79 null2nullnull21 null0 null5 null null0 null null0 50null90 1null39null72 5null93null02 null0 null5 null null0 null null0 null 2null155 974null11 2nullnullnullnull Fnull nullFair nullrnullt Rentnull nullte: Rnullnullare nullr tnull current nullrmula is nullnullnull nullnullnullnullr tnull Administration’s proposalnull

117Cityscape nulle Prospects nullr Guiding nullusing Cnullice Voucnullr nullusenulllds to nullgnullnullportunity nullignullornullods available neighborhoods drop to about null,nullnullblocnullgroups nullbout null percent of the totalnulland the number of units to only about nullnullmillion nullnly null percent of the totalnull The last constraint is the trend in poverty, which is based on a decline in poverty during the nullnullnullnulls, which was typical. This constraint, when added to the others, drops the available neighborhoods to only null,nullnulland the available units to under nullnullmillion. null is difficult to nullow when the loss of neighborhoods and units becomes prohibitive, because it is hard to nullow how many neighborhoods and units need to enullst to effectively implement a poverty deconcentration program. The nullnullprogram as a whole assists more than nullnullmillion households, but it is doubtful that a poverty deconcentration program would be applied across the entire pro- gramnulltoo many households would not want to locate elsewhere. nullen a modest effort, however, such as the proposal to engage null,nullnullvouchers per year for null years, means that nullnullnullnullunits would need to be successfully leased in the designated high-opportunity neighborhoods. null do not nullow a great deal about the capacity of nullnullhouseholds to compete against households without subsidies. null do nullow that nullnullhouseholds are able to lease about null to null percent of the units in low-poverty neighborhoods. Perhaps this figure could be pushed higher, but it is doubtful that, short of a significant new incentive for landlords to participate in the nullnullProgram, the ability to capture units can be dramatically higher. null this is true, it suggests that a poverty deconcentration initiative should adopt not-too-stringent criteria for high-opportunity neighbor- hoods so that the participating households will be able to enter a large number of neighborhoods with more than enough units available. What Has Not Been Examined nullveral issues have not been enulllored that possibly should. The current analysis depends heavily on data available from the decennial census. These data may be sufficient, because several variables used in the census data correlate with other factors that should be used to develop an opportunity indenull null is possible, however, that other data sets should be enulllored to see if they can provide measures that will improve the assessment of a neighborhoodnull potential to provide opportunities for good housing, employment, schools, shopping, and other services. Conclusions null an ideal setting, if enough neighborhoods ennullyed desirable traits nullow poverty, high educational attainment, and full employmentnulland provided sufficient rental units priced below the applicable nullRs, it would be simple to guide nullnullhouseholds to these neighborhoods. null a practical matter, however, too few neighborhoods offer all of these traits manullng the tasnullvery challenging. Roughly null million rental units enullst in the nullited nullates, but only about null percent of these units are listed below the nullR levels that govern the nullnullProgram. Thus, about null million units are eligible to participate in the program. nullot all of these units, however, are located in desirable neighbor- hoodsnull many are located in neighborhoods that suffer from high poverty and unemployment. nullf the nullnullnull Program, or at least a significant share of its participating households, were to be restricted so that they could reside only in neighborhoods with poverty below null percent, only nullnullmillion

118 Refereed Papers nullClure rental units would be available. nullthough the nullnullmillion units are greater in number than the appronullmately nullnullmillion nullnullhouseholds, this may not be enough, because the households in the nullnullProgram seenullng eligible rental dwellings would have to compete with other unassisted renter households for these few units. The nullnullProgram could restrict a program household to only those neighborhoods with the following characteristicsnull null nullw poverty nulless than null percent of the populationnull null nullw presence of other assisted rental units nulless than null percent pronullct-based housing and nullpercent voucher householdsnull null nullw incidence of adults who did not complete high school nulless than null percentnull null nullw incidence of unemployment nulless than nullpercentnull null nullw incidence of minorities nulless than null percentnull null Declining poverty. null these constraints were adopted, the number of affordable rental units would diminish consider - ably. nulling nullnull nullnsus counts, it is estimated that only nullnullmillion rental units would be able to participate in only null,nullnullblocnullgroups. This count of units is smaller than the number of households already in the nullnullProgram. null addition, units meeting these conditions are located in only null percent of the blocnullgroups across the nation, which would be a prohibitively small number of neighborhoods. null present, nullnullhousehold are able to lease null to null percent of the affordable rental units in low-poverty neighborhoods nullnull,nullnullvoucher households in the nullnullmillion affordable unitsnull null another nullnullnullnullvoucher households were added to this number, it would mean that nullnull households would have to capture null percent of the available affordable units. null is unlinullly that an innullnullof additional voucher households of this scale could successfully compete with unsubsidinulld households for units within a narrowly constrained set of neighborhoods. The voucher households would need to be able to search across many neighborhoods, not nullust a few. The need to search across many neighborhoods means that any effort to identify high-opportunity neighborhoods should enull- ercise caution when adopting criteria that limit the location options of the participating households. The households may also need to compete for units that are priced above the nullR. nullits rented at or below the nullnullR manulle up nullust nullnull percent of all the rental units in the low-poverty neighborhoods. This low percentage suggests that guiding households to low-poverty neighborhoods will be hindered by the requirement that units be rented at or below the nullnullR. Poverty deconcentration may be facil- itated through the use of enulleption rents and other possible modifications to the nullnullProgram. The analysis here is developed using only crude measures of the housing and demographic conditions in the blocnullgroups. nullthough this research is instructive because of its national scope, the results are only suggestive. null may be necessary to conduct more detailed research following the successes and failures of nullnullhouseholds in metropolitan areas where the housing, employment, educational, and crime characteristics can be measured with greater precision.

119Cityscape nulle Prospects nullr Guiding nullusing Cnullice Voucnullr nullusenulllds to nullgnullnullportunity nullignullornullods nullnullowledgments The author thannull the nullnull Department of nullusing and nullban Development for supporting this research and multiple anonymous referees for their very helpful guidance. nulltnullr nullrnullnullnullure is a professor in the Department of nullban Planning at the nulliversity of nullnsas. Renullrences nulliggs, nullvier de nullunull, and nullrgery nullstin Turner. nullnull. nullssisted nullusing nullbility and the nullccess of nullw-nullcome nullnority nullmiliesnullnullssons for Policy, Practice, and nullture Research,null Northwestern nullurnal of nullw and nullcial nulllicy nullnullnull nullnullnull nulloonull-nullnn, nullanne, nulleg null Duncan, and null nullwrence nuller, eds. nullnull. Neighborhood nullnullrtynull nulll. null Contenull and Consenullences for Childrennull nullw nullrnull Russell nullge nullundation. nullulton, nullaudia null, nullll nullrbin, Tsui nullan, and nullrilyn null. nullnull. nullapping ResidentsnullPercep - tions of nullighborhood nullundariesnullnullnullthodological nullte,nullnullerican nullurnal of Community nullychology null nullnull nullnullnullnull Devine, Deborah null, Robert null nullay, nullster Rubin, and nulldia null Taghavi. nullnull. nullusing Choice Voucher nullcation nulltternsnullImplications for nullrticipant and Neighborhood nulllfarenull nullshington, Dnull nullnull Department of nullusing and nullban Development, Office of Policy Development and Research, Division of Program nullnitoring and Research. nulllen, nullgrid null, and nullrgery null Turner. nullnull. nullDo nullighborhoods nulltter and nullynullnull null Choosing a nulltter nullfenullnullaluating the nullnullng to nullportunity nullperiment, edited by nullhn null nullering and nulldith D. nullins. nullshington, Dnull nullban nullstitute Pressnullnullnullnullnull nullnull nullnull. nullDoes nullighborhood nulltternullnullsessing Recent nullidence,nullnullusing nulllicy nullbate nullnullnull nullnullnullnull nullrley, Reynolds. nullnull. nullarriers to the Racial nulltegration of nullighborhoodsnullThe Detroit nullse,null nullnals of the nullerican nullademy of nulllitical and nullcial nullience nullnullnullnull nullnullnull. nulleeman, nullnce, and nullllary nulltein. nullnull. nullubsidinulld nullusing and nullighborhood nullpactsnullnull Theoretical Discussion and Review of the nullidence,nullnullurnal of nullanning nullterature null nullnull nullnullnullnull nulliedrichs, nullrgen. nullnull. nullDo Poor nullighborhoods nullnull Their Residents Poorernullnullntenull nullfects of Poverty nullighborhoods on Their Residents.nullnull nullpirical nullnullrty nullsearch in a Comparatinull nullrspectinull, edited by nullns-nullrgen nulldress. nulldershot, nullited nullngdomnullnullhgatenullnullnullnull nulllster, nullorge null nullnull. nullnullnsequences nullom the Redistribution of nullban Poverty During the nullnullsnullnullnullutionary Tale,nullnullonomic nullnulllopment nullarterly null nullnull nullnullnullnull

120 Refereed Papers nullClure nullnull nullnull. nullnullvestigating nullhavioural nullpacts of Poor nullighbourhoodsnullTowards nullw Data and nullalytic nullrategies,nullnullusing nulludies null nullnull nullnullnullnull nullnull nullnull. nullnull nullonomic nullficiency nullalysis of Deconcentrating Poverty Populations,null nullurnal of nullusing nullonomics null nullnull nullnullnullnull nulllster, nullorge null, Roberto null nullercia, nullvaro nullrtes, and Ron nulllega. nullnull. nullhe nullrtunes of Poor nullighborhoods,nullnullban nullfairs nullnullew nullnullnullnullnullnullnull nulllster, nullorge null, Peter null Tatian, nullna null nullntiago, nullthryn nullnull Pettit, and Robin null nullith. nullnull. nully Not in null nullcnullardnull nullw nullunswicnull nullnullThe nullate nulliversity of nullw nullrsey, Rutgers, nullnter for nullban Policy Research. nulllster, nullorge null, Peter null Tatian, and Robin null nullith. nullnull. nullThe nullpact of nullighbors nullo nulle nullction nullnullrtificates on Property nulllues,nullnullusing nulllicy nullbate null nullnull nullnullnullnull nulllster, nullorge null, and nullne nullebel. nullnull. nullnullll Dispersed nullusing Programmes Reduce nullcial Problems in the nullnullnull nullusing nulludies null nullnull nullnullnullnull nullonulltics, nullc. nullnull. nullnull nullng nullrm in nullnull nullundaries. nullst nullunswicnull nullnullnullonulltics, nullc. nullering, nullhn null, and nulldith D. nullins. nullnull. Choosing a nulltter nullfenullnullaluating the nullnullng to nullportunity nullperiment. nullshington, Dnull nullban nullstitute Press. nullering, nullhn null, nulldith D. nullins, and Todd null Richardson. nullnull. nullnullat nullve null nullarned nullout nullusing nullbility and Poverty Deconcentrationnullnull null Choosing a nulltter nullfenullnullaluating the nullnullng to nullportunity nullperiment, edited by nullhn null nullering and nulldith D. nullins. nullshington, Dnull nullban nullstitute Pressnullnullnull. nullering, nullhn null, nulldollah nullghighi, nulllene nullebbins, and nullchael nullewert. nullnull. nullomoting nullusing Choice in nullnulls nullntal nullsistance nullogramsnullnullnullport to Congressnull nullshington, Dnull nullnull Department of nullusing and nullban Development, Office of Policy Development and Research. nulletnull nullward null, and nullren nullapple. nullnull. nullnullu nulltta nullvenullnullvancing the Debate on the Record of Dispersal,nullnullusing nulllicy nullbate null nullnull nullnullnullnull nullbroscio, David. nullnull. nullnullnited and nulltuated by nullme nullmmon nullpulse of Passionnullnullalleng - ing the Dispersal nullnsensus in nullerican nullusing Policy Research,null nullurnal of nullban nullfairs null nullnull nullnullnullnull nullrgowsnull, Paul null nullnull. nullResponse to nullorge null nulllsternull nullnullnsequences nullom the Redistribution of nullban Poverty During the nullnullsnullnullnullutionary Tale,’nullnullonomic nullnulllopment nullarterly null nullnull nullnullnullnull nullnull nullnull. nullunning nullogress, nulldden nulloblemsnullnulle nullamatic nullcline of Concentrated nullnullrty in the 1null0s. The nullving nullties nullnsus nullries. nullshington, Dnull nulloonullngs nullstitution. nullsarda, nullhn D. nullnull. nullnullner-nullty nullncentrated Poverty and nullighborhood Distressnullnullnull to nullnull,nullnullusing nulllicy nullbate nullnullnull nullnullnullnull

121Cityscape nulle Prospects nullr Guiding nullusing Cnullice Voucnullr nullusenulllds to nullgnullnullportunity nullignullornullods nullels, nullcere, nulleg null Duncan, nullefanie Deluca, Ruby nullndenhall, and nullmes Rosenbaum. nullnull. nullifteen nullars nullternullnulln Residential nullbility Programs Provide a nullng-Term nullcape nullom nullighborhood nullgregation, nullime, and Povertynullnull nullmography null nullnull nullnullnull nullngsley, null Thomas, and nullthryn nullnull Pettit. nullnull. Concentrated nullnullrtynullnullChange in Coursenull nullshington, Dnull nullban nullstitute. nullailable at httpnullnullww.urban.orgnullploadedPDnullnullnullnullnull nullnullnullpdf. nullventhal, Tama, and nullanne nulloonull-nullnn. nullnull. nullnullving to Opportunitynullnull nullperimental nulludy of nullighborhood nullfects on nullntal nullalth,nullnullerican nullurnal of nullblic nullalth null nullnull nullnullnullnullnull nulldwig, nullns, nulleg Duncan, and Paul nullrschfield. nullnull. nullnullban Poverty and nullvenile nullimenull nullidence nullom a Randominulld nullusing-nullbility nullperiment,null nullarterly nullurnal of nullonomics nullnull nullnull nullnullnullnull nulldwig, nullns, nulleg Duncan, and nullshua Pinnullton. nullnull. nullnullighborhood nullfects on nullonomic nulllf-nullfficiencynullnullidence nullom a Randominulld nullusing-nullbility nullperiment. null nullailable at httpnullnull www.nber.orgnulltopublicnullaltimorenulltonullaltnullmployment.pdf. nulldwig, nullns, nulllen nulldd, and nulleg Duncan. nullnull. nullnullban Poverty and nullucational Outcomes.null null nulloonullngsnullharton nullpers on nullban nullfairs, edited by nulllliam null nullle and nullnet R. Pacnull nullshington, Dnull nulloonullngs nullstitutionnullnullnullnullnull Orr, nullrry, nulldith D. nullins, Robin nullcob, nullinullnullecroft, nullsa nullnbonmatsu, nullwrence null nulltnull nullffrey null nullebman, and nullffrey R. nulling. nullnull. nullnullng to nullportunity for nullir nullusing nullmonstration nullogramnullInterim Impacts nullaluationnullReport prepared for the nullnull Department of nullusing and nullban Development by nullt nullsociates, nullc., and the nulltional nullreau of nullonomic Research null nullshington, Dnull nullnull Department of nullusing and nullban Development. Polinullff, nullenullnder. nullnull. nullRacial nullequality and the nullacnullnulletto,nullnullnullrty and nullce. nullailable at httpnullnullww.prrac.orgnullullnullenull.phpnullenullnulldnullnullnullitemnulldnullnullnullnewsletternull idnullnullheadernulllenullndernullnullolinullffnullnullnullautreaunullnullProposal. Popnulln, nullsan null, nullrry null nullron, Diane null nullvy, and nullry null nullnningham. nullnull. nullhe nullutreaunull nullgacynullnullat nullght nullnulld-nullcome and Dispersal nullrategies nullan for the Poorest Public nullusing Tenantsnull nullusing nulllicy nullbate null nullnull nullnullnullnull Rosenbaum, nullmes null nullnull. nullnullanging the nullography of Opportunity by nullpanding Residential nulloicenullnullssons nullom the nullutreaunullProgram,nullnullusing nulllicy nullbate nullnullnull nullnullnullnull nullmpson, Robert, nullffery nullrenoff, and Thomas nullnnon-Rowley. nullnull. nullssessing nulleighborhood nullfectsnull nullcial Processes and nullw Directions in Research,nullnullnual nullnullew of nullciology nullnullnullnullnullnull nullnull nullreau of the nullnsus nullensusnull nullnull. 200nullnullerican Community nullrnully. nullnullnullnullnullnulleri- can nullmmunity nullrvey nullnullar nulltimates. nullvailable at www.census.gov. nullnull nullnull. nullnull nullnsus. nullmmary nullle null nullrious tables. nullailable at www.census.gov.

