C2. Residential property value and better urban design

Urban form and the value of amenities

Aims and method:

Explores the relationships between social and economic value and urban form across six British cities. The study draws on a variety of publicly available data at ward level and utilises linear regression analysis to establish and understand correlations between the key dependant (depreciation or value) and independent variables (aspects of urban form).

Key findings:

· The social and economic value placed on the presence of greenery relates to its quality and not necessarily to its quantity or proximity.

· The sort of generally high quality greenery found in London can add 10.6% to the value of housing, but in Liverpool where there is an abundance of often low quality green space, homes located closer than average to such space suffered a 7.2% decrease

· Areas of high population and large areas of unbuilt space are less valuable and often associated with deprived communities

· The heritage premium is greater than the new build one. In London a home closer than average to a listed building is worth 10.3% more on average. The new build premium is a fifth of this.

· Areas gentrifying in London are typified by their high proportion of pre-1900 housing stock. In London, also, walkable, well-connected street based networks carry a premium

· Diversity in form, land use and transport provision carries a premium in all the cities studied.

Reference:

Boys Smith, N., Venerandi, A. & Toms, K. (2017) Beyond Location, A Study into the Links Between Specific Components of the Built Environment and Value, London, Create Streets

http://dev.createstreets.com/wp-content/uploads/2017/09/Beyond-Location-summary.pdf

Residential property value and auto dominance

Aims and method:

Examines the relationship between the built environment and residential property values in the Boston, Massachusetts, metropolitan area. The study computes 27 built environment variables at a 250m x 250m grid cell level, uses factor analysis to extract five built environment factors to mitigate multicollinearity, and integrates built environment factors into hedonic price models. Spatial regression techniques are applied to correct spatial autocorrelation.

Key findings:

· Property values are positively associated with accessibility to public transport and jobs, connectivity, and walkability, and negatively related to auto dominance. The built environment effects depend on neighbourhood characteristics.

· The relationship between auto dominance and housing price can be attributed to: a positive impact of increasing auto speed and reducing travel costs and the negative impact of high-speed roads on noise, emissions, and safety. In this study, the negative effect outweighs the positive effect.

· The net effect is that property values are estimated to decrease 0.68% for one standard deviation (0.569 units) increase in the auto dominance factor

· If the walkability score increases by one standard deviation (0.971 units), the property value will increase around 1.42%, or $5,340 for a house priced at $376,500.

· If the connectivity score increases by 1.364 units, which is one standard deviation of this factor, the property value will increase 2.20%, or $8,390 for a house priced at $376,500

Reference:

Diao, M., & Ferreira Jr, J. (2010). Residential property values and the built environment: Empirical study in the Boston, Massachusetts, metropolitan area. Transportation Research Record: Journal of the Transportation Research Board, (2174), 138-147.

http://trrjournalonline.trb.org/doi/abs/10.3141/2174-18

Valuing sustainable urbanism

Aims and method:

This research was designed to define and then to measure the physical characteristics of ‘sustainable urbanism’ (mixed use, streets based, walkable, environmental and socially sustainable development) and to look at the economic characteristics of sustainable urbanism in terms of present total development value and how that differs from other forms of value generation and residential value growth in conventional projects. Three sustainable urbanism schemes were identified, and potential differences to suitable comparators assessed. The average value across property types of each scheme was derived and discussed at a series of focus groups.

Key findings:

· Building some or all of the features of sustainable urbanism can enhance total development value in all markets

· This includes locations of low demand (Fairford Leys, Aylesbury experienced a 46% uplift in values per hectare), high demand (Poundbury, Dorchester saw a 18% uplift), and in high supply (Crown Street, Glasgow, a 30% uplift, despite oversupply)

· Sustainable urbanism provides the greatest value enhancement where development is taking place in a low demand market.

Reference:

Dittmar, H., Mayhew, G., Hulme, J., & Smallwood, C. (2007). Valuing Sustainable Urbanism: A Report Measuring and Valuing New Approaches to Residentally Led Mixed Use Growth, The Prince’s Foundation For the Built Environment.

http://www.ads.org.uk/wp-content/uploads/0707vsureport_0.pdf

The value of residential layout

Aims and method:

Examines the relationship between the value of residential property in London and the layout of roads. The research took a single outer London borough and correlated the relationship between road layout and connectivity (using Space Syntax analysis) and value as captured in Council Tax bands.

