Estimating the Public Costs and Benefits of HOPE VI Investments: Methodological Report

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Abstract

The HOPE VI program has invested over $6 billion in federal funds for the redevelopment of severely distressed public housing.  Drawing on the existing research evidence, this study systematically compares the costs (both monetary and nonmonetary) of maintaining severely distressed public housing developments to the potential costs and benefits of effectively revitalizing them.  An effective redevelopment strategy can dramatically improve living conditions for families, resulting in better physical and mental health and increased employment and earnings. Moreover, redevelopment can trigger the revitalization of previously blighted communities. These outcomes also save public resources. In fact, for a typical distressed public housing project, mixed-income redevelopment can save the public more than $20 million over 20 years.

Introduction

Over the past decade, the HOPE VI program has invested over $6 billion in federal funds for the replacement or renovation of severely distressed public housing developments. These federal dollars have leveraged billions more in other public, private, and philanthropic investments. To date, over 78,100 distressed public housing units have been demolished, with another 10,400 units slated for redevelopment (HUD 2007).

The current administration has been critical of the high costs of HOPE VI, proposing that the program should be cut back dramatically or even eliminated. In effect, they argue that the problem of severely distressed public housing has largely been solved and that the country cannot afford to replace or revitalize more properties. However, a growing body of research highlights the damage to families and children of living in dangerous, high-poverty environments and the potential benefits of replacing severely distressed public housing with a combination of high-quality, mixed-income housing and rental vouchers (Popkin et al. 2002, Popkin et al. 2004, Orr et al. 2003, and Briggs and Turner 2006).

Drawing on existing research evidence, this study compares costs (both monetary and nonmonetary) of maintaining severely distressed public housing developments to the potential costs and benefits of effectively renovating or replacing them. It is important to acknowledge that no rigorous evaluation of the costs and benefits of HOPE VI redevelopment has yet been conducted, that the availability of empirical evidence about the likely trajectory of both distressed properties and redeveloped properties is severely limited, and that the future of both market and policy environments is uncertain. The analysis presented here focuses on costs and benefits for which the research evidence is strongest and makes generally conservative assumptions about the likely impacts of public housing redevelopment. Nonetheless, the estimates are by necessity somewhat speculative and should be viewed as approximate.

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The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

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