122 Refereed Papers nullClure nullnull nullnull. nullnull nullnsus. nullmmary nullle null nullrious tables. nullailable at www.census.gov. nullnull Department of nullusing and nullban Development nullnullnull nullnull null nullhapter null nullpanding nullus- ing Opportunities and nullbility.nullnull nullusing Choice Voucher nullogram nullideboonull edited by nulladel nullnsulting nullrporationnullnullshington, Dnull nullnull Department of nullusing and nullban Development. nullailable at httpnullnullww.hud.govnullfficesnulldmnulludclipsnulluideboonullnullnullnullnullnullnullnullgnullnullnull.pdf . nullnull nullnullnullnullction nullght nullnagement nullsessment nullogram nullnullnullnull nullshington, Dnull nullnull Department of nullusing and nullban Development. nullailable at httpnullnullww.hud.govnullfficesnullihnull programsnullcvnullemapnullemap.cfm. van nullmpen, nulla T. nullnull. nullPoverty Pocnullts and nullfe nullances,null nullerican nullhanulloral nullientist null nullnull nullnullnullnull nullrady, David P., and nullrole null nulllnullr. nullnull. nullnullusing nulluchers and Residential nullbility,null nullurnal of nullanning nullterature null nullnull nullnullnull nullnnicnull nulluis. nullnull. nullThe Triumph of nullusing nulllowance Programsnullnullw a nullndamental Policy nullnnullct nulls Resolved,nullCityscapenullnullnullurnal of nulllicy nullnulllopment and nullsearch nullnullnull nullnullnull.

123nulltyscapenullnullnullurnal of nulllicy Development and Research • Volume 12, Number 3 • 2010 U.S. Department of Housing and Urban Development • Office of Policy Development and Research Cityscape Measuring Neighborhood Quality With Survey Data: A Bayesian Approach nullent null nullst nullnull Department of nullusing and nullban Development nullstract nullthough neighborhood nullality is important for shaping public policy, it is also difnullult to nullantifynullnullis study measured subnullctinull neighborhood nullality using data from two sourcesnullnullnullthe 2002 nullerican nullusing nullrnully nullnullnulland nullnullthe nullnull nullpartment of nullusing and nullban nullnulllopmentnulls nullnullnullsnullCustomer nulltisfaction nullrnully nullnullnullof nullction nullnullusing Choice Voucher nullogram nullCVnull householdsnullnullrnully responses were analyzed regarding neighborhood nullality, home nullality, and crime perceptionsnullnullractnull lenulll nullyesian estimates were computed using nullnullmetropolitannullenulll data and Cnull census tract datanull nulle new nullyesian estimates hanull fewer outliers than the original Cnull data, and the use of prior information allows for estimation for tracts with lower sample sizes than would be practical to estimate using only Cnull datanull I compared the Cnull and nullyesian estimates with other measures of neighborhood nullalnull ity, such as ponullrty rates, median income, and indicators for tracts receinullng lownullncome housing tanullcreditsnullnulle Cnull and nullyesian indicators are highly correlated, and both the Cnull and nullyesian estimates correlate well with the aunullliary nullriables used in this studynull nullr tracts with large differences between the Cnull and nullyesian estimates, correlations are much stronger for the nullyesian estimatesnull nulle contents of this article are the nullews of the author and do not necessarily renullct the nullews or policies of the nullnull nullpartment of nullusing and nullban nullnulllopment or the nullnull gonullrnmentnull

124 Refereed Papers nullst Introduction nullasuring neighborhood quality is important for shaping many public policies. nullr instance, the nullnull Department of nullusing and nullban Developmentnull nullnullnullnullnullusing nulloice nullucher Program nullnullPnullis intended to enulland social and economic opportunities nullutside areas of poverty or minority concentrationnullnullnull nullnullnullch. null p. nullnull. null other words, the program is designed to promote access to decent and affordable housing in higher quality neighborhoods compared with neighborhoods of traditional public housing pronullcts. Despite its importance to policymanullrs, neighborhood quality is inherently complenulland difficult to measure. Data are available on a wide variety of neighborhood characteristics, such as poverty rates, income, crime rates, and school test scores. nullthough many policymanullrs and researchers rely on such indicators, they may have limited ability to measure the quality of neighborhood life as rated by residents nullnullron and Patrabansh, nullnullnull nullrvey data are available that measure residentsnullsubnullctive perceptions of their neighborhoods. The study described in this article analynulld neighborhood quality perception data from two sur - veysnullnullnullthe nullerican nullusing nullrvey nullnullnulland nullnullnullDnull nullstomer nulltisfaction nullrvey nullnullnull The nullnullcollects a large amount of information on housing conditions of nullerican households. null

The nullnullis actually composed of two surveys, metropolitan and national, each tanullng place in different years. nullemployed nullnull metropolitan data for this study. nullDnull nullnullwas a nullyear survey of nullnull households. null nullnducted between nullnull and nullnull, its main obnullctive was to provide independent housing quality data to public housing agencies. nullout nullnullnullnullresponses were collected. nullthough the nullnulland nullnullcontain many related questions, survey design differences manull the direct comparison of nullnulland nullnulldata difficult. null nullr a subset of data items, however, estimates from both surveys correlate well. nullr instance, despite substantial differences in question wording, nullst nullnullnullnullreported similar crime perception estimates based on nullnulland nullnull nullnulldata. Two similar questions on each survey asnullnullnulland nullnullrespondents to rannullboth their home and neighborhood on a scale of nullto null. nulltimates for nullnull households from the nullnulland nullnull nullnull are very close nullast nullnullbnull nullthough many studies have enullmined differences in estimates from independent surveys, few researchers have attempted to combine information from independent surveys with nullyesian methods. This study attempted to enullend this literature by using nullyesian methods to produce neighborhood quality indicators based on both the nullnulland nullnull nullnulldata pose several problems for measuring neighborhood quality. nullrst, the neighborhood and home ratings are subnullctive ordinal ratings on a nullto null scale. nullthough we could compute a mean rating, for ordinal data it is customary to compute only order statistics such as the median or other percentiles. The data do not easily lend themselves to standard statistical models that analynulle the mean. null nullnulldata and information are available at httpnullnullww.huduser.orgnullatasetsnullhs.html. null nulle nullst nullnullnullnulland nullay, nullley, and nullst nullnullnull for more nullnullinformation. null nulle nullay, nullley, and nullst nullnullnull and nullron, nullul, and Patterson nullnullnull for discussions of differences between the nullnull and nullnull

125Cityscape nullasuring nullignullornullod nullality nullitnullSurvey nullta: A nullyesian Approacnull nullstead of analynullng raw ordinal ratings, nullcomputed a binary nullood or badnullneighborhood indica - tor by treating scores of at least nullas high quality. null enough responses nullt least null enullsted in each category for a neighborhood, the mean proportion followed an appronullmately normal distribution. nullr most census tracts not nearly enough nullnullresponses enullsted to treat the tract distribution as normal, however. nullen when combining nullnulldata for all nullyears of the survey, most census tracts have nullor fewer nullnullresponsesnullthis small number poses a second problem, because most statistical models for survey data assume normality of the sample mean. nullnstead of assuming normality, null treated the tract distributions as binomial data. null addition to having small samples, many tracts have highly snullwed distributions, with most or all households in the same binary categorynullthis snullwness poses a third problem. nullproposed address - ing the issue with a nullyesian model using prior information for the nullnull null drawing strength from the nullnull nullyesian methods can produce more reasonable estimates for many tracts with highly snullwed nullnulldistributions. nullthough sharp ideological differences enullst between nullyesian and classical nullr frequentistnullstatis - tics, in practice the most important difference concerns the use of prior information. null nullthough classical methods tend to let the data nullpeanullfor themselves,nullnullyesian estimates always condition on prior information. nullr this study, nullstarted with prior information from the nullnulland updated these estimates with nullnulldata. nullemployed a particular nullyesian approach, referred to as a nullyesian nullerarchical nulldel, using metropolitan-level nullnullnull data and nullnullnull census tract data. nullompared with tract estimates based only on nullnullnull data, the nullayesian estimates have fewer outliers with very low or very high estimated quality. To validate my estimates, nullenullmined correlation of the nullnulland nullyesian estimates with other measures of neighborhood quality, such as median income, poverty rates, and indicators for tracts receiving low-income housing tanullcredits nullnullTnullnull The nullyesian estimates tend to correlate more strongly with these aunullliary variables, and the differences are more apparent for tracts with larger differences between the nullnulland nullyesian estimates. The remainder of the article proceeds as followsnull null nullreview of relevant studies. null The survey data description. null null enulllanation of the model. null The empirical results. null The estimates compared with other tract-level measures of neighborhood quality. null nullsummary of the results. null nullayesians view statistical inference as a problem in belief dynamics, or use of evidence about a phenomenon to revise and update our nullowledge about it.nullnullom course description at httpnullnullolgenau.gmu.edunullnullasnullynullnullTnullnullnullnullnullnullhtml. nulle nulle nullnullnull for an introduction to nullyesian methods.

Brownfields

126 Refereed Papers nullst Literature Review null this section, nullreview two bodies of relevant literature. nullstart with a discussion of neighborhood quality studies. nullthen review past studies that have compared estimates from independent surveys. Measuring Neighborhood Quality nullighborhood quality is a difficult concept to quantify. nullcording to Dubin nullnullnull, measurement error is a linullly cause for the lacnullof consistent effects of neighborhood quality indicators in hedonic housing price regressions. The stalwarts of neighborhood quality measurement have traditionally been data on income, race, ethnicity, and poverty. nullthough, until recently, reliable neighborhood-level population, income, and poverty data were available only from the decennial census. null nullime rates may also be useful measures of neighborhood quality. nullr instance, Deller and Ottem nullnullnullnullnullnull used county crime rates as neighborhood quality controls in hedonic property value regressions. nullime rate data are also available at lower levels of aggregation for some localities. nullhill nullnullnull reported crime rates nullveraged over nullnull through nullnullnullfor census tracts and blocnullgroups for three nullnull cities nullashville, Tucson, and Portlandnull null null increasing number of areas, such as nullattle, are manullng neighborhood crime data available through their crime mapping programs. null nullighborhood quality should also be positively related to educational achievement. nulldgley, nulllliams, and Derricnullnullnullnull found that eighth-grade test scores and nullT scores have significant positive effects on housing prices. They found no consistent effect for third-grade scores, however. nullrvey measures are available that measure residentsnullsubnullctive perceptions of their neighbor - hoods. nullron and Patrabansh nullnullnull provided evidence that subnullctive perceptions of neighbor - hood quality may not correlate highly with obnullctive measures, such as poverty rates. nullrelated literature studied the differences in perceived neighborhood quality in the same localities due to differences in characteristics such as race, ethnicity, gender, and income nullt. nullhn and nullarnull nullnullnull Differences may be especially apparent regarding neighborhood crime nullustin, nullrr, and nulline, nullnullnull nullr instance, females may manifest more sensitivity toward violent crime. nullny researchers have measured perceived neighborhood quality with nullnulldata nullhapman and nullmbard, nullnullnullDilulio, nullnullnullnullwman and nullhnare, nullnullnull nullr instance, nullpp nullnullnull studied the relationship between nullnullhousehold crime perceptions and county crime rates. null found household perceptions of crime were more strongly related to violent crime than property crime. null Designed to replace the decennial census long form, the nullerican nullmmunity nullrvey will soon provide tract-level estimates nullveraged over multiple yearsnull null nulle nullhill nullnullnull for data and information. null httpnullnullpotcrime.comnullanulleattle.

127Cityscape nullasuring nullignullornullod nullality nullitnullSurvey nullta: A nullyesian Approacnull Other studies have measured neighborhood quality with nullnulldata. nullron and Patrabansh nullnullnull studied the relationship between nullnullhousehold neighborhood quality responses and census data and, as indicated previously, they found little correspondence. This lacnullof correspondence calls into question the use of social indicators, such as poverty rates, as measures of neighborhood quality. nullron and Patrabanshnull findings, however, may be affected by their use of household-level data. This study found that resident perceptions aggregated to the tract level have fairly strong correlation with poverty and income. nullay, nullley, and nullst nullnullnull reported wide variation in nullnullneighborhood ratings across demographic groups. nullst nullnullnullnull using nullnulldata, estimated that nullst nullrginia crime percep - tions relate more strongly with property crime than violent crime. Comparing Estimates From Independent Surveys nullmerous studies have compared and contrasted estimates from independent surveys. nullr enullmple, nullshaw and nullern nullnullnull enullmined differences in poverty estimates based on the nullnsus nullreaunull nullerican nullmmunity nullrvey nullnullnulland nullrrent Population nullrvey nullPnull. nullfew studies have compared nullnulland nullnullestimates. nullron, nullul, and Patterson nullnullnull matched nullnull nullnullhouseholds with a sample of unassisted nullnullhouseholds. nullthough they reported lower housing quality for nullnull households relative to similar unassisted families, they cautioned that their results may be driven by methodology and questionnaire differences. nullst nullnullnullnullstudied crime perception questions on both the nullnulland nullnull nullnull The wording of the crime question differs on the two surveys. The nullnullasnull residents if null neighborhood crime problemnullenullsts, and the nullnullasnull if crime or drugs nulls a big problem in nullhenullneighborhood.null Response options also differ. Despite these discrepancies, nullst nullnullnullnullrecoded responses into binary indicators with similar means. Of nullnullnullnull households, null.nullpercent were estimated to have a crime problem compared with null.nullpercent of nullnullhouseholds. Two of the most similar questions on each survey asnullnullnulland nullnullrespondents to rannulltheir home and neighborhood on a scale of nullto null. nullst nullnullnullnullcompared both rannullngs on the nullnull with those for nullnull households in the nullnull nullnull nullr both homes and neighborhoods, nullnull rannullngs are nullst slightly higher than nullnullestimates for nullnull homes. nullast nullnullnullnullnullanull suggested that, because nullnullnull and nullnullnull crime estimates are similar, they are well suited for nullyesian methods. nullcause the nullnullsample sinull is much larger than the nullnull nullemployed a nullayesian nullierarchical nullodel. nullnullnull national estimates are used as priors, along with nullnullnull county data, to estimate nullyesian posterior county estimates. nullmpared with estimates solely based on nullnull data, the nullyesian estimates have lower variance and correlate more highly with county violent and property crime rates. nullnsistent with nullpp nullnullnull, the relationship is strongest with violent crime.