Key findings:

· The features home owners value most about their home are not associated with the building itself, but more the environment in which it is located

· Property of the highest value was found to be located on roads that are highly reachable – that is well-connected to the wider network.

· The more permeable the street networks of a neighbourhood, the greater the choice of routes through it, the higher the property value.

· Neighbourhoods that were only connected at a local level, rather than to their wider surroundings, were worth less as residential locations.

Reference:

Savills (2010) Spotlight on: Development Layout, London, Savills Research

http://pdf.euro.savills.co.uk/uk/spotlight-on/spotlight-on-development-layout.pdf

The value of residential street layout

Aims and method:

Provides empirical evidence from Halifax, Nova Scotia, confirming the view that the type of neighbourhood street can affect home values. The study identifies two categories of streets-the cul-de-sac and the grid-and measures their impacts on home value. Regression analysis was used to examine the Compural Data Base of Turner and Drake Limited, with analysis of 268 home sales between 1976 and 1984.

Key findings:

· The hypothesis that the cul-de-sac would attract premium values was supported by the study.

· The cul-de-sac generated a 29 percent price premium over the grid street pattern

Reference:

Asabere, P. (1990) The Value of a Neighborhood Street with Reference to the Cul-de-Sac, `journal of Real Estate and Finance Economics, 3: 185-193

https://link.springer.com/article/10.1007/BF00216591

The value of placemaking

Aims and method:

Explores the financial case for investing in place quality in England, addressing some of the challenges developers face and suggesting how these barriers can be overcome. The data used is from a simplified land value model built by Savills and populated with their national real estate data.

Key findings:

· Investing early in high quality placemaking can pay off: early spend increases land values by around 25%

· There is a trade off with risk with debt peaking around 50% higher by investing early

· Land value uplift enables the delivery of well designed neighbourhoods and successful communities

Reference:

Savills (2016) Spotlight Development: The Value of Placemaking, London, Savills World Research UK Development

http://pdf.euro.savills.co.uk/uk/residential---other/spotlight-the-value-of-placemaking-2016.pdf

Mixed land uses and housing value

Aims and method:

Analyses the impact on the prices of single family houses when mixed land uses are included in neighbourhoods. Utilises a range of quantitative measures of mixed land uses through Geographic Information System (GIS) data and computes these measures for various neighbourhoods in Washington County, Oregon (USA). Measures were incorporated into a hedonic price analysis.

Key findings:

· Mixing certain types of land uses with single family residential housing has the effect of increasing residential property values.

· Housing prices increase with their proximity to (or with an increasing amount of) public parks and neighbourhood commercial land uses (neighbourhood stores).

· An additional premium exists when a neighbourhood store is situated within pedestrian walkable distance.

· Housing prices are higher in neighbourhoods dominated by single-family residential land uses, where non-residential land uses are evenly distributed, and where more service jobs are available.

· Housing prices tend to fall with proximity to multi-family residential units.

Reference:

Song, Y., & Knaap, G. J. (2004). Measuring the effects of mixed land uses on housing values. Regional Science and Urban Economics, 34(6), 663-680.

http://www.sciencedirect.com/science/article/pii/S016604620400016X

Neighbourhood layout, access to retail and property value

Aims and method:

Evaluates how consumers value differences in neighbourhood composition and street layout in Seattle, Washington. The research uses measures of neighbourhood street connectivity and their interaction with other attributes to evaluate how street layout affects property values. Two different methods of indexing street layout are employed, space syntax and an alternative based on the ratio of street intersections to segments. A hedonic model was used to make the comparisons with a range of amenities controlled for.

Key findings:

· In pedestrian oriented neighbourhoods based on a traditional gridiron street pattern, proximity to retail sites has a significant effect on house prices.

· In automobile oriented neighbourhoods based on curvilinear and cul-de-sac subdivision development patterns, there generally is no price effect, positive or negative.

