Urban Neighborhoods: Research and Policy

Allen C. Goodman

Housing prices reflect characteristics of the dwelling unit and the characteristics of the neighborhood within which the unit is located. Hedonic price analysis allows one to estimate the valuation or worth of particular housing structural characteristics and neighborhood amenities such as clean air, good schools, and safe streets. The logic of this analytic strategy is explained and general results emerging from earlier studies are briefly reviewed. Analytic pitfalls in estimating the prices of neighborhood and housing characteristics are noted and results from two studies in the Baltimore region are then presented.

The first study, in which detailed housing and neighborhood information are available, indicates that in both city and suburban areas residents were willing to pay more for housing in neighborhoods with better-quality schools and which had less violent and less property crime. Impacts of racial composition on prices were negligible. A second study of rental prices observes impacts of several neighborhood characteristics on rents. Again, impacts of racial composition were negligible. The chapter ends with the discussion of hedonic price analysis as a policy analysis tool.

Almost any real estate broker, when asked about selling or renting a residence, will respond that there are three major features--location, location, and location. This suggests that although the costs of constructing housing

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