128 Refereed Papers nullst Data Description This section reports nullnull nullnulland nullnullsummary statistics on three measures of neighborhood qualitynullneighborhood ratings, home ratings, and crime perceptions. nullth surveys asnullrespondents to rate the neighborhoods and homes on an ordinal scale of nullto null. nullecause the response categories are numerical, we could compute mean ratings. nulle would be manulling an assumption, however, that a rating of nullis enullctly twice as good as a rating of null nullr subnullctive ordinal data, it is therefore customary to compute only order statistics, such as the median or other percentiles. nullhibit nullreports percentiles nullnullh, nullth, median, nullth, and nullthnullfor neighborhood and home ratings. nullnulldata are reported for all occupied rental units and nullnull households. The nullnullratings are based on responses for nullnull households in the null nullnullmetropolitan areas between nullnull and nullnull. null nullrvey responses for nullnullrenters are weighted to be representative of all renters in the null metropolitan areasnullnullnullnullnull and nullnullresponses are weighted to be representative of all voucher households in the null metropolitan areas. null nullighborhood ratings correspond highly with home ratings. nullighborhood ratings in the nullth percentile are nullfor all three samples nullnull renters, nullnullnullnull, and nullnull. nullme ratings in the nullth percentile are nullfor nullnullrenters, nullfor nullnullnullnull households, and nullfor nullnullfamilies. nulll median ratings are null nullighborhood ratings in the nullth percentile are nullfor both nullnullsamples and nullnull for the nullnullnull. nullome ratings in the nullnullth percentile are null for both nullnullnull samples and nullnull for the nullnullnull. null nullnulldata were matched to the nullnullby county for counties in the null metropolitan areas according to the Office of nullnagement and nulldget nullne nullnull definitions. nullr information on metropolitan area definitions, see httpnullnullww.census. govnullopulationnullwwnulletroareasnulletrodef.html. null The metropolitan nullnullis stratified by metropolitan area, with weights summing to total households. The nullnullis stratified by public housing agency nullnullnulland year, with weights summing to nullnull households in all sampled Pnulls in a given year. Only a tiny fraction of Pnulls was enullluded. nullr more information on the survey designs for the nullnull see httpnullnullww. huduser.orgnullatasetsnullhs.html and, for the nullnull see nullst nullnullnullnulland nullay, nullley, and nullst nullnullnull. Exhibit 1 nulleinullted Percentile Neinullborhoods nullnulls nullSnullll nullnters nullSnullCVP nullnulleholds CSS nullSnullll nullnters nullSnullCVP nullnulleholds CSS nullinullnullrnullonullannullnullnull nulltinnullnullrcentiles 10tnullpercentile 5 5 4 5 5 4 25tnullpercentile null null null null 7 null nullnullan null null null null null null 75tnullpercentile 9 9 9 9 10 10 90tnullpercentile 10 10 10 10 10 10 Anull nullAmerican nullusing SurveynullCSS nullCustomer Satisnullction SurveynullnullVP nullnullusing Cnullice Voucnullr Programnull For neignullornullod ratingsnullnullenullals nullnullnull nullr Anull rentersnullnullnullnullr AnullnullCVP nullusenullldsnulland nullnullnull nullr tnull CSSnullFor nullme ratingsnullnullenullals nullnullnull nullr Anull rentersnullnullnullnullr AnullnullCVP nullusenullldsnulland nullnullnull nullr tnull CSSnull Source: Autnullr’s calculation using nullnull Anull and CSS data

129Cityscape nullasuring nullignullornullod nullality nullitnullSurvey nullta: A nullyesian Approacnull null can compute binary indicators of high neighborhood and home ratings for which mean analysis is appropriate. nullr this study nulltreated ratings of at least nullas high ratings. The threshold is admittedly arbitrary. nullhibit nullreports mean percentages of households with high neighborhood and high home ratings. nullre than one-half of the households in each sample rated their neighborhood nullor above. Of nullnull renters, null.nullpercent have high neighborhood ratings, as do null.nullpercent of nullnullnullnull house - holds and null.nullpercent of nullnullhouseholds. On average, voucher families tend to rate their homes better than renters in general. Of nullnullnullnull families, null.nullpercent rate their homes nullor above, as do null.nullpercent of nullnullhouseholdsnullthe corresponding mean for all nullnullrenters is null.nullpercent. The wording of the crime question differs on the two surveys. The nullnullasnull households if their nulleighborhood has a neighborhood crime problem.nullResponse categories include nullo,nullnullonnull nullow,nulland nulles.nullThe nullnullasnull if crime or drugs nulls a big problem in nullhenullneighborhood.null Response categories include nullo Problem,nullnullonnull nullow,nullnullome Problem,nulland nullig Problem.null To facilitate comparison of crime variables from both surveys, nullrecoded responses as binary indicators of low crime. nullr the nullnull nullesnullresponses were set to nullro, and nullonulland nullonnull nullownull responses were treated as ones. nullr the nullnull nullome problemnulland nullig problemnullresponses were set to nullro, and nullo problemnulland nullonnull nullownullresponses were set to one. nullnresponses for both surveys were set to missing. nullan indicators of low-crime perceptions are reported in enullibit null nullmpared with all renters, voucher households rate their neighborhoods as less safe. Of all the renters surveyed, null.nullpercent do not perceive a manullr crime problem in their area. The corresponding means are null.nullpercent for nullnullvoucher households and null.nullpercent of nullnullhouseholds. Exhibit 2 Variable nullSnullll nullnters nullSnullCVP nullnulleholds CSSnullCVP nullnulleholds nullsponses nulleinullted Mean nullsponses nulleinullted Mean nullsponses nulleinullted Mean nullan Innullcators of nullnull nullinullnullrnullonullnullalitnull nullnull neinullnullrnullonullratinnull 1null45null 0.55null 503 0.544 2nullnull2 0.52null nullnull nullnull ratinnull 1null510 0.547 503 0.null4 2null9null 0.59null nullnullcrinull innullcator 1null777 0.770 509 0.null7 27null7null 0.null4 Anull nullAmerican nullusing SurveynullCSS nullCustomer Satisnullction SurveynullnullVP nullnullusing Cnullice Voucnullr Programnull nullgnullnullme and neignullornullod ratings are ≥nullon a scale onullnullto nullnull Source: Autnullr’s calculation using nullnull Anull and CSS data nullhibits null null and nullreport summary statistics by metropolitan area for high neighborhood ratings, high home ratings, and low-crime indicators, respectively. nullcording to the nullnull Phoeninullhas the lowest fraction of high neighborhood rating for all renters null.nullnull and nullnull households null.nullnull. The nullnsas nullty metropolitan area has the best neighborhood ratings, according to all nullnullrenters null.nullnull, and the worst neighborhoods according to nullnullhouseholds. One possible enulllanation for differing opinions between all renters and voucher households is clustering of affordable rental

130 Refereed Papers nullst Exhibit 3 Metropolitan nullea nullSnullll nullnters nullSnullCVP nullnulleholds CSSnullCVP nullnulleholds nullsponses nulleinullted Mean nullsponses nulleinullted Mean nullsponses nulleinullted Mean nullan Innullcators of nullnull nullinullnullrnullonullnulltinnullnullnull nulltropolitan Area Santa AnanullnanullinullIrvinenullCA Division 1null13 0.5null 44 0.5null 1null24 0.null0 Bnullfalonullnullenullonullnullnull Tonanullnnullnullnull 1null22 0.535 57 0.4null 1null34 0.54null Cnullrlottenullastonianulloncornull nullnullC 1null14 0.579 1null 0.null0 2null37 0.53null Colnullnullsnullnull 1null30 0.541 55 0.4null 1null51 0.453 Dallasnulllanonullrvinnull Tnull Division 1null37 0.5null 41 0.nullnull 3null77 0.494 nullrt nullortnullArlinnullonnullTnull Division 1null03 0.52null 40 0.523 1nullnull 0.49null nullnsas CitnullnullnullnullS 1null5null 0.595 43 0.4null 2null3null 0.442 nullanullnullort nullnullernulllenullianull Beacnull null 1null1null 0.574 27 0.590 2null07 0.591 nulllnullnulleenullanullesnullnullest Allisnullnull 1nullnull 0.5null 30 0.5null 1nullnull 0.451 nulloeninullnullsanullcottsnulllenullAZ 1null00 0.517 30 0.322 2null75 0.499 nullrtlannullnullanconullernull BeavertonnullnullnullA 1null71 0.525 32 0.433 1null09 0.534 nullversinullnullan Bernarnullnonull nulltarionullCA 1nullnull 0.553 2null 0.5null 1null44 0.514 San DienullnullarlsnullnullSan nullrcosnullCA 1null1null 0.570 5null 0.null7 1nullnull 0.5null Anull nullAmerican nullusing SurveynullCSS nullCustomer Satisnullction SurveynullnullVP nullnullusing Cnullice Voucnullr Programnull nullgnullneignullornullod ratings are ≥nullon a scale onullnullto nullnull Source: Autnullr’s calculations using CSS and nullnull Anull data units meeting nullD housing quality guidelines in particular neighborhoods. nullcording to voucher households participating in the nullnull nullnta nulla has the best neighborhoods. Two of the three survey estimates rannullnullnta nulla as the safest metropolitan area. Of nullnta nulla nullnullrenters, null.nullpercent report no manullr crime problem, as do null.nullpercent of nullnullnullnull households and null.nullpercent of nullnullrespondents. nulllumbus is the least safe metropolitan area according to two of three survey measures. Of the nullnullrenters surveyed, null.nullpercent report no manullor crime problems in the nullolumbus area, compared with nullnull.null percent of nullnullnull nullnullnullP households and null.nullpercent of nullnullhouseholds. nullcording to nullnullvoucher respondents, the Phoeninullarea has the greatest perceived crime problem, but the difference might merely renullct small sample sinull. nullhibit nullsummarinulls absolute values of percentage differences between the metropolitan-level nullnulland nullnullmeans reported in enullibits null null and null nullr each indicator of neighborhood quality, two differences are summarinulldnullone between nullnullrenter means and nullnullmeans and the other between nullnullnullnull means and nullnullmeans.

131Cityscape nullasuring nullignullornullod nullality nullitnullSurvey nullta: A nullyesian Approacnull Exhibit null Metropolitan nullea nullSnullll nullnters nullSnullCVP nullnulleholds CSSnullCVP nullnulleholds nullsponses nulleinullted Mean nullsponses nulleinullted Mean nullsponses nulleinullted Mean nullan Innullcators of nullnull nullnull nulltinnullnullnull nulltropolitan Area Anull nullAmerican nullusing SurveynullCSS nullCustomer Satisnullction SurveynullnullVP nullnullusing Cnullice Voucnullr Programnull nullgnullnullme ratings are ≥nullon a scale onullnullto nullnull Source: Autnullr’s calculations using CSS and nullnull Anull data Santa AnanullnanullinullIrvinenullCA Division 1null17 0.531 44 0.nullnull 1null41 0.701 Bnullfalonullnullenullonullnullnull Tonanullnnullnullnull 1null2null 0.5null 57 0.null4 1null41 0.nullnull Cnullrlottenullastonianulloncornull nullnullC 1null1null 0.550 1null 0.71null 2null42 0.5null Colnullnullsnullnull 1null35 0.511 55 0.57null 1nullnull 0.52null Dallasnulllanonullrvinnull Tnull Division 1null45 0.55null 41 0.741 3null90 0.539 nullrt nullortnullArlinnullonnullTnull Division 1null03 0.509 40 0.null0 1null93 0.5null nullnsas CitnullnullnullnullS 1nullnull 0.5null 43 0.5null 2null5null 0.522 nullanullnullort nullnullernulllenullianull Beacnull null 1null1null 0.54null 27 0.null0 2null30 0.null9 nulllnullnulleenullanullesnullnullest Allisnullnull 1null93 0.5null 30 0.nullnull 1null91 0.543 nulloeninullnullsanullcottsnulllenullAZ 1null05 0.549 30 0.702 2null90 0.547 nullrtlannullnullanconullernull BeavertonnullnullnullA 1null79 0.512 32 0.nullnull 1null30 0.null4 nullversinullnullan Bernarnullnonull nulltarionullCA 1null92 0.554 2null 0.423 1null5null 0.5null San DienullnullarlsnullnullSan nullrcosnullCA 1null21 0.549 5null 0.null9 1nullnull 0.null4 Differences in mean neighborhood indicators based on nullnullrenters range from nullnullpercent in Phoeninullto null.nullpercent in nullnsas nullty, with a median of nullnullpercent in Riverside. nullighborhood indicator differences based on the nullnullnullnull sample are slightly larger on average. The mean difference based on nullnullrenters is nullnullpercent, versus null.nullpercent for the nullnullnullnull sample. Differences based on the nullnullvoucher sample vary from nullnullpercent in nullami to null.nullpercent in Phoeninull with a median difference of null.nullpercent in nullarlotte. Differences in home indicators by metropolitan area are quite similar in magnitude to differences in neighborhood indicators. The mean difference in home indicator means is null.nullpercent based on nullnullrenters and null.nullpercent based on nullnullvouchers. nullcause the larger differences with the nullnullvouchers are almost certainly a consequence of the small sample sinulls, nullconsistently use the overall nullnullrenter population as the reference point for the remainder of the article. nullhen independent surveys estimate the same variable, nullayesian methods can produce a more reliable estimate using information from both surveys. The nenull section demonstrates how a nullyesian nullerarchical nulldel can produce more robust tract-level estimates using metropolitan nullnulldata and tract nullnulldata.