· The net price effect, where it exists, comprises the positive effect of convenient access to retail offset by the negative externality effects from the noise, light, traffic, trash, etc., that are associated with retail use.

· In neighbourhoods with highly connected streets, such as a gridiron pattern, the positive effects outweigh the negative effects and proximity to retail uses enhances the price of a house.

· In neighbourhoods that do not have highly connected streets, for example, a cul-de-sac or curvilinear pattern, the negative externality effects overwhelm the positive accessibility effects and proximity to a retail use diminishes house value.

Reference:

Matthews, J. & Turnbull, G. (2007) Neighborhood Street Layout and Property Value: The Interaction of Accessibility and Land Use Mix, The Journal of Real Estate Finance and Economics, 35(2): 111-141

http://pdf.euro.savills.co.uk/uk/spotlight-on/spotlight-on-development-layout.pdf

The value of housing design and layout

Aims and method:

Assesses the extent to which design impacts on the value of residential development. Different types of design in housing and housing layout are examined to understand their impact on the price of new housing developments. The research selected eight examples of completed developments and compared them in four matched pairs at different locations around the South East of England. This eliminated the impact of regional economies and the differences between regional housing markets when making comparisons.

Key findings:

· Higher density does not decrease value per square foot, but there is a critical balance to be struck by the developer in maintaining unit values while increasing density.

· In three out of four cases there was an enhanced added value by the innovative nature of the designs over their conventional counterparts, of 15, 10.3 and 7.5 per cent respectively.

· Sites with relatively high residual values, in relation to their matched pairs, appeared to have high proportions of public open space in relation to the overall size of the site.

· There are a series of factors, including the built form, which creates a sense of place. It is possible to create a sense of place, and therefore a new type of location on a piece of land, by employing urban design principles. These new places may be more desirable, and therefore more valuable, than their neighbours.

Reference:

FPDSavills Research (2003) The value of housing design and layout, Commission for Architecture and the Built Environment

http://webarchive.nationalarchives.gov.uk/20110118095356/http:/www.cabe.org.uk/publications/the-value-of-housing-design-and-layout

The value new urbanism

Aims and method:

Assesses the added value of new urbanist single family dwellings over conventional subdivisions. Utilises data from 2,061 single family housing transactions in the new urbanist Kentlands (Maryland, USA) development and surrounding comparable projects and several hedonic pricing models.

Key findings:

· Consumers are willing to pay a 12% premium for properties in Kentlands, a premium that is separate from housing unit quality

· Parameter estimates of the binary variable representing a proxy for new urbanism are positive and statistically significant

· Kentlands differs from its comparators through incorporating design principles that include extensive green infrastructure, more public space, an interconnected street network, pedestrian oriented design, a mix of uses and neo-traditional architecture.

Reference:

Tu, C. & Eppi, M. (1999) Valuing New Urbanism: The Case of Kentlands, Real Estate Economics, 27(3), 425-451

http://onlinelibrary.wiley.com/doi/10.1111/1540-6229.00779/epdf

Market appreciation and neo-traditional housing

Aims and method:

Studies market appreciation for clustered housing (a neo-traditional approach that clusters the same number of units on smaller lots and leaves the remaining space as permanently open community space) compared with conventional housing. The percentage change in the selling price of two comparable housing schemes in New England (USA) examined over a ten year period.

Key findings:

· The purchase of the average home in a neo-traditional development would have yielded a higher rate of return on investment (by some 12.7%) than one in a conventional development.

· Even with lot sizes up to 50% smaller, the value of the neo-traditional scheme exceeds the conventional suburban one.

Reference:

Lacy, J. (1990). An examination of market appreciation for clustered housing with permanent open space. Department of Landscape Architecture and Regional Planning, University of Massachusetts, Amherst, 78.

www.ehsa.info/ehsa.info/Echo_Hill.../OpenSpace%20%26%20RE%20Value.pdf

The economics of style (in housing)

Aims and method:

Examines the impact of architectural style on the price paid for new homes in The Netherlands. The research used a detailed data set of housing transactions for 86 Vinex housing estates built between 1990 and 2015. Researchers used Google Street View to determine the style of every house in the transaction database using three criteria to judge: the shape of the building, the composition of the facade and the details. In the sample only 1% of all transactions are pure neo-traditional homes and 9% are buildings that refer to traditional styles; 90% are non-traditional. 60,000 transactions were subject to hedonic price analysis.

