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Can Local Housing Ordinances Prevent Neighborhood Destabilization?

This paper assesses the ability of local housing ordinances to prevent neighborhood destabilization. We evaluate the degree to which vacancy registrations and point-of-sale inspection requirements influenced housing market outcomes following the housing crisis. With comprehensive real property data from Cuyahoga County, Ohio, we measure outcomes that characterize housing market distress including foreclosures, sales below the tax-assessed value, bulk sales, flipping, and property tax delinquency. We compare outcomes across properties in regulated and unregulated municipalities using matching procedures on linked data containing property, loan, and transaction characteristics. We find evidence that vacancy registrations substantially reduce foreclosures. Registrations are also negatively associated with tax delinquency and sales below a property’s tax-assessed value in some specifications. In contrast, we find little evidence that point-of-sale inspections reduce undesirable transactions. Rather, properties in cities with inspection requirements displayed higher levels of foreclosure and tax delinquency relative to the control group during the study period.

Keywords: Housing Ordinances, Neighborhood Stabilization, Propensity Score Matching.
JEL Classication: R52 R31 K30.

Note: This paper was originally posted under the title "The Effect of Local Housing Ordinances," in December 2012.

Suggested citation: Fitzpatrick, Thomas J., Lisa Nelson, Francisca G.-C. Richter, and Stephan Whitaker, 2014. "Can Local Housing Ordinances Prevent Neighborhood Destabilization?" Federal Reserve Bank of Cleveland, Working Paper no. 12-40R.

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