132 Refereed Papers nullst Exhibit null Metropolitan nullea nullSnullll nullnters nullSnullCVP nullnulleholds CSSnullCVP nullnulleholds nullsponses nulleinullted Mean nullsponses nulleinullted Mean nullsponses nulleinullted Mean nullan Innullcators of nullnullCrinull nullrceptionsnullnull nulltropolitan Area Santa AnanullnanullinullIrvinenullCA Division 1null30 0.null3 44 0.null5 1nullnull 0.nullnull Bnullfalonullnullenullonullnullnull Tonanullnnullnullnull 1null74 0.7null null 0.745 1null5null 0.nullnull Cnullrlottenullastonianulloncornull nullnullC 1null2null 0.nullnull 19 0.null9 2nullnull 0.null4 Colnullnullsnullnull 1null43 0.nullnull 5null 0.530 1null92 0.540 Dallasnulllanonullrvinnull Tnull Division 1nullnull 0.725 42 0.nullnull 3null4null 0.null9 nullrt nullortnullArlinnullonnullTnull Division 1null20 0.7null 40 0.727 1null27 0.nullnull nullnsas CitnullnullnullnullS 1nullnull 0.null3 43 0.null9 2nullnull 0.59null nullanullnullort nullnullernulllenullianull Beacnull null 1null3null 0.null0 27 0.null7 2null7null 0.729 nulllnullnulleenullanullesnullnullest Allisnullnull 1null1null 0.725 30 0.null0 1null13 0.591 nulloeninullnullsanullcottsnulllenullAZ 1null15 0.70null 30 0.51null 2null1null 0.572 nullrtlannullnullanconullernull BeavertonnullnullnullA 1null00 0.707 32 0.5null 1null42 0.703 nullversinullnullan Bernarnullnonull nulltarionullCA 1null99 0.771 2null 0.null9 1null79 0.null4 San DienullnullarlsnullnullSan nullrcosnullCA 1nullnull 0.7null 5null 0.null5 1null14 0.null9 Anull nullAmerican nullusing SurveynullCSS nullCustomer Satisnullction SurveynullnullVP nullnullusing Cnullice Voucnullr Programnull Source: Autnullr’s calculations using CSS and nullnull Anull data Exhibit null nullsolnulle Percentanull Dinullnullrence nullnull Neinullborhood nulltinnullnulldicator nullnull nullnull nulltinnullnulldicator nullnullCrinull nulldicator nullS nullnters vsnullCSS nullnull nullS nullVP vsnullCSS nullnull nullS nullnters vsnullCSS nullnull nullS nullVP vsnullCSS nullnull nullS nullnters vsnullCSS nullnull nullS nullVP vsnullCSS nullnull Anullolnulle nullrcentanull Differences Betnullen Anull annullCSS nulltropolitan nullans nullninullnullnullfference 0.393 0.1null 0.4null 0.null4 0.52null 0.null7 nullnullan nullfference 7.21null 10.null0 null010 10.457 20.449 7.025 nullan nullfference 9.497 14.0null 10.523 14.2null 1null75null nullnull2 nullnullnullnullnullfference 29.515 43.14null 27.590 32.500 29.237 22.5null Anull nullAmerican nullusing SurveynullCSS nullCustomer Satisnullction SurveynullnullVP nullnullusing Cnullice Voucnullr Programnull Source: Autnullr’s calculations using CSS and nullnull Anull data

133Cityscape nullasuring nullignullornullod nullality nullitnullSurvey nullta: A nullyesian Approacnull Data Analysis This section analynulls neighborhood, home, and crime measures from the nullnulland nullnull nullnull null goal was to produce nullyesian tract estimates of neighborhood quality based on both surveys. nullthough conventional nullyesian updating would require nullnulland nullnulltract-level estimates, the nullnullsample is not large enough to produce reliable tract estimates. Therefore, nullchose a nullyesian nullerarchical nulldel using nullnullmetropolitan estimates and nullnulltract estimates. nullnullresponses are aggregated at the metropolitan level for null metropolitan areas, and null,nullnullnullnull responses are aggregated into nullnullnullcensus tracts in the nullnullmetropolitan areas. null Neighborhood Indicators nullthough the neighborhood and home ratings are ordinal, such data do not easily lend themselves to nullyesian methods. null nullr my analysis, nullused the binary indicators of high neighborhood ratings null null null high home ratings null null null and low-crime perceptions null null nulldiscussed previously. Only a small percent of the nullnullcensus tract samples meet the usual normality criteria for any of the indicators. null Therefore, nullassumed null null -null null follow a nullnomial null,p i nulldistribution, for i nullnullto null n represents the number of weighted responses, which is the same for all indicators in a given cen- sus tract. nullcomputed weighted responses by multiplying the original survey weight by responses divided by the sum of the original weights. null nulling weighted counts based on original sampling weights summing to total nullnull households would treat estimated counts as nullown values. This would grossly understate variance by ignoring sampling variability. To reduce bias, nullused weighted counts with adnullsted weights summing to responses. nullmpared with estimates based on the original sampling weights, this reweighting produces estimates with the same weighted means and a more realistic variance. p i represents the probability that indicator null i equals null nullthough each indicator has a separate distribution for each tract, for simplicity nulldid not use tract subscripts. p i follows a nullta nullα i ,b i nullprobability distribution, where α i equals the weighted count of high-quality indicators. b i equals the weighted count of low-quality indicators, which equals n - α i . The nullta probability distribution has a mean αnullα null bnulland standard deviation equal to the square root null nullenullluded nullnullnullnullnullresponses when either nullnullthe address could not be accurately geocoded at the tract level or nullnullno valid response enullsted for the home rating, neighborhood rating, or crime question. null nullmited combinations of distributions enullst for data and parameters, referred to as connullgate pairs, with analytic solutions for nullyesian posterior distributions. nullthough a connullgate model for multinomial categorical data enullsts, it does not account for ordering of the categories. Therefore, nullemployed a binomial-beta connullgate model, where the household neighborhood indicators are binomial and the probability of a high rating follows a beta distribution. nullr a nullyesian analysis of nullnulland nullnulldata with a normal-normal connullgate model, see nullst nullnullnullnull null nullconsidered a nullnulltract sample proportion to be normally distributed if weighted responses were at least null and each binary category had at least nullweighted responses. null nullt nulli be the original survey weight with n responses summing to population, and let nullinullbe the adnullsted weight summing to responsesnullnullinullnullnnullinull∑nulli.

134 Refereed Papers nullst of αbnullnullα null bnull null nullα null b nullnull. nullr enullmple, if n nullnull and we have null high-quality responses, the estimated probability that a random tenant would give the neighborhood a high rating would be nullnullnull with a standard deviation of nullnullnull nullhibit nullreports descriptive statistics for the nullnullnullnullnulltract distributions of null null -null null . The first vari- able listed is null null , the indicator for high neighborhood ratings. nullighted responses for null null vary from nullnullnullto nullnullnullnull with a median of nullnullnulland a mean of nullnullnull α null , the count of high neighbor- hood ratings, ranges from nullto nullnullnullnull The median number of high neighborhood ratings equals nullnullnull and the mean is nullnullnull p null , the mean probability of a high neighborhood rating, varies across census tracts from nullto null nullnulltracts have p null nullnullnullo high neighborhood ratingsnull and nullnullnull have p null nullnullnullll high ratingsnull these tracts have nullstandard deviation. The median probability of a high neighborhood rating is nullnullnull and the mean is nullnullnull nullnullrespondents rate their homes slightly higher on average than their neighborhoods. null null is the indicator of high home ratings, and the p null is the mean probability of a high home rating. The median value of p null is nullnullnull and the mean is nullnullnull nullst nullnullhouseholds do not report manullr crime problems in their neighborhoods. null null indicates low-crime perceptions, and p null is the mean probability of a low-crime perception. p null has a median of nullnullnulland a mean of nullnullnull Exhibit null

null 1 nullinull Neinullborhood nulltinnull Mininullnull Median Mean Maxinullnull

null 2 nullinull nullnull nulltinnull Mininullnull Median Mean Maxinullnull

null 3 nullonullCrinull Perceptionnull Mininullnull Median Mean Maxinullnull CSS Censnull Tract SnullnullrnullStatistics nulleinulltenullresponses 0.09null 3.9null 7.043 173.4null Conullt of nullnull ratinnull nullαnull 0.000 2.0null 3.720 171.0null Conullt of lonullratinnull null bnull 0.000 1.305 3.323 170.2null nullan pronullnulllitnullof a nullnull ratinnullnullnull 0.000 0.null9 0.593 1.000 Stannullrnullnullviation of p 0.000 0.0null 0.093 0.443 nulleinulltenullresponses 0.09null 3.9null 7.043 173.4null Conullt of nullnull ratinnull nullαnull 0.000 2.2null 4.202 171.901 Conullt of lonullratinnull null bnull 0.000 1.133 2.null1 4null045 nullan pronullnulllitnullof a nullnull ratinnullnullnull 0.000 0.null0 0.nullnull 1.000 Stannullrnullnullviation of p 0.000 0.091 0.094 0.443 nulleinulltenullresponses 0.09null 3.9null 7.043 173.4null Conullt of nullnull ratinnull nullαnull 0.000 2.550 4.null7 1null.null1 Conullt of lonullratinnull null bnull 0.000 0.null2 2.3null 45.114 nullan pronullnulllitnullof a nullnull ratinnullnullnull 0.000 0.nullnull 0.713 1.000 Stannullrnullnullviation of p 0.000 0.05null 0.0null 0.457 CSS nullCustomer Satisnullction Surveynull nullnullnullnullnulltractsnull Source: Autnullr’s calculations using CSS data

135Cityscape nullasuring nullignullornullod nullality nullitnullSurvey nullta: A nullyesian Approacnull Bayesian Estimates The nullyesian posterior distribution of p i for each tract follows a nullta nullα i null b i null distribution where α i nullnullα i,prior nullα i , and b i nullnull bi, prior null b i . α i,prior is our prior best guess for the number of high ratings, with no nullowledge of the nullnulldata. b i , prior is our prior guess for the number low ratings. α i is the nullnullweighted count of high ratings, and b i is the nullnullweighted count of low ratings. Reliable tract-level information from the nullnullis not available. Therefore, nullemployed a nullyesian nullerarchical nulldel adopted from nulllman et al. nullnullnull. null nullr each metropolitan area, nullused a common prior distribution for all tracts in that metropolitan area based on the nullnulldata. null noted previously, nullused data for all nullnullrenters. null α prior is set to the nullnullweighted mean probability of a high rating multiplied by null and b prior is set to null α prior . This results in a prior nullta distribution with the same weighted mean as the nullnullmetro - politan distribution but a smaller sample sinull of nulland a larger standard deviation. nulling the nullnullnumber of weighted responses for the prior sample sinull would result in posterior distributions dominated by the nullnullfor most tracts. nullr a tract with the median nullnullweighted responses close to null my choice of nullfor the prior sample sinull results in a posterior distribution where the nullnulland nullnullhave appronullmately equal innullence. nullr enullmple, consider null null nulligh home ratingnull nullhibit nulldepicts the prior, nullnull and nullyesian posterior probability density functions for null null in one tract nullnullnullnullnullnullin one randomly selected metropolitan area nullolumbusnull The tract was chosen because nullnullweighted responses of nullnullnull are close to nullnullhe median for all metropolitan areasnull The nullnullbased metropolitan prior distribu - tion has nullnullnullhigh ratings, nullnullnulllow ratings, and a mean probability of a high rating equal to null.nullnullnull or nullnullnull The prior standard deviation is nullnullnull The nullnulltract distribution is highly snullwed toward favorable ratings, with nullnullnullweighted high ratings, nullnullnullweighted low ratings, and a mean probability of null.nullnullnullnullnull or nullnullnull The nullnulltract standard deviation is nullnullnull The nullyesian posterior distribution is distributed nullta null αnull bnull with αnullnullnullnullnullnullnullnullnullnullnullnullnull and bnullnullnullnullnull nullnullnullnullnullnullnull The posterior mean probability equals nullnullnullnull.nullnullnullnullnullnull or nullnullnull nullcause the prior and nullnulldistribution have about the same sample sinull, the posterior mean is appronullmately a simple average of the prior and nullnullmeans. The posterior standard deviation is nullnullnull nullhen nullnullnull weighted responses increase, the nullnullnull data have greater innulluence on the posterior distri- bution. nullnullhibit null depicts the null null prior, nullnullnull, and posterior probability density functions for nullolumbus area tract nullnullnullnullnull The tract was chosen because it has nullnullnullweighted nullnullresponses, which is close to nullnullhe nullth percentile for all metropolitan areasnull The metropolitan-level prior distribution, described previously, has a mean of nullnullnull The nullnulltract distribution has a mean of nullnullnulland null nullr an accessible introduction to nullyesian nullerarchical nulldels, see httpnullnullolgenau.gmu.edunullnullasnullynullnullTnullnullnullyesnull nullitnullpdf. null nullalso produced nullyesian posterior estimates using metropolitan priors based on the nullnullnullnull sample. These estimates had lower correlation with aunullliary variables compared with estimates with priors based on all renters nullesults available upon requestnull

136 Refereed Papers nullst 0 2 4 6 8 10 12 0.01 0.05 0.09 0.13 0.17 0.21 0.25 0.29 0.33 0.37 0.41 0.45 0.49 0.53 0.57 0.61 0.65 0.69 0.73 0.77 0.81 0.85 0.89 0.93 0.97 0.01 0.05 0.09 0.13 0.17 0.21 0.25 0.29 0.33 0.37 0.41 0.45 0.49 0.53 0.57 0.61 0.65 0.69 0.73 0.77 0.81 0.85 0.89 0.93 0.97 Prior CSS Bayesian Posterior Prior CSS Bayesian Posterior 0 0.5 1 1.5 2 2.5 3 0 100 200 300 400 500 600 700 800 900 1,000 0.05 0.15 0.25 0.35 0.45 0.55 0.65 0.75 0.85 0.95 CSS Bayesian Posterior 0 2 4 6 8 10 12 0.01 0.05 0.09 0.13 0.17 0.21 0.25 0.29 0.33 0.37 0.41 0.45 0.49 0.53 0.57 0.61 0.65 0.69 0.73 0.77 0.81 0.85 0.89 0.93 0.97 0.01 0.05 0.09 0.13 0.17 0.21 0.25 0.29 0.33 0.37 0.41 0.45 0.49 0.53 0.57 0.61 0.65 0.69 0.73 0.77 0.81 0.85 0.89 0.93 0.97 Prior CSS Bayesian Posterior Prior CSS Bayesian Posterior 0 0.5 1 1.5 2 2.5 3 0 100 200 300 400 500 600 700 800 900 1,000 0.05 0.15 0.25 0.35 0.45 0.55 0.65 0.75 0.85 0.95 CSS Bayesian Posterior Exhibit null Exhibit null null 2 nulliornullCSSnullannullBanullsian nullsterior nullonullnulllitnullDensitnullnullnctionsnull Colnullnulls Tract 045031100 null 2 nulliornullCSSnullannullBanullsian nullsterior nullonullnulllitnullDensitnullnullnctionsnull Colnullnulls Tract 041011520 CSS nullCustomer Satisnullction Surveynull null null is an indicator nullr a nullgnullnullme ratingnullnulle Columbus metropolitan area nulls randomly cnullsennullnulle tract nulls cnullsen nulltnull CSS nullignulled responses closest to tnull median nullnull Source: Autnullr’s calculations using CSS and nullnull American nullusing Survey data CSS nullCustomer Satisnullction Surveynull null null is an indicator nullr a nullgnullnullme ratingnullnulle Columbus metropolitan area nulls randomly cnullsennullnulle tract nulls cnullsen nulltnull CSS nullignulled responses closest to tnull nulltnullpercentile nullnull Source: Autnullr’s calculations using CSS and nullnull American nullusing Survey data