Key findings:

· The hedonic price model that has been estimated shows a significant price premium of 15% for pure neo-traditional styles and 5% for buildings that refer to traditional styles.

· Various robustness checks confirmed that these results are partly, but not entirely, driven by, unobserved differences in quality between houses with different building styles

· The price premium suggests that owners appreciate certain building styles more than others, but is also partly a consequence of the under-supply of such houses in a highly regulated market

· With the increasing production of neo-traditional dwellings in The Netherlands the price premium is disappearing.

Reference:

Buitelaar, E. & Schilder, F. (2017). The Economics of Style: Measuring the Price Effect of Neo-Traditional Architecture in Housing. Real Estate Economics, 45(1), 7-27.

http://onlinelibrary.wiley.com/store/10.1111/1540-6229.12137/asset/reec12137.pdf;jsessionid=F8B526FE6187D838B3E8A8B2080EB705.f01t01?v=1&t=j901sifw&s=ed993fec7e225f63ebfdb309ffdedd7a2925741c

Valuing proximity to iconic (residential) design

Aims and method:

Investigates the willingness of homebuyers to pay for co-location with iconic architecture. Oak Park, Illinois (USA) with its 24 Frank Lloyd Wright houses was examined. The study utilised a hedonic price model that included several independent variables, various structural characteristics, distance to amenities, proximity to other historic landmark buildings and location in historic districts that served to control for a variety of factors affecting the price of a home.

Key findings:

· A premium on the price paid per land unit is achieved of up 8.5% for homes within 50m of a Wright home, and about 5% within 50-250m.

· Beyond this threshold evidence for positive effects is weak at best.

Reference:

Ahlfeldt, G., & Mastro, A. (2012). Valuing iconic design: Frank Lloyd Wright architecture in Oak Park, Illinois. Housing Studies, 27(8), 1079-1099.

http://www.tandfonline.com/doi/abs/10.1080/02673037.2012.728575

and

http://www.spatialeconomics.ac.uk/textonly/SERC/publications/download/sercdp0084.pdf

Internalising neighbourhood externalities

Aims and method:

Traces the impact of overall development size on the price of individual housing developments. The research undertaken in the USA uses data sets of sale prices recorded in a range of new residential developments to determine how the size of the development impacts on the sorts of amenities that a developer can provide, and therefore in the price.

Key findings:

· At a median development size, an additional acre in lot size adds 3% to the sale price of each house.

· This is because larger developments allow developers to internalise neighbourhood externalities and better control the characteristics of the new neighbourhood.

· Consumers appear willing to pay for the better amenities that larger developments can provide.

Reference:

Thorsnes, P. (2000). Internalizing neighborhood externalities: the effect of subdivision size and zoning on residential lot prices. Journal of Urban Economics, 48(3), 397-418.

http://www.sciencedirect.com/science/article/pii/S0094119000921739

Connectivity to rail and property value

Aims and method:

Examines the impact on property values of proximity to good public transport as represented by a rail station. Presents the results through hedonic price model of the Atlanta region (USA) that incorporates externalities such as the potential for increased neighbourhood crime.

Key findings:

· Rail stations have a direct effect on the value of single-family homes. These effects are found to vary with neighbourhood income, distance to the CBD centre, and whether the nearest station has a parking lot.

· In the basic model, properties within a quarter of a mile from a rail station are found to sell for 19% less than properties beyond three miles from a station. However, properties that are between one and three miles from a station have a significantly higher value compared to those farther away.

