Richmond Fed Sheds Light on the Practice of Targeting Investment Funds for Maximum Impact on Urban Neighborhoods

RICHMOND, Va., July 11 -- The Federal Reserve Bank of Richmond and the Richmond Local Initiatives Support Corporation (LISC) today released the results of a comprehensive study of Richmond's redevelopment investment practices during a breakfast discussion at the Richmond Bank. The recent study, commissioned by the Richmond Bank, analyzed efforts by the City of Richmond and LISC to direct investment resources to specifically targeted neighborhoods for maximum impact. The study reveals some insights into this unusual practice and provides new approaches for conducting research into this aspect of redevelopment investment.

"Anyone who has even a passing acquaintance with community development has seen abundant evidence of things that have been done to try and enhance economic outcomes," said Bank President Jeffrey M. Lacker. "What is surprising is the scarcity of well-grounded research that is focused on outcomes and the effect on people's actual well-being. ...This study represents a significant step in that direction."

The study centers on the City of Richmond's Neighborhoods in Bloom (NiB) project. As part of its NiB policy, the city targeted federal Community Development Block Grant funds, Home Investment Partnership funds, capital improvement funds and other resources to carefully chosen neighborhoods. At the same time, Richmond LISC directed its housing investment subsidies (lines of credit, loans and grants) to the same neighborhoods. Both the City of Richmond and LISC tracked their investments by household and neighborhood, which produced a rich and unique data set. This data set, which includes five years of investments, was pivotal in enabling researchers to go beyond anecdotal information and conduct rigorous analysis to determine the impact of targeting funds.

The study was co-authored by George Galster, Hilberry Professor of Urban Affairs and Interim Dean of Wayne State University in Detroit, John Accordino of Virginia Commonwealth University and Peter Tatian of The Urban Institute in Washington, D.C. The authors used an adjusted interrupted time series (AITS) model to analyze the data and found that:

   * Housing prices in targeted NiB areas appreciated almost 10 percent
     faster than the citywide average.

   * A spill over affect in adjacent neighborhoods showed an increase in
     housing prices at a rate of 5.3 percent faster than the citywide
     average.

   * The most significant home price impacts occurred at a threshold
     investment of about $20,000 per housing block when invested annually
     for five years.

"Even relatively uncompetitive, disadvantaged neighborhoods can be revitalized if public and private investments are predictable, sustained and spatially targeted to achieve thresholds," Galster remarked to an audience of about 100.

Event speakers also included Greta J. Harris, Richmond LISC senior program director; L. Douglas Wilder, mayor for the City of Richmond; and James E. Ukrop, chairman Ukrop Markets Inc./First Market Bank and chairman emeritus of LISC.

For a complete copy of the study, call Community Affairs at 804-697-8447. The study also is available in .pdf format in the Community Affairs section of the Federal Reserve Bank's public Web site at http://www.richmondfed.org/community_affairs/topical_essays_and_resources/repo rts/nib_research.cfm.

The Richmond LISC has posted an educational summary about the NiB project on their Web site at http://www.lisc.org/richmond/index.php