137Cityscape nullasuring nullignullornullod nullality nullitnullSurvey nullta: A nullyesian Approacnull 0 2 4 6 8 10 12 0.01 0.05 0.09 0.13 0.17 0.21 0.25 0.29 0.33 0.37 0.41 0.45 0.49 0.53 0.57 0.61 0.65 0.69 0.73 0.77 0.81 0.85 0.89 0.93 0.97 0.01 0.05 0.09 0.13 0.17 0.21 0.25 0.29 0.33 0.37 0.41 0.45 0.49 0.53 0.57 0.61 0.65 0.69 0.73 0.77 0.81 0.85 0.89 0.93 0.97 Prior CSS Bayesian Posterior Prior CSS Bayesian Posterior 0 0.5 1 1.5 2 2.5 3 0 100 200 300 400 500 600 700 800 900 1,000 0.05 0.15 0.25 0.35 0.45 0.55 0.65 0.75 0.85 0.95 CSS Bayesian Posterior a standard deviation of nullnullnull The posterior distribution has a mean probability of a high rating equal to nullnullnull The nullnullsample sinull is about nullnull times that of the prior sample sinull of null thus the nullnullhas about nullnull times the innullence on the posterior distribution. nullhibit null reports summary statistics for the nullyesian posterior means and standard deviations. nullhibit null depicts a histogram of nullnulland nullyesian means for null null nulligh neighborhood ratingnull The mean of the nullnullnullnullyesian mean estimates for null null is nullnullnull which is lower than the nullnullmean of nullnullnullreported in enullibit null nullmpared with nullnullestimates, the nullyesian estimates are much more normally distributed, with fewer tracts with very low or high means. The nullnullestimates for null null have nullnulltract distributions with mean nullnulland nullnullnullwith mean nullnull these degenerate distributions have nullstandard deviation. The nullyesian mean estimates, however, range from nullnullnullto nullnullnull nullthough the nullnullstandard deviations range from nullto nullnullnull the nullyesian standard deviations range from nullnullnullto nullnullnull Exhibit 10

null 1 nullinull Neinullborhood nulltinnull null 2 nullinull nullnull nulltinnull null 3 nullonullCrinull Perceptionnull Mean Std Mean Std Mean Std SnullnullrnullStatistics for Banullsian nullsterior Distrinulltions nullninullnull 0.031 0.009 0.0null 0.00null 0.0null 0.009 nullnullan 0.577 0.15null 0.59null 0.15null 0.7null 0.133 nullan 0.55null 0.152 0.5null 0.152 0.72null 0.132 nullnullnullnull 0.9null 0.221 0.9null 0.221 0.9null 0.20null nullnullnullnullnulltractsnull Source: Autnullr’s calculations using Customer Satisnullction Survey and nullnull American nullusing Survey data Exhibit 11 nullstonullanullof CSS annullBanullsian nullan Estinulltenullnullonullnulllities for null 1 CSS nullCustomer Satisnullction Surveynull nullnullnullnullnulltractsnullnull null is an indicator nullr a nullgnullneignullornullod ratingnull Source: Autnullr’s calculations using Customer Satisnullction Survey and nullnull American nullusing Survey data

138 Refereed Papers nullst Data Validation This section compares the nullnulland nullyesian estimates with other tract-level measures of neigh - borhood quality. These variables include median household income, percent of families living below the poverty line, and an indicator for nullnulltracts qualifying for nullnullnull null nullhibit null reports summary statistics for these measures. nullhibit null reports Pearson correlation coefficients for the previously mentioned aunullliary variables with the nullnulland nullyesian estimated mean probabilities for null null -null null . nulll coefficients are significant at the nullnullnull level with the enullected signs. nulldian income is positively related with neighborhood quality, although the poverty rate and the nullnullnullindicator correlate negatively. nullr each neighborhood indicator, the nullnulland nullyesian correlations with the aunullliary variables are very close. Of course, the nullyesian distributions are a weighted average of the prior and nullnull distributions. null such, the nullnulland nullyesian estimates are highly correlated. The Pearson correla - tion coefficient between the nullnulland nullyesian means for null null nulligh neighborhood ratingnullis nullnullnull The nullyesian model is not intended to drastically change most of the nullnullestimatesnullits purpose is to reduce outliers and manull estimation possible for tracts with few nullnullresponses. Differences may be more apparent for tracts with larger differences between the nullnulland nullyesian estimates. null nullnullnulldata indicators are for tracts qualifying in any year between nullnull and nullnull. Original data were for qualifying tracts based on nullnull geography. nullr this study, nullconstructed qualifying tracts based on nullnull geography. nullr tracts that changed, null assumed a tract with nullnullnullnull geography qualified if it included any part of a tract qualified based on nullnullnullnull geography. Exhibit 12 Variable Mininullnull Median Mean Std SnullnullrnullStatistics for Anulliliarnullnullinullnullrnullonullnullalitnullnullasnulles nullnullan inconullnull 74null.000 3null4null000 40470.nullnull 14473.09null nullvertnullratenull 0.2null 12.140 15.029 10.null4 nullnullC innullcatornull 0.000 0.000 0.179 0.3null LInullC nulllonullincome nullusing tanullcreditnullnullnullnullnullnulltractsnull Sources: nullnullnullCensus nullreau nullnull Censusnullnullnulltp:nullnullnullnulludusernullrgnullatasetsnullinullcnulltml Exhibit 13 nullxiliarnull Variable null 1 nullinull Neinullborhood nulltinnull null 2 nullinull nullnull nulltinnull null 3 nullonullCrinull Perceptionnull CSS Mean nullnullsian Mean CSS Mean nullnullsian Mean CSS Mean nullnullsian Mean nullarson Correlation Coefnullients nullvertnullrate null0.371 null0.371 null0.25null null0.225 null0.34null null0.3null nullnullan inconull 0.332 0.312 0.232 0.1null 0.313 0.321 nullnullC innullcator null0.2null null0.270 null0.1null null0.1null null0.23null null0.2null CSS nullCustomer Satisnullction SurveynullLInullC nulllonullincome nullusing tanullcreditnull nullnullnullnullnulltractsnullAll correlation coenullcients are signinullant at tnull nullnullnulllevelnull Source: Autnullr’s calculations using nullSnullCensus nullreaunullnullnullLInullCnullnullnull American nullusing Surveynulland CSS data

139Cityscape nullasuring nullignullornullod nullality nullitnullSurvey nullta: A nullyesian Approacnull nullxiliarnull Variable null 1 nullinull Neinullborhood nulltinnull null 2 nullinull nullnull nulltinnull null 3 nullonullCrinull Perceptionnull CSS Mean nullnullsian Mean CSS Mean nullnullsian Mean CSS Mean nullnullsian Mean nullxiliarnull Variable null 1 nullinull Neinullborhood nulltinnull null 2 nullinull nullnull nulltinnull null 3 nullonullCrinull Perceptionnull CSS Mean nullnullsian Mean CSS Mean nullnullsian Mean CSS Mean nullnullsian Mean nullhibit null reports Pearson correlation coefficients for tracts with an absolute percentage difference between nullnulland nullyesian estimates at or above the median difference. nulldian differences are null.nullpercent for null null , null.nullpercent for null null , and null.nullpercent for null null nulll of the correlations coefficients are significant at the nullnullnull level. nullr this subsample of tracts, nullof the nullnullyesian correlation coefficients are larger in absolute magnitude than their corresponding nullnullcoefficients. nullhibit null reports Pearson correlation coefficients for tracts with an absolute percentage difference between nullnulland nullyesian estimates at or above the nullth percentilenullnullth-percentile differences are nullnull.null percent for null null , nullnull.null percent for null null , and nullnull.null percent for null null. nullll of the correlation coefficients are significant at the nullnullnull level. nullr this subsample of tracts, all nullyesian correlation coefficients are larger in absolute magnitude than their corresponding nullnullcoefficients. null addition, the differ - ences between the nullnulland nullyesian correlation coefficients are much larger for this subsample. Exhibit 1null Exhibit 1null nullarson Correlation CoefnullientsnullSnullsanullle of Tracts nulltnullDifferences Betnullen CSS annullBanullsian Estinulltes ≥ tnull nullnullan nullarson Correlation CoefnullientsnullSnullsanullle of Tracts nulltnullDifferences Betnullen CSS annullBanullsian Estinulltes ≥ tnull nulltnullnullrcentile nullvertnullrate null0.430 null0.4null null0.301 null0.309 null0.407 null0.4null nullnullan inconull 0.379 0.397 0.252 0.24null 0.3null 0.417 nullnullC innullcator null0.320 null0.339 null0.20null null0.214 null0.2null null0.302 nullvertnullrate null0.422 null0.492 null0.34null null0.402 null0.3null null0.4null nullnullan inconull 0.39null 0.44null 0.30null 0.343 0.40null 0.4null nullnullC innullcator null0.294 null0.340 null0.217 null0.254 null0.244 null0.290 CSS nullCustomer Satisnullction SurveynullLInullC nulllonullincome nullusing tanullcreditnull All correlation coenullcients are signinullant at tnull nullnullnull levelnullnullnullnullnullnullnullr null null and nullnullnullnullr null null and null null null Source: Autnullr’s calculations using nullSnullCensus nullreaunullnullnullLInullCnullAmerican nullusing Survey nullnullnulland CSS data CSS nullCustomer Satisnullction SurveynullLInullC nulllonullincome nullusing tanullcreditnull All correlation coenullcients are signinullant at tnull nullnullnull levelnullnullnullnullnullnullr null null nulland nullnullnullr null null and null null null Source: Autnullr’s calculations using nullSnullCensus nullreaunullnullnullLInullCnullnullnull American nullusing Surveynulland CSS data Conclusion nulllthough neighborhood quality is important for shaping public policy, it is also difficult to quantify. This study measured neighborhood quality using data from two sourcesnullnullnullthe nullnull nullerican nullusing nullrvey and nullnullnullDnull nullstomer nulltisfaction nullrvey of nullction nullnullusing nulloice nullucher Program households.

140 Refereed Papers nullst nullthough the nullnulland nullnullcontain related questions, differences in survey methods and the ques - tionsnullwording manull direct comparison of the two surveys difficult. nullyesian methods are nullnullble enough, however, to use information from related questions from both surveys. null enullamined survey responses in nullnull metropolitan areas regarding neighborhood quality, home quality, and crime perceptions. Tract-level nullyesian estimates are computed using nullnullmetropolitan-level data and nullnullcensus tract data. nullmpared with estimates solely based on nullnulldata, the nullyesian estimates have fewer outliers. nullyesian analysis also allows for estimation for tracts with lower sample sinulls than would be practical using only nullnulldata. nullcompared the nullnulland nullyesian estimates with other measures of neighborhood quality, such as poverty rates, median income, and indicators for tracts receiving low-income housing tanullcredits. The nullnulland nullyesian indicators are highly correlated, and both the nullnulland nullyesian correlate well with these aunullliary variables. nullr tracts with large differences between the nullnulland nullyesian estimates, correlations are much stronger for the nullyesian estimates. nullture research could focus on testing the value of nullyesian neighborhood quality measures as left-hand-side and right-hand-side variables in any number of quantitative studies. nullnullowledgments The author thannull nullrnullnullroder, nullthryn nullsnully, and three anonymous referees for helpful comments and also thannull Todd nullnullil for nullnullassistance with the nullnullnulldata. nulltnullr nullent D. nullst is a social science analyst in the Office of Policy Development and Research, Program nullnitoring and Research Division, at the nullnull Department of nullusing and nullban Development. Renullrences nullstin, D. nullrnull null nulllen nullrr, and nullchael nulline. nullnull. nullhe nullfects of nullighborhood nullnditions on Perceptions of nullfety,nullnullurnal of Criminal nullstice null nullnull nullnullnullnull nullishaw, nulllemayehu, and nullharon nulltern. nullnullnullnull. nullnullaluation of nullonullerty nullstimatesnull null Comparison of the nullmerican Community nullurnulley and the Current nullopulation nullurnulleynull nullashington, Dnullnull null.null. nullensus nullureau. nulluron, nullarry, nullulbul nullaul, and Rhiannon Patterson. nullnullnullnull. nulluality of nullousing Choice Voucher nullousingnull Report prepared for the nullnull Department of nullusing and nullban Development. nullshington, Dnull nullnull Department of nullusing and nullban Development. nullron, nullrry, and nulltyendra Patrabansh. nullnull. nullre nullnsus nullriables nullghly nullrrelated nullth nullusing nulloice nullucher nullldersnullPerception of the nullality of Their nullighborhoodsnull Cityscapenull nullnullurnal of nulllicy nullnulllopment and nullsearch null nullnull nullnullnullnullnull

141Cityscape nullasuring nullignullornullod nullality nullitnullSurvey nullta: A nullyesian Approacnull nullhill, nullagan nullinullbeth. nullnull nullugustnull nullographies of nullban Crime in Nashnulllle, nullnnessee, nullrtland, nullegon, and nullcson, nullizona, 1nullnull2002. nulln nullbor, nullnullnullter-university nullnsortium for Political and nullcial Research. httpnullnullww.icpsr.umich.edunullocoonnullnullnullnullTnullnullnullnullnullnulll nullccessed October nullnullnull nullapman, David null, and nullhn R. nullmbard. nullnull. nulleterminants of nullighborhood nulltisfaction in nulle-nullsed nullted and nullngated nullmmunities.nullnullban nullfairs nullnullew null nullnull nullnullnullnull httpnullnullww. sagepub.comnullournalsProdDesc.navnullrodnullnullournalnullnullnull nullccessed nullne nullnullnull Deller, nulleven null, and Thomas Ottem. nullnull nullulynull nullrime and the nullality of nullfe in nullsconsin nullunties.nullnullricultural and nullplied nullonomics nullaff nullper nullries Nonullnull2nullnulldison, nullnullnulliversity of nullsconsin-nulldison, Department of nullricultural and nullplied nullonomics. httpnullnullww.aae.wisc. edunullubsnullpsnulldfnulltpapnullnullpdf nullccessed nullly nullnullnull Dilulio, nullhn null, null. nullnull. nullhe nullestion of nullacnullnullime,null nullblic Interest nullnull nullnull. Dubin, Robin null nullnull. nullpatial nulltocorrelation and nullighborhood nullality,null nullgional nullience and nullban nullonomics null nullnull nullnullnullnull nulllman, nulldrew, nullhn null nullrlin, nulll null nullern, and Donald null Rubin. nullnull. nullyesian nullta nullalysis, nulld ed. nullndon, nullited nullngdomnullnullapman and nullllnullRnull nullay, Robert null, nullrbara null nullley, and nullent D. nullst. nullnull. Tell null nullout nullur nullmenullThree nullars of nullrveying nullusing nullality and nulltisfaction in the nullction nullnullusing nulloice nullucher Program. nullpublished paper. nullshington, Dnull nullnull Department of nullusing and nullban Develop - ment, Office of Policy Development and Research. nullpp, nullhn. nullnull nullarchnull Resident Perceptions of nullimenullnullw nullmilar nulle They to Official nullime Ratesnullnullrnullng paper. nullshington, Dnull nullnull nullnsus nullreau, nullnter for nullonomic nulludies. httpnullnull www.ces.census.govnullndenullphpnullesnullespapersnulletailnulleynullnullnullnull nullccessed nullgust nullnullnull nulle, Peter null nullnull. nullyesian nullatisticsnullnull Introduction, nulld ed. nullndon, nullited nullngdomnullnulldder nullnold. nullst, nullent D. nullnulla nullugustnull nullayesian nullerarchical nulldel nulltimates of nullcal nullime Percep - tions.nullnullogram nullnitoring and nullsearch nullnullsion nullrnullng nullper nullriesnull nullshington, Dnull nullnull Department of nullusing and nullban Development, Office of Policy Development and Research. httpnullnullww.huduser.orgnullublicationsnullmrdnullmrdnullornullapnullhtml nullccessed nullly nullnullnull nullnull nullnullb nullulynull nulleasuring nullusing nullality in the nullusing nulloice nullucher Program nullith nullustomer nullatisfaction nullurvey Data,null Cityscapenull null nullournal of nullolicy nullenullelopment and nullesearch nullnull nullnullnullnull nullnullnullnullnullnullnull. httpnullnullnullwww.huduser.orgnullperiodicalsnullcityscpenullvolnullnullnumnullnullindenull.html nullaccessed nulluly nullnullnullnullnull. nullwman, nullndra null, and nulln null nullhnare. nullnull. nullast in nullnenullnullusing nullsistance for nulluseholds nullith nullildren,nullnullusing nulllicy nullbate nullnullnull nullnullnullnull nulldgley, nullrman null, nullncy null nulllliams, and nulledericnullnull Derricnull nullnull nullunenull nullhe nullfect of nullucational Test nullores on nulluse Prices in a nulldel nullth nullatial Dependence,null nullurnal of nullusing nullonomics null nullnull nullnullnullnull