· The results suggest that houses that are very close to stations are affected by negative externalities (e.g. higher crime associated with the station), but those at an intermediate distance are beyond the externality effects and benefit from the transportation access provided by the stations

Reference:

Bowes, D. R., & Ihlanfeldt, K. R. (2001). Identifying the impacts of rail transit stations on residential property values. Journal of Urban Economics, 50(1), 1-25.

http://www.sciencedirect.com/science/article/pii/S0094119001922144

The value of pedestrian and transit-oriented development

Aims and method:

Analyses have indicated a growing market for pedestrian- and transit-designed development and that this is reflected in the price people are willing to pay for those styles of development. This article traces the literature that uses hedonic price methods for testing this hypothesis, either by assessing pedestrian/transit-design development holistically or by evaluating its component parts

Key findings:

· With more than 50 empirical studies in the last 35 years, there is a great deal of published research on the connections between transit and real estate.

· The literature confirms that this market shift is being capitalised into real estate prices

· It demonstrates that the amenity-based elements of transit-designed development play an important positive role in urban land markets, independent of the accessibility benefits provided by transit.

Reference:

Bartholomew, K. & Ewing, R. (1995). Hedonic Price Effects of Pedestrian- and Transit-Oriented Development. Journal of Planning Literature. 26(1), 18-34

http://journals.sagepub.com/doi/pdf/10.1177/0885412210386540

The market for smarter growth

Aims and method:

Studies perceptions of the market for pedestrian- and transit-oriented development forms in the USA. Utilises a national survey of 676 developers from across the country.

Key findings:

· Overall, respondents perceive considerable market interest in alternative (pedestrian-

and transit-oriented) development forms, and believe that there is inadequate supply of such alternatives relative to market demand.

· Across the country a market of at least 10% of consumers of new housing exists, with a potential market of up to 25% in some places

Reference:

Levine, J., & Inam, A. (2004). The market for transportation-land use integration: Do developers want smarter growth than regulations allow?. Transportation, 31(4), 409-427.

https://link.springer.com/article/10.1023/B:PORT.0000037086.33893.9f

External improvements and housing markets

Aims and method:

Explores the impact of home improvement schemes on local housing markets. The study looked at varying levels of intervention during the 1980s, comparing external with internal and with no intervention in areas of poor quality housing.

Key findings:

· Public investment in the exterior of properties has helped to revive areas with a weak housing market, sustained that market, and improved conditions for residents.

· Houses are now habitable, saleable, and acceptable to mortgage lenders as security and exhibit low vacancy rates

· Renewal investment has had little direct impact on house price levels that have followed national trends.

Reference:

Groves, R., & Niner, P. (1998). A Good Investment?: The Impact of Urban Renewal on an Inner-city Housing Market. Policy Press.

https://www.jrf.org.uk/report/impact-urban-renewal-owner-occupied-inner-city-housing-market

Real estate value and quality design in residential properties

Aims and method:

Estimates the impact of quality design attributes on real estate value through empirical investigation of the owner-occupied multifamily residential sector In Belfast (UK). The research is based on spatiotemporal modelling using a unique data-set of 424 Belfast City Centre apartments sold during the period 2000–2008.

Key findings:

· Urban scale aspects of quality such as connectivity and vitality associated with building density add to real estate value.

· At the building level, quality features highly valued by home buyers include appropriateness of material quality, fenestration and massing in relation to the surroundings.

· These key criteria are considered to have a significant visual perception compared to more complex concepts such as identity, material choice and overall condition

Reference:

Nase, I., Berry, J., & Adair, A. (2016). Impact of quality-led design on real estate value: a spatiotemporal analysis of city centre apartments. Journal of Property Research, 33(4), 309-331.

http://www.tandfonline.com/doi/abs/10.1080/09599916.2016.1258588

Placemaking and value

Aims and method:

Explores the relationship between design attributes and sales in large residential schemes, and how a positive sense of place can trigger higher values. The research was based on a case study approach examining five large residential-led urban extension schemes in the London commuter belt. Placemaking criteria included: the development team; clarity of vision; quality of architecture and design; layout; commercial and community provision; public and private amenity space; transport, car parking, accessibility and walkability; effective community engagement; and sustainability.

Key findings:

· The research found that placemaking does add economic value. However, there is considerable disparity in the size of the premium, between 5% and 50%, which varies between different dwelling types.

· Greater premiums are achievable in areas that already have higher local embedded new-build values. Good placemaking techniques in high value areas can secure additional premiums of over 50% which can be sustained over the long term as the reputation gathers pace.