Brownfields

142 Refereed Papers nullst null. nullhn, nullaig, and nullieda nullarnull nullnull. nullacial Differences in Dimensions of nullighborhood nulltisfaction,nullnullcial Indicators nullsearch null nullnull nullnullnull nullnull Department of nullusing and nullban Development nullnullnull nullnull. nullusing Choice Voucher nullogram nullideboonull nullshington, Dnull nullnull Department of nullusing and nullban Development. httpnullnullww.hud.govnullfficesnullihnullrogramsnullcvnullormsnulluideboonullcfm nullccessed nullptember nullnullnull

143nulltyscapenullnullnullurnal of nulllicy Development and Research • Volume 12, Number 3 • 2010 U.S. Department of Housing and Urban Development • Office of Policy Development and Research Cityscape The Impacts of More Rigorous FHA Underwriting Guidelines nullastair nullFarlane nullnull Department of nullusing and nullban Development nullpact nullregulatory impact analysis must accompany enullry economically signinullant federal rule or regulationnullnulle nullnulle of nulllicy nullnulllopment and nullsearch performs this analysis for all nullnull nullpartment of nullusing and nullban nullnulllopment rulesnullnull impact analysis is a forecast of the annual benenulls and costs accruing to all parties, including the tanullayers, from a ginulln regulationnullnulldeling these benenulls and costs innulllnulls use of past research nulldings, application of economic principles, empirical innullstigation, and professional nulldgmentnull Summary of Impact Analysis The nullderal nullusing nullministrationnull nullnullnullnullauthorinullng statute for insurance authorities, the nulltional nullusing nullt, clearly states that the nullnull Department of nullusing and nullban Development nullnullnullwill adnullst program standards and practices to operate the nulltual nullrtgage nullsurance nullnd nullnullnull on a self-sustaining basis. null the nulltice nullederal nullusing nullministration Risnull nullnagement nullitiativesnullReduction of nullller nullncessions and nullw nullan-to-nulllue and nulledit nullore Requirements,null null nullnullproposes to tighten portions of its underwriting guidelines that present an enullessive level of risnullto both homeowners and nullnull The benefit of the set of actions outlined in the nulltice will reduce the net losses resulting from high rates of insurance claims on affected loans, and the cost of the action will be the value of the loan opportunity denied to the enullluded borrow - ers. The total transfer to nullnullwould be nullnullmillion, and the net cost of enullluding borrowers could be as high as nullnullmillion. Need for Policy Change nullnullhas resumed a countercyclical position, supporting private lending for homeownership when access to private sources of capital for credit enhancements is otherwise constrained by the recent financial crisis. This state of affairs is most evident in the rapid increase in the volume of nullnull null nullederal nullusing nullministration Risnullnullnagement nullitiativesnullReduction of nullller nullncessions and nullw nullan-to-nullalue and nulledit nullore Requirements,nullnull-nullnull-nullnull. nullderal nullgister, nullly null, nullnull. nullvailable at httpnullnullederalregister.govnullnull nullnull-nullnullnull.

144 nullFarlane Impact insurance as private sources of mortgage finance retreated from the marnullt. The growth in the nullnull portfolio over a nullyear period coincides with a set of difficult economic conditions, namely, continued housing price declines and increasing levels of unemployment. Together, these enullernal conditions increase the risnullof additional losses to nullnull nullrecently issued independent actuarial study null shows that the nullnull capital ratio has fallen below its statutorily mandated threshold of nullpercent. The study reported that nullnullwould linullly sustain significant losses from mortgage loans made before nullnull due to the high concentration of seller- funded downpayment assistance mortgage loans and declining real estate values nationwide. nullnullcan implement four primary policy changes to replenish the nullnull capital reserve accountnull nullnullincrease premium rates to raise income, nullnullreduce losses on new business by tightening underwriting guidelines, nullnullstrengthen enforcement measures to reduce unwarranted claim pay - ments, and nullnullavoid claims through enhanced loss mitigation efforts. nullnullis engaged in efforts on all these fronts, enullrcising its full authority under the terms of the nulltional nullusing nullt, including new authorities provided in recently enacted legislation. This nulltice further complements the underwriting approach to strengthening nullnulls fiduciary responsibilities. Summary of Notice nullrst, nullnullproposes to reduce the amount of financing costs that the property seller or other inter - ested party may pay on behalf of a homebuyer using an nullnullinsured mortgage. This proposed cap on seller concessions would more closely align nullnulls single-family mortgage insurance programs with standard industry practice and miniminull nullnullenullosure to the risnullof insuring borrowers most linullly to default. nullen a homeseller or interested third party pays all or part of the buyernull cost of financing, the payments are commonly referred to as seller concessions. nullthough nullD previously allowed seller concessions up to nullpercent of the sales price, conventional mortgage lenders have capped seller concessions at nullpercent of the sales price on loans with loan-to-value nullTnull ratios similar to nullnullstandards. nullnullproposes to cap the seller concession in nullnullinsured single-family mortgage transactions at nullpercent of the lesser of the sales price or appraised value for purposes of calculating the manullmum mortgage amount. nullthough seller concessions above nullpercent would not be prohibited under this proposal, concessions that enulleed nullnulls nullpercent cap would require a dollar-for-dollar reduction in the sales price for the purposes of calculating the manullmum nullnull loan amount. One reason for this change is that borrowers who received more than nullpercent in seller concessions had a significantly higher risnullof losing their homes. This proposed cap will not only align nullnulls single-family mortgage insurance programs to private industry practice but also will help ensure that borrowers who rely on nullnullinsured financing have a sufficient investment in their home, thereby manullng them less linullly to default on the mortgage. nullcond, nullnullproposes to introduce a two-part credit-score threshold, with a lower threshold for loans with nullnullratios of null percent or less and a higher threshold for those loans with higher nullnull ratios. This will be the first time that nullnullhas ever instituted an absolute lower threshold for bor - rower credit scores nulls measured by nullnullnull nullrrowers with low credit scores present higher risnull null nulle nullnullnullnullnull.

145Cityscape nulle Impacts onullnullre Rigorous Fnull nulldernulliting Guidelines for defaulting and filing a mortgage insurance claim. nullnullis proposing to introduce a minimum decision credit score of no less than nullnullto determine eligibility for nullnullfinancing and to also reduce the manullmum nullnullfor all borrowers with decision credit scores of less than or equal to nullnull nullnullmum nullnullinsured financing nullnullnullpercent nullnullfor purchase transactions and null.null-percent nullnullfor rate-and-term refinance transactionsnullwould be available only to borrowers with credit scores at or above nullnull nulll borrowers with decision credit scores between nullnulland nullnullwould be limited to a manullmum null-percent nullnull nullthough today nullnullis serving very few borrowers with credit scores below nullnull as shown in enullhibit null, the performance of these borrowers is clearly very poor, as renullected in enullhibit null. nullorrowers with credit scores below nullnullnull struggle to meet their mortgage obligations. The percentage of borrowers who ultimately lose their homes is twice as high for borrowers with lower credit scores. nullmilarly, nullnulldata demonstrate that borrowers with decision credit scores below nullnull who invest only a minimal amount of funds into the transaction, struggle to manull their mortgage payments and ulti- mately lose their homes at a rate that is unacceptable to nullnullnull. The borrowers affected by this nullotice have seriously delinquent rates that are four to five times higher than those who remain eligible. Third, nullnullwill tighten underwriting standards for mortgage loan transactions that are manually underwritten. The purpose of mortgage underwriting is to determine a borrowernull ability and will - ingness to repay the debt and to limit the probability of default. nullr cases in which the borrower has a very limited or nontraditional credit history, the credit bureaus may not be able to calculate a credit score. nullrtgage loans for borrowers in this category will need to be manually underwritten. These categories of borrowers present a higher level of risnulland, as a result, manual underwriting guidelines, in general, are more stringent to address that higher risnulllevel. Costs and Benefits nullven the importance of maintaining a viable nullnull for enullsting and future homeowners, it is nullnulls intent to focus only on particular practices that have been found to result in enullremely poor mortgage loan performance. Aggregate Loans Affected The highlighted portion of enullibit nullindicates the proportion of borrowers enullected to be im - mediately enullluded from the nullnullguarantee by the nulltice, relative to the total nullnullportfolio. This policy is still important to nullnullbecause nullDnull enullectation are that, after the conventional mortgage marnullt recovers and lenders again loosen underwriting standards, nullnullcould be adversely selected with larger shares of these higher risnullloans. null late as fiscal year nullnull nullnull, loans that would be newly enullluded under this proposed policy accounted for more than nullpercent of all loans insured by nullnullnullnullluding streamline refinancingnull nullhibit nullclearly indicates through the performance data provided that these borrowers are at a sig - nificantly greater risnullof losing their homes than are other nullnullinsured borrowers. The seriously delinquent rate of borrowers subnullct to the proposed restrictions nulleighted average across the three cells in enullibit null is null.nullpercent, while the rate for all other mortgage loans is nullnullpercent.

146 nullFarlane Impact null nullnull, nullnullendorsements numbered nullnullmillion and were, as of the third quarter of nullnull, ap - proaching an annual level of appronullmately nullmillion null.null nullusing nullrnullt nullnditions, nullvember nullnullnull nullrrent endorsement levels are linullly to be a historic manullmum. null normal years, endorse - ment levels are closer to nullnullmillion. null our modeling, we used nullnullmillion as the default, nullmillion as a manullmum, and nullmillion as minimum. nullltiplying these endorsement numbers by the current share of subprime loansnull.null percentnullields an assumed total of loans affected by the nulltice of null,nullnull with a manullmum of null,nullnulland a minimum of null,nullnull Benefit of Policy Change The direct purpose of the policy change outlined in this nulltice is to achieve the statutorily mandated minimum capital reserve ratio of nullpercent. The broader purpose of the policy change, however, is to ensure the survival of the nullnullso that it can continue to provide mortgage loans when private marnullts fail. The current financial crisis has led to a credit crunch in which nullnullhas been a lender of last resort to low-income and risnull borrowers. Today, nullnulls share of the single- family mortgage marnullt is appronullmately null percent, up from nullpercent in nullnull, and the dollar volume of insurance written has nullmped from nullst nullnullbillion in nullnull to more than nullnull billion in nullnull. nullcilitating the provision of credit during a liquidity crisis is a welfare-enhancing activity, and nullnullprovides such a public benefit. nullantifying this benefit would involve measuring the enullent to which this nulltice increased the survival of the nullnulland multiplying this probability by an estimate of the public benefit of nullnullendorsement activities. Exhibit 1 Exhibit 2 nullannullonullalnull nullnnull Credit Score nullnnulls None 300nullnull null0nullnull null0null1null null0nullnull null0nullnull nullannullonullalnull rannull Credit Score nullnnulls None 300nullnull null0nullnull null0null1null null0nullnull null0nullnull nullA SinnullenullanulllnullInsnullance Ennullrsenullnt Snullres in Calennullr nullear 2009 nullA Sinnullenullanulllnullnullrtnullnull InsnullancenullSerionulllnullDelinnullent nulltes null nullTnullannullCrenullt Scores null to 90null 0.03 0.01 0.12 0.4null 2.2null 3.51 Anullve 90null 0.34 0.02 1.39 7.24 35.null 4null77 null to 90null 13.3 35.4 22.4 15.7 null1 1.5 Anullve 90null 20.9 43.3 30.4 19.null nullnull 2.3 Fnull nullFederal nullusing Administrationnull Source: nullnullSnull nullepartment onull nullousing and nullrban nullevelopmentnullFnullAnull nullFederal nullousing Administration Risnull nullanagement Initiatives: Reduction onullSeller Concessions and nullnullLoannullonullalue and Credit Score Renullirementsnull nullable Anull FRnullnullnullnullnullnull Federal Registernullnullly nullnullnullnullnullavailable at nulltp:nullnullderalregisternullovnullnullnullnullnullnullnull Fnull nullFederal nullusing AdministrationnullLnull null loan to valuenull nullte: Seriously delinnullent rates measure tnull sum onullcases tnullt are null days or more delinnullentnullin nullreclosurenulland in bannulluptcy as a percent onullall actively insured loans on a given datenull Source: nullnullSnull nullepartment onull nullousing and nullrban nullevelopmentnullFnullAnull nullFederal nullousing Administration Risnull nullanagement Initiatives: Reduction onullSeller Concessions and nullnullLoannullonullalue and Credit Score Renullirementsnull nullable nullnull FRnullnullnullnullnullnull Federal Registernull nullly nullnullnullnullnullavailable at nulltp:nullnullderalregisternullovnullnullnullnullnullnullnull

147Cityscape nulle Impacts onullnullre Rigorous Fnull nulldernulliting Guidelines The current financial crisis has been attributed to many different causesnullrom government failure to a natural readnullstment of marnullts. nullny good arguments, however, support the theory that a financial crisis is the result of inefficiencies caused by imperfect information and perverse incentives. nullr enullmple, nulliglitnull nullramillo-nullllenull, and Parnullnullnullnull describe a negative selection enullernality that nulladnullfinancial firms have on nulloodnullfinancial firms during a credit crunch. The mere percep - tion of a troubling credit marnullt can affect investorsnullwillingness to provide equity to good firms. nullcause bad firmsnullactions have spoiled the marnullt, investors will not provide an efficient level of capital to the financial marnullt. nullssidy nullnullnull enulllains in great detail how this scenario fits the current financial crisis. nullrge financial institutions have borrowed from others to manull bets on risnull assets using complenullfinancial instruments. nullven the complenullty of these financial arrange - ments, it is difficult, even for well-informed insiders, to gauge the value of the firms holding these risnull assets on their balance sheets. nullter housing price appreciation began to slow down and the value of the financial institutions investing subprime mortgage-bacnulld securities nullnullnullbecame uncertain, lenders were unwilling to provide credit to these large institutions because they feared that the borrower would not be able to repay. The result was an economy-wide credit crunch in which ordinary borrowers were not able to acquire a loan at a reasonable cost. null another enullmple of a marnullt failure, the monitoring of financial firms is a public good that is undersupplied nulltiglitnull nullramillo-nullllenull, and Parnull nullnullnull nullstitutional bannull will not decrease their leverage ratios to a point that reduces systemic risnullfor the entire financial marnullt. nullthin a financial institution, management has the ability to limit its firmnull risnullto decrease the linulllihood that their firm collapses. The benefit from a firm lowering its risnull however, will have spillover benefits to all the financial marnullt stanullholders by lowering the chance of contagion. null a result, a financial institution will not receive enough compensation to lower its leverage ratio to the efficient level. null hindsight, many of the financial institutions originating nullnullcan be considered to have become overleveraged during the years preceding the financial crisis of nullnullnullnullnull nullnullloans are now in higher demand as a result of the failure or withdrawal of private investors from the mortgage marnullt. Thus, the primary contribution of nullnullto the public welfare is to facilitate the transition to sustainable homeownership for low-income or credit-constrained individuals when the marnullt is not achieving this goal on its own. nullcause both private and public benefits nullescribed in the nenull sectionnullare associated with homeownership, a postponement of those benefits, as a result of a poorly functioning credit marnullt, would represent a reduction in welfare. Cost of Excluding Borrowers The goal of nullnullis to promote a national housing policy by providing access to mortgage credit for first-time homebuyers and others with limited financial wealth. Tightening underwriting guidelines will cause enullluded households to delay their transition to homeownership status nullr perhaps never manull the transitionnull nullr refinance loans, the proposed restrictions will cause higher housing costs until such time as when the enullluded households can improve their credit histories and gain more home equity through general marnullt-level house price appreciation. nullfew analytical options estimate the gains to nullnullloan program participants nullnd thus the cost of being enullludednull

148 nullFarlane Impact Costs onulla nullnullerent nullrtgage Loan One approach to measuring the advantages of an nullnullnull loan is to estimate the private gain to the house- hold of an nullnullnull loan by deriving an estimate of the additional costs a borrower would have to pay to receive a similar loan not insured by nullnull nullnulldoes not earn a profit as a private mortgage insurer would. The average gain would be what the borrower would have had to pay for the same insurance on the private marnullt. The disadvantage of this approach is that it is no longer current practice to insure borrowers with low credit scores. The private mortgage insurance marnullt has never served the segment of borrowers who would be eliminated from nullnulleligibility by this nulltice, and the subprime marnullt where they previously could have turned for home financing no longer enullsts. nulllthough the nullnullnull guaranty has value, it would be impossible to measure it through such a method. Private nullnenulls onullnullmeownersnullp null second approach is to compare the private benefits of renting with the benefits of homeownership. nulliven the state of the marnullet, an nullnullnull-guaranteed loan may represent the only path to homeowner- ship for low-income households. Those households that apply for a loan clearly believe that own- ership is the optimal financial decision. nullme of the potential benefits of homeownership would be a lower quality-adnullsted price for housing, higher satisfaction, and wealth creation. null nulltenant could be enullected to pay less for the same unit of housing as an owner occupant than as a renter. nullgher costs for renters arise because of an information asymmetry. nulllandlord does not nullow in advance of enullending a lease to what enullent a tenant will innullct damage, manull an effort to tanull care of the property, or report urgent problems. null owner occupant, on the other hand, has a financial interest in tanullng care of the property. Thus, both the depreciation and maintenance costs of rental housing can be enullected to be highernull marnullt imperfection that will create an incentive for transition to owner-occupied housing. The difference in owner-occupant and renter behavior would also lead to a difference in the type of housing offerednullin general, owner-occupied housing is of a higher quality. nullgher satisfaction from owner occupancy stems from the greater freedom to alter the property to suit onenull taste and from not being subnullct to variable housing costs nullhen the alternative is a finulld-rate mortgagenull null is also possible that owner occupancy provides access to neighborhoods and municipalities where long-term rental housing is hard to find. nullfrequently perceived benefit of ownership is one of wealth creation. The federal government encourages investment in residential real estate by, in most cases, not tanullng the capital gains from selling onenull home. The asset-building advantage of homeownership materialinulls only when hous - ing prices appreciate. The downside of homeownership, of course, is the risnullof investing most of onenull wealth into a single asset. nullreclosure would represent a greater hardship than eviction from a rental property. null the current marnullt, it is unlinullly that investment opportunity is the primary motive for becoming a homeowner. nullmeownership also has significant upfront costs. nullcoming a homeowner entails paying upfront costs, such as realtor, settlement, and lender fees. nullhousehold could easily spend null percent of null nullr a good literature review of both the private and public benefits of homeownership, see Dietnulland nullurin nullnullnull.

149Cityscape nulle Impacts onullnullre Rigorous Fnull nulldernulliting Guidelines the purchase price on transaction costs. nulllower bound estimate would be nullpercent nullee Dietnull and nullurin, nullnullnull nullven the finulld costs, households for whom owning is a better choice would not enullect to move soon after purchasing. The transition to homeownership is associated with enullected low mobility and, thus, a higher age, family sinull, and income. The dollar value of the reduction in housing costs can be estimated with census data. The average income of households enullluded by the nulltice is nullnullnullnull nullr households of this income, the rent- to-income ratio is null.null percent, which translates to nullnullnullnullin annual rent payments. nullppose that becoming an owner leads to a reduction in housing cost for a unit of comparable quality. The benefit can be measured as a percentage reduction of the annual rent payments. nullr enullmple, a sinullable nullpercent reduction leads to nullnull annual benefit to households null percent nullnullnullnullnull. The total value of the annual reduction in housing costs will be affected by the number of years that the benefit is denied and by the discount rate. null assume that the effect of denying the opportunity of an nullnullloan to the population in question will be to delay homeownership. null the length of the delay increases, so does the loss in consumer benefits. nullth higher discount rates, the present values of future years are reduced and thus the private opportunity cost of delay is diminished. nulluseholds that find the transition to homeownership a beneficial decision will wornull to repair their credit score. nullst of the negatives will be removed from a credit report after nullyears, and it is possible to increase credit scores significantly after nullyears by better managing consumer debt. nullreasonable outside estimate of the number of years homeownership would be delayed is null years. null choose nullpercent as our default discount rate given the similarity of that rate to what was used in the nullnullactuarial model. This calculation is shown in enullibit null column null The sinull of the rental enullernality also plays a role. null can be seen as the difference between the sum of the depreciation and maintenance rates of rental housing and owner-occupied housing. nullnventional wisdom among lenders is that households should budget from nullto nullpercent of the original purchase price for annual maintenance to prevent significant depreciation. null null the rental depreciation rate were twice that of owner-occupied housing, the range for rental housing main- tenance costs would be nullto nullpercent, manullng nullpercent a plausible outside estimate of the sinull of the rental enullernality. nullven the annual benefit of nullnull nullased on an enullernality of nullpercentnull a delay of nullyears, and a discount rate of nullpercent, the present value of the loss would be null,nullnull nulllthough the argument of nullenderson and nulloannides nullnullnullnullnullnull has great theoretical validity, not much empirical wornullsupports the claim that renters pay more than homeowners for constant-quality housing. nullvidence enullists, however, that rental housing does depreciate at a greater rate than owner- occupied housing. nullata and nullmaga nullnullnull estimated the probability of a house being in nulloundnull condition, depending on whether it was owner-occupied housing, tenant-occupied housing, or landlord-owned housing. They found that the probability of a house being in sound condition decreases by nullpercent if a house is landlord-owned housing compared with owner-occupied housing. nullng, nullissom, and nullbb nullnullnull estimated the price difference of a single-family home, depending on whether it was renter occupied or owner occupied. null the house had been a rental property, its selling price would have decreased by null,nullnull which is appronullmating nullnullpercent of null nulle Riha nullnullnull.

150 nullFarlane Impact the price of a nulltandard house.nullThis nullnullpercent decline in value is roughly equal to our estimate of the rental enullernality derived using assumptions concerning the differences in maintenance and depreciation rates. nullilling, nullrmans, and Dombrow nullnullnull found that renter-occupied housing depreciates nullnullpercent more each year than owner-occupied housing. nulling repeat sales data, nulltnullaff and nulleen nullnullnull found that the difference is very small, only nullnull percent. This negligible difference in housing value may renullct that landlords are using the additional revenue collected through the rental enullernality to invest in their property. The reduction in housing costs through homeownership is considered a benefit to society because the source of the reduction is a decline in the cost of supplying the housing. null it were only a transfer between consumers nullenters who become homeownersnulland producers nullandlordsnull then the transition to homeownership would represent a nullro-sum gain for society. nullsocial gain enullsts, however, because the removal of the rental enullernality is equivalent to a reduction in the cost of supplying housing services for the household that made the transition to ownership. nullndlords charge a rental premium to compensate them for the damage that occurs to their property given the incentives that renters face. Transition to homeownership changes those incentives and gener- ates net benefits for society. nullfinal and important point to manull concerning consumer benefits is that not all borrowers enullluded by the nulltice would have realinulld the benefits of homeownership. nullme of those who receive a loan will default and be foreclosed upon. To accurately measure the private benefits of homeownership, we need to account for the chance that not all households who become owners will remain owners. The probability that a homeownership will survive until a specific year with- out a foreclosure is equivalent to nullless the probability that the household will not be foreclosed upon, or the cumulative claim rate for that year. nullmulative claim rates increase over time with the greatest increase occurring in the third or fourth year, yielding an nullshaped survival curve. nulling the cumulative claim rates for the enullluded group in the fifth year of appronullmately null.nullpercent, the estimate of the enullected private loss is null,nullnullper household nullnullnullpercent nullnull,nullnull. Public nullnenulls onullnullmeownersnullp nullthird approach to measuring the advantages of an nullnullloan would be to evaluate the social benefits of a household becoming a homeowner. The traditional argument for homeownership is that a homeowner will invest more in his or her community because a financial incentive enullsts to improve the quality of the neighborhood and thus home values. nullintaining properties will also have positive spillover effects to neighboring property values. null addition, an engagement by homeowners will lead to greater political activity, a more amenable urban environment, and less crime. null literature enullists that also linnulls housing tenure with child outcomes nullhealth and educationnull. One negative social effect of homeownership is reduced mobility, which leads to rigidity in the labor marnullt and thus lengthens economic downturns. This type of empirical research has some obvious methodological challenges. Disentangling the enulllanatory variable nullenure statusnullwith other characteristics of the household is difficult when the path to ownership depends on credit score, which depends on the stability and thrift of the household. nullrong empirical evidence has been found, however, for the positive effect on child outcomes, political activity, and wealth accumulation and for the negative effect on mobility.

151Cityscape nulle Impacts onullnullre Rigorous Fnull nulldernulliting Guidelines nullmeownership seems to have both social costs and benefits, and the empirical evidence for some of the most compelling arguments for encouraging homeownership is weanull nullnew wave of empiri - cal research has generated much more modest estimates of the social value of homeownership. nullr the sanull of argument, however, we choose one study by nullulson and null nullnullnull that does not focus on the cause of the benefits but produces an empirically rigorous estimate of the impact of adding a homeowner to a neighborhood. nullulson and null nullnullnull used data from the nullerican nullusing nullrvey and analynulld housing clus - ters that included between nulland null single-family homes. They found that a nullnullpercent increase in the homeownership rate in a cluster raises the price of a housing unit by null to null percent. null one enullmple, they calculated that the transition of an additional unit would raise the value of other units by nullnullpercent. null the average price per unit is nullnull,nullnull this calculation signifies an increase of null,nullnullper unit. Therefore, the enullernality benefit of ownership for the rest of the typical cluster of nullhomes is nullnullnullnullnull nullnull,nullnull. The value of nullyear of public benefits is the discount rate times the total stream of benefits, or null,nullnullnull percent nullnullnullnullnull. The opportunity cost to the public of preventing transition to homeownership is the loss of the present value of the stream of public enullernalities. null a householdnull transition were delayed for nullyears, the present value of the stream of lost public benefits would be null,nullnullnullt a nullpercent discount rate and null,nullnullannuallynull as shown in enullibit null The enullected loss from delay is equal to the dollar amount of the lost benefit times the probability that the household would remain as owner occupants. This probability is equal to null less the cumula- tive claim rate. nullth a delay of nullyears, the enullected loss from delay would be null,nullnull null shown in enullibit null the sum of the private and public costs is nullnullnullnulland the enullected total cost is null,nullnull nulln the previous estimate of the enullpected cost to society of enullcluding a household from homeowner- ship, we assume that the only effect of enullluding a household is the denial of the benefits of homeownership. null did not account for the possible social costs of foreclosure for every home - owner created. nullnullable losses enullst, however, from a foreclosure borne by consumers, lenders, property marnullts, and local governments. null estimate of the deadweight losses nullocial costsnull Exhibit 3 Delanull in nullears nullnull nullnull nullnull nullnull nullnull nullnull nullnull nullnull Clainull nullte nullnullnull Private Cost onull Delanull nullnullnullnull nullnull Pnulllic Cost onull Delanull nullnull Total Cost onull Delanull nullnull Expected Cost onull Delanull nullnull1nullxnullnull nullnull Cost onull nullreclosnulle nullnull Expected Cost onull nullreclosnulle nullnull Net Expected Cost onull Delanull nullnullnullnull nullnull nullt EnullectenullnullportnullitnullCost of Delanullnnullnullnullenulllnull nullonullTransition to nullnull onullersnullp nullnullercent Disconullt nulltenull 1 0.14 417 1nullnull 2null99 2null9null 52null90 72 2null24 2 1.null null0 3null5null 4nullnull 4nullnull 49null94 929 3null53 3 5.null 1null92 5null7null null570 null201 47nullnull 2null43 3null5null 4 nullnull 1nullnull 7null50 nullnull2 7null70 4null370 4null21 3null49 5 11.1 1null22 nullnull3 10null95 9null19 45null20 5null4null 3null74 null 13.1 2null71 10null49 12null21 10null79 43null0null null43null 4null42 7 14.null 2null10 11nullnull 14null90 12nullnull 42null35 7null7null 5null0null

152 nullFarlane Impact from a foreclosure would include transaction costs, the distress discount on the property, and the negative effect on the value of surrounding properties. To calculate transaction costs, we sum bronuller and legal fees. nullronuller fees are null percent of the property value nullnull,nullnullnullnullpercent nullnullnull,nullnull and legal fees are nullpercent of the loan value nullnullnullnullnull nullpercent nullnullnull,nullnull assuming an null-percent nullnullrationull Total transaction costs are nullnullnullnull The reduction in property value from the investor being forced to sell a home because it is foreclosed upon nulltress discountnullis a second source of deadweight loss. null is not obvious, however, whether the stress discount should be counted as a cost rather than a transfer. nullthough the seller will lose from a reduction of property value, the buyer may gain from the opportunity to purchase at a lower price. Pennington-nulloss nullnullnull found that Real nulltate Owned nullnullnullproperties suffer a null-percentage point discount in appreciation rates compared with the metropolitan average appre - ciation rates. nullion nullnnullof nullitnullrland nullnull, nullnullnulluses a stress factor of null percent to estimate the additional decrease in value from selling a foreclosed property. One obvious enulllanation for this result is one of reverse causationnulla default may occur because appreciation in a particular submarnullt lags behind the metropolitan average. nullgative price appreciation may result in rational default by the borrower once the value of the loan enulleeds the value of the home. Two other theoretical enullplanations for this empirical result provide insights into economic behavior. The first enullplanation is the possibility that in an environment of asymmetric information a foreclosure is a signal of a nullemonnullproperty, in which case the buyer is compensated through a lower purchase price for tanulling a risnull. null second enullplanation of the stress discount to the values of foreclosed homes involves behavior that creates a deadweight loss to society. nullequently, before owners sell a home, they invest a great deal into the structure, at least into the cosmetic aspects of the property. null owner who nullows that he or she will default will cease to maintain and upgrade the property and may even actively disinvest nullell appliances or finullures, for enullmplenull The depreciation to the property is structural and realnullthe new owner must invest resources to restore the property to its preforeclosure state. nullrding et al. nullnullnull found evidence of this enullernalitynullborrowers with high nullnullratios spend, on average, null percent less on maintenance than those with lower nullnullratios. nullowledge of impending default would increase the overuse of housing. null assume that this structural damage is equivalent to the entire value of the nullnullestimate of the stress discount on the property, which yields nullnullnullnullnullnullpercent nullnullnull,nullnull. nullreclosures resulting in long-term vacancies have a negative effect on the value of neighboring properties by reducing the physical appearance of the neighborhood, attracting crime, and depressing the local economy. The study of nullmerglucnulland nullith nullnullnull reports a reduction of nullnullpercent of value for all properties within one-eighth of a mile. One approach to using the results from this literature would be to limit the negative enullernalities to close neighbors nullnes directly adnullcent and across from the foreclosed propertynulltwo on each side of the property and five across the streetnull Doing so would limit the aggregate effect to nullnullnullnullnull.nullpercent nullnullnull,nullnullnullnull. The total social cost per foreclosure would be nullnullnullnullnullnull,nullnullnullnullnullnullnullnullnullnullnullnull. The enullected social cost of foreclosure is the sum divided by the length of the delay of the probabilities of a foreclosure occurring in a particular year nullhe conditional claim ratenulltimes the discounted value of the social cost of the foreclosure. nullth our assumed cumulative claim rates, a delay of