· Placemaking is effective in lower-value areas with the most successful scheme achieving close to 20% uplift on local new-build competition.

· The most successful placemaking schemes achieved the greatest uplift on relatively small homes. For example, terraced properties were often more expensive than new semi-detached homes.

Reference:

RICS (2016) “Placemaking and value”, Royal Institution of Chartered Surveyors

http://www.rics.org/uk/knowledge/professional-guidance/information-papers/placemaking-and-value-1st-edition/

Commercial land use and residential value

Aims and method:

Investigates how commercial land use affect residential land values. Using data gathered in Seoul (Korea), the authors pay attention to two particular aspects of commercial land use: spatial concentration and neighbourhood scale. Spatial concentration is determined by the number of commercial employees present in the buffer zone around an individual residential parcel.

Key findings:

· Increasing commercial activity around residences is related to higher residential land values

· Beyond a threshold level, land values decrease because convenience is offset by excessive congestion or noise

· Overall the value of mixed use development is supported

Reference:

Yang, H. J., Song, J., & Choi, M. J. (2016). Measuring the Externality Effects of Commercial Land Use on Residential Land Value: A Case Study of Seoul. Sustainability, 8(5), 432.

http://www.mdpi.com/2071-1050/8/5/432

Land use diversity, land value and taxation

Aims and method:

Explores the degree to which land-use diversity (and other factors), used as outcome proxies for local zoning practices, influence residential land values in Santa Clara County, California. Hedonic price models are used to test the case.

Key findings:

· Results clearly show that land-use diversity contributed positively and appreciably to residential land values

· An inference from the findings is that building housing in areas with fairly diverse land uses and good jobs can indirectly improve the fiscal positions of local governments through the higher property tax proceeds that are generated from the resulting higher market (and assessed) values of residential parcels.

Reference:

Cervero, R., & Duncan, M. (2004). Neighbourhood composition and residential land prices: does exclusion raise or lower values?. Urban Studies, 41(2), 299-315.

http://journals.sagepub.com/doi/abs/10.1080/0042098032000165262

Elevated freeway removal, traffic impacts and property prices

Aims and method:

Investigates the neighbourhood, traffic, and housing price impacts of replacing elevated freeways with surface boulevards in two corridors of San Francisco in California, USA. A mix of methods is used including informant interviews, literature review, and statistical analyses. A matched-pair approach was employed to examine demographic and land-use attributes prior to and after freeway removal based on block-level census statistics and land-use projection. To examine impacts on property values, hedonic models were estimated using time-series data on residential sales prices, housing and neighbourhood attributes, and measures of proximity to transportation corridors.

Key findings:

· Replacement of elevated freeways causes traffic to redistribute across the network without raising congestion

· Depressed house prices rebounded in the years following the work, with the biggest before-and-after differential for residences within 0.25 miles of the boulevard.

· Freeway-to-boulevard conversions, a form of urban reprioritisation that gives more emphasis to neighbourhood quality and less to automobility, have yielded net positive benefits without seriously sacrificing transportation performance

Reference:

Cervero, R., Kang, J. & Shively, K. (2009). From elevated freeways to surface boulevards: neighborhood and housing price impacts in San Francisco, Journal of Urbanism: International Research on Placemaking and Urban Sustainability, 2(1), 31-50

http://www.tandfonline.com/doi/pdf/10.1080/17549170902833899?needAccess=true

Trade-off qualities in the residential environment

Aims and method:

Explores preferences amongst home owners concerning attributes of their residential environments. Through experimental surveys subjects were asked to trade-off different attributes of dwelling and environmental quality and to give some indication of their willingness to pay for the changes.

Key findings:

· The quality of the dwelling was the principal determinant of home owner preferences.

· Environmental considerations were generally less important

· Proximity to industry and dereliction elicited a strong negative reaction and willingness to pay for its removal, suggesting that removal of eyesores within residential contexts represents a valuable investment.

· House price change can be used as an indicator of overall quality change.

Reference:

Whitbread, M. (1978). Two trade-off experiments to evaluate the quality of residential environments. Urban Studies, 15(2), 149-166.

http://journals.sagepub.com/doi/abs/10.1080/713702338