153Cityscape nulle Impacts onullnullre Rigorous Fnull nulldernulliting Guidelines nullyears, and a discount rate of nullpercent, the enullected social cost of a foreclosure is null,nullnull null shown in enullhibit null, column null, the net enullpected cost of enullcluding a borrower is thusnull nullnull null probability of foreclosurenullnullopportunity cost of preventing ownership nullprobability of foreclosure nullcost of foreclosure. nullth a nullyear delay, the net enullected cost of enullluding a borrower is null,nullnull nullansnullrs to Fnull nullen nullnulltightens its underwriting guidelines, it will reduce the net claim enullense associated with loans for which delinquency leads to an insurance claim. nullD bases its proforma budget accounting on forecasts of claim and prepayment rates calculated using the forecasting model from the independent actuarial study of the nullnull nullnull, nullnullnull but using the economic pronullctions of the Presidentnull nulldget. The actuarial models rely on null years of actual nullnullenullerience and are calibrated to produce loan-performance outcomes using forecasts of future economic conditions. The following equation represents the enullected net claim enullense associated with any given loan, in any given yearnull nullpected claim amount nullclaim rate nullnulloss rate nullunpaid loan balancenull The claim rate is the number of claims during a particular time period divided by the total number of loans endorsed when an annual insurance cohort was underwritten. nullr the null nullnull cohort, the most recent budget forecasts a null.null-percent cumulative claim rate. The time trend of the claim rates over null years is estimated using the predicted cumulative claim rates from the actuarial review nullnull, nullnullnullpage nullnull. The cumulative claim rates from the actuarial review were innullted by a factor of nullnull to account for the higher claim rate predicted among the higher risnull enullluded group nullnullnull percentnull.null percentnull The loss rate is the net loss after property-sale recoveries, as a percentage of the unpaid loan bal- ance on the defaulting loan. nullhibit nullnullof the actuarial review provides a time series of loss rates. The nullnulls began with loss rates as low as null percent but reached null percent by nullnull. nullrrent estimates by nullnullfor the nullnull cohort is that the loss rate on average is null.null percent and that the loss rate for the enullluded borrowers will be higher at null.null percent. nulling recent nullnulldata, we found that the average loan originated to the group of individuals affected by the nulltice is smaller than the global averagenullnullnull,nullnullas opposed to nullnull,nullnull nulling nullnull,nullnullas our default and assuming an interest rate of nullpercent, the annual mortgage payment would be nullnullnullnull The decline in the unpaid balance is slow at first, decreasing appronullmately null,nullnullin the first year, because mortgage payments consist of primarily interest at the beginning of the repaymentnullby the end of the loannull null years, the decline reaches nullnullnullnull nullr enullmple, in the second year, the unpaid balance on the nullnull,nullnullloan would be nullnull,nullnull The claim amount, therefore, would be nullnullnullnullnullnullnull percent nullnullnull,nullnull. nulling an annual unconditional claim rate of nullnull percent, null the enullected claim amount would be null,nullnull The present value of the enullected claim paid in the second year would be null,nullnullnullhen the discount rate is appronullmately nullpercentnull null null The unconditional claim rate is an annual rate consistent with the annual change in the cumulative claim rate. null The time series of discount rates is those used in the actuarial review.

154 nullFarlane Impact nullnull, we summed the present values of the enullected claims paid over all years to arrive at an estimate of the enullected claim. nullr our parameters, the enullected claim amount is nullnullnullnull null multiplied this amount by the original number of endorsements to arrive at a total across all loans. nullether nullnullshould enullect a gain or loss depends on the mortgage insurance premium incomenull nullpected loss per loan nullenullected claim amount nullupfront premium nullperiodic premium income. The upfront mortgage insurance premium is equal to nullnull percent of the original loan balance, or null,nullnull when the loan balance is nullnull,nullnull nullr nullnull greater than null percent, which represent appronullmately null percent of the affected borrowers, the annual premium is nullnull percent of the unpaid loan balance and is collected until the unpaid balance reaches null percent of the original loan amount. null a specific year, the proportion of loans that pays the periodic premium is assumed to be null nullunconditional claim ratenullplus one-half the prepayment rate nullo renullct that prepayers would have paid one-half per yearnull The enullected net present value of the premium income nullpfront nullannualnullis null,nullnullnullnullnullnullnullnull,nullnull. The net loss per loan to nullnullis null,nullnull nullreduction of net losses from the subnullct loans provides a direct benefit to the financial status of the nullnull. Over time, it is also possible that this reduction of nullnulllosses could lead to benefits to remaining nullnullinsured borrowers through lower premium rates. The annual aggregate benefits would be appronullmately nullnullmillion when nullnullendorses nullnullmillion loans annually and the sinull of the group affected is null,nullnull Aggregate Impact nullen nullnullendorses nullnullmillion loans and this nulltice enullludes null,nullnullloans, the total transfer to nullnullwould be nullnullmillion and the nulletnullcost of enullluding the borrowers would be nullnullmillion. To generate an estimate of the net public benefit of the policy change would also entail attaching a value to the qualitative argument concerning the public benefit of nullnullin providing liquidity. The aggregate impacts of the program in the base case are summarinulld in enullibit nullbelow. Exhibit null Costs annullBenenulls of nulltice Pernulloan Transnullrnullnullvoided nullnullnullss nullnullEnullectenullclainull null0nullnull nullnullnullenullnull inconull nullnull77 nullnullEnullectenullnullA nullin nullnull91 nullnullnullnullnull Pernulloan CostnullCost onullDelanullnnullTransition to Onullership nullnullEnullectenulltotal cost nullnull19 nullnullEnullectenullcost of foreclosnulle nullnull4null nullnullEnullectenullnet costs nullnull74 nullnullnullnullnull Total Costs and nullnenulls nullnullnullans ennullrsenullin nullar 1 1.5 nullllion nullnullnullans affectenullnull tnull nulltice 21null00 0.0142 nullnullnull nullnullnullA losses avoinullnull nullnullnullllion nullnullnullnullnull null0nullCosts of enulllnullion null5 nullllion nullnullnullnullnull Fnull nullFederal nullusing Administrationnull

155Cityscape nulle Impacts onullnullre Rigorous Fnull nulldernulliting Guidelines Sensitivity Analysis nullsensitivity analysis is merited because the parameters of this model are difficult to predict. The number of loans endorsed, average amount of the loan, loss rate, claim rate, and capitalinulltion rate all are subnullct to trends in the real estate and credit marnullts. The number of loans endorsed does not affect the per-loan net benefits, but it will affect the aggregate costs and benefits proportionally. null enullibit null the aggregate costs and transfers are shown for different numbers of loans affected by the rule. The number could vary for two reasonsnullnullnulltotal endorsements vary or nullnullthe proportion of risnullier loans varies. nullor enullample, when the nullotice was first considered, low nullnullnullO nullcredit-scoring modelnulland high nullnullborrowers constituted a greater share of nullnullborrowers than they do now. null is difficult, however, to predict trends in credit scores. null used the scenario of null,nullnullloans enullluded throughout the analysis. null is reasonable to assume that loans of those characteristics would be null percent lesser or higher in volume. Exhibit null Anullrenullte Costs annullTransfers of tnull nulltice null nullan Ennullrsenullnts nullans affectenull 14null00 21null00 2null400 Transfer to nullA null4 nullllion nullnullnullllion null44 nullllion Costsnullnullplnull lost null7 nullllion null5 nullllion null27 nullllion Fnull nullFederal nullusing Administrationnull Alternatives Considered null mentioned previously, this nulltice is only one approach to restoring the nullnull capital reserve account. To a large enullent, many of the alternative policies are currently being pursued. This null - tice is focused on risnuller borrowers. One way in which this particular nulltice could vary is by the stringency of the underwriting standards. nullnsider, for enullmple, a nulltice that enullluded borrowers with a nullnull score below nullnull a nullor that is commonly used by private lenders. There are three parameter changes from this alternative. The first is the number of loans affected null.null versus nullnull percent of all loans endorsednull the second is the cumulative claim rate, which would be slightly lowernulland the third is the loan sinull, which would be highernullnullnullnullnullas opposed to nullnull,nullnull The net effect is that the transfer per loan of the alternative drops by appronullmately null,nullnullto null,nullnull null addition, the average social cost of enullluding a borrower rises by appronullmately nullnull. The change in the claim rates will affect whether the net benefit per loan is positive or negative, the sinull of loan will affect the sinull of the transfer benefit per loan, and the number of loans will affect the aggregate impact of the nulltice. The lower claim rates lead to a lower transfer to nullnullnull,nullnull as opposed to the base case estimate of null,nullnullof this nulltice. nullthough the aggregate transfer to nullnullwould be greater nullnullnullmillionnullbecause of the higher number of loans, so would be the aggregate net enullected cost of delaying homeownership nullnullnullmillionnull nullrthermore, the portion of loans enullluded under this alternative would be disproportionately composed of borrowers belonging to protected classes under the nullir nullusing nullt of nullnull.

156 nullFarlane Impact nullnullowledgments The author thannull nullucnullnullpone of the nullderal nullusing nullministration for carefully reading the impact analysis on which this article is based and providing constructive advicenull nullndrew nullrannegan and nullnull nullyes for research assistancenulland nullll Reeder, null nullymanosnull, and nullrt nullowsnull for helpful discussions. nulll errors are mine. nulltnullr nullastair nullnullrlane is director of the nullonomic Development and Public nullnance Division at the nullnull Department of nullusing and nullban Development, Office of Policy Development and Research. Renullrences nullssidy, nullhn. nullnull. nullw nullrnullts nullilnullnulle nullgic of nullonomic Calamities. nullw nullrnull nullrrar, nullraus and nullrounull nullulson, nullward, and nullrman null. nullnull. nullasuring the nullternal nullnefits of nullmeownership. nullrnullng paper. httpnullnullcon.la.psu.edunullecoulsonnullwnenullpdf nullccessed nullne null, nullnullnull Dietnull Robert, and Donald nullurin. nullnull. nullhe nullcial and Private nullcro-nullvel nullnsequences of nullmeownership,nullnullurnal of nullban nullonomics nullnullnullnullnullnull nulltnullaff, Dean, Richard nulleen, and David nullng. nullnull. nullross-Tenure Differences in nullme nullintenance and nullpreciation,nullnullnd nullonomics nullnullnullnullnullnull nullrding, nullhn, Thomas nullceli, and nullnull nullrmans. nullnull. nullo Owners Tanull nulltter nullre of nullur nullusing Than Rentersnull nullal nulltate nullonomics null nullnull nullnullnullnull nullnderson, nullrnon null, and nullnnis null nullannides. nullnull. null nulldel of nullusing Tenure nulloice,null nullerican nullonomic nullnullew null nullnull nullnullnull. nullmerglucnull Daniel, and nulloff nullith. nullnull. nullhe nullternal nullsts of nullreclosurenullThe nullpact of nullngle-nullmily nullrtgage nullreclosures on Property nulllues,nullnullusing nulllicy nullbate null nullnull nullnullnull nulltegrated nullnancial nullgineering, nullc. nullnullnull nullnull. nulltuarial nullnullew of the nullderal nullusing nullministration nulltual nullrtgage Insurance nullnd nullnullluding nullCnullnullfor nullscal nullar 200null Report prepared for the nullnull Department of nullusing and nullban Development. nullshington, Dnull nullnull Department of nullusing and nullban Development. nullailable at httpnullnullud.govnullfficesnullsgnullompnull rptsnullctrnullnullnullctrnullnullecm.pdf. nullata, nullinichiro, and nullsanull nullmaga. nullnull. Rental nullternality, Tenure nullcurity, and nullusing nullality. nullrnullng paper. httpnullnullww.asres.orgnullnullnullonferencenullapersnullnullnullatanullnullnullnull nullmaga.pdf nullccessed nullly null nullnullnull Pennington-nulloss, nullthony. nullnull. nullhe nulllue of nullreclosed Property,null nullurnal of nullal nulltate nullsearch null nullnull nullnullnullnull

Brownfields

157Cityscape nulle Impacts onullnullre Rigorous Fnull nulldernulliting Guidelines Riha, nullhn. nullnull. nullhe nulllue of nullme nullintenance.nullnullrch null nullnull. httpnullnullww.houselogic.comnull articlesnullalue-home-maintenancenull nullccessed nullly null nullnullnull nullilling, nullmes D., nullnull nullrmans, and nullnathan null Dombrow. nullnull. nulleasuring Depreciation in nullngle-nullmily Rental and Owner-Occupied nullusing,nullnullurnal of nullusing nullonomics nullnullnull nullnull. nulliglitnull nullseph, nullime nullramillo-nullllenull, and nullng Parnull nullnull. nullhe Role of the nullate in nullnancial nullrnullts.nullnull nullrld nullnnullnullsearch nullsernullr nullnnual nullnference on Development nullonomics nullpplementnull nullnullnull nullvailable at httpnullnullww.econ.uoa.grnullnullfilesnullnullnullnullnullnullpdf. nullccessed nullly null nullnullnull nullion nullnnullof nullitnullrland nullnullnull nullnull. nulleveritynullnullere Does null nullme nullomnull nullnullnullrtgage nullrategist, nullgust null. nullnull Department of nullusing and nullban Development nullnullnull Office of Policy Development and Research nullDnullnull nullnull. nullnull nullusing nullrnullt Conditions, null rd nullarter nullaynull nullshington, Dnull nullnull Department of nullusing and nullban Development, Office of Policy Development and Research. nullvailable at httpnullnullww.huduser.orgnullortalnulleriodicalsnullshmcnullinternullnullndenullhtml . nullng, null, Terry null nullissom, nullmes R. nullbb, and nullwis nullellman. nullnull. nullhe nullpact of Rental Properties on the nulllue of nullngle-nullmily Residences,nullnullurnal of nullban nullonomics nullnullnullnullnullnull

158 nullFarlane Impact