AN ABSTRACT OF THE ESSAY OF Matthew Perreault for the degree of Master of Public Policy presented on June 8, 2020. Title: Revitalization of Gentrification?: An Examination of Urban Renewal Areas and Housing Instability in Oregon. Abstract approved: ______________________________________________________ Patrick Emerson Housing affordability is a salient topic among policymakers and the general public today, especially in Oregon. As housing costs continue to rise, there are concerns that urban planning policies such as urban renewal via tax-increment financing (TIF) are exacerbating the problem and pushing more households into a state of housing instability.
This study examines whether there is a systematic difference in the number of cost-burdened households in urban renewal areas (URAs) in Oregon compared with areas outside of URAs. It also attempts to discern whether the duration of a URA’s existence has any effect on the levels of cost-burdened households in that area. Results show that census tracts that contain urban renewal areas are associated with approximately 5% more cost-burdened households than census tracts without urban renewal areas, with levels as high as 20% higher for rent- burdened households in these areas. However, there is no evidence that these high levels of cost-burdened households change across the duration of a URA’s existence.
While further research is needed to determine causal effects, the persistence of elevated levels of cost burdens in URAs is cause for concern for policymakers. ©Copyright by Matthew Perreault June 8, 2020 All Rights Reserved Revitalization or Gentrification?: An Examination of Urban Renewal Areas and Housing Instability in Oregon by Matthew Perreault AN ESSAY submitted to Oregon State University in partial fulfillment of the requirements for the degree of Master of Public Policy Presented June 8, 2020 Commencement June 2020 Master of Public Policy essay of Matthew Perreault presented on June 8, 2020 APPROVED: Patrick Emerson; Major Professor, representing Economics Mark Edwards; representing Sociology Scott Akins; representing Sociology I understand that my thesis will become part of the permanent collection of Oregon State University libraries. My signature below authorizes release of my thesis to any reader upon request. Matthew Perreault, Author ACKNOWLEDGEMENTS I would like to express my sincere appreciation for those who helped me accomplish this project.
Thank you to Patrick Emerson, my committee chair, who advised me throughout this process from the beginning. Thanks to Brent Steel, Mark Edwards, Scott Akins, Alison Johnston, and the rest of the faculty at the School of Public Policy, whose teaching was invaluable. I would also like to extend thanks to Kate Porsche, whose professional expertise is a credit to the City of Corvallis and the School of Public Policy. Thanks to Alethia Miller for inspiring me to start this journey.
Thank you to my mom for her undying love and encouragement. It is because of her that I consider myself to be a lifelong learner. Lastly, thank you to my wife, my partner in life, whose sacrifices, love, and support made this all possible. TABLE OF CONTENTS Page I.
Background and Literature Review. 3 Urban Renewal in Oregon. 3 Tax Increment Financing. 6 Tax Increment Financing.
6 Gentrification and Displacement. Data and Methods. 16 Data Sources and Coding. 19 Model Specification and Hypotheses.
54 Appendix A: Urban Renewal Areas in Oregon. 55 Appendix B: Percentage Point Regression Results. 60 Appendix C: Negative Binomial Regression Results. 61 Appendix D: Auxiliary Regression Results.
62 LIST OF FIGURES Figure Page Figure 1…………………………………………………….42 LIST OF TABLES Table Page Table 1………………………………………………………………………………20 Table 2…………………………………………………………………….44 LIST OF APPENDIX TABLES Table Page Table A1 …………………………………………………………………55 Table A2……………………………………………………………….62 DEDICATION For my wife Hannah, who can make me laugh like no one else. Introduction Decades after the era of white flight, cities are once again emerging as the country’s cultural and economic centers. As cities continue to grow, rising prices and scarce land has led to housing becoming increasingly unaffordable for many residents. Consequently, the “global housing affordability crisis” has become an increasingly salient concern for citizens and policymakers alike (Wetzstein, 2017).
While states and cities implement new laws to strengthen legal protections for vulnerable households in response to this crisis, other longstanding policies for urban planning and economic development have come under scrutiny as counterproductive drivers of gentrification and displacement. One such policy is urban renewal by means of tax- increment financing (TIF), a tool used by municipalities to redevelop areas of cities that have historically experienced disinvestment, poverty, and blight. Proponents of TIF tout its effectiveness as a tool for raising tax revenue without increasing tax rates on property owners, which allows for a public intervention in an economically depressed area that results in greatly improved outcomes for the community. Critics cite its power as a force for gentrification and displacement, historically clearing out entire neighborhoods and redeveloping them in order to attract wealthier residents and businesses.
As more cities in Oregon and elsewhere continue to express interest in adopting TIF for economic development, it is worth investigating what impact it may have on housing instability and whether it contributes to gentrification and displacement of vulnerable residents. Rising housing costs in the last decade have given rise to concerns of the increasing unaffordability of housing and associated social consequences, such as inequality, poverty, and 2 homelessness. This study seeks to examine whether urban renewal areas (URAs) in Oregon that are financed by TIF are associated with increased levels of housing instability. Because the purpose of urban renewal is to target “blighted” areas for redevelopment and increase the assessed value of property in the area, I hypothesize that urban renewal areas are associated with disproportionately higher levels of cost-burdened households, which are defined as households that allocate more than 30% of their income to housing costs.
However, this alone will not determine what impact urban renewal has on housing instability. In addition, I examine a hypothesized association between cost-burdened households and the duration of a URA’s existence in order to determine the impact of urban renewal over time. The paper is organized as follows. Section II lays out the historical and institutional background of urban renewal policy in Oregon, the theoretical framework for this study’s methodology, and a review of the literature on the topics of gentrification, displacement, and housing instability.
Section III describes the methodology and data used in this study, while section IV presents my findings. Section V discusses the results through the lens of theory. Section VI discusses limitations of the study’s methodology and makes recommendations for future research. Section VII discusses larger policy implications of my findings and concludes.
Background and Literature Review Background Urban Renewal in Oregon Urban renewal has a complex history in the world of public policy. Often, the term is associated with the large-scale federally funded redevelopment and infrastructure projects of the 1950s and 1960s. These projects arose from the federal Housing Act of 1949, an initiative to reverse decades of decline and blight in the country’s urban centers in the wake of the Great Depression and the Second World War (Hoffman, 2000). In spite of the legislation’s progressive policy goals of alleviating poverty and replacing substandard housing with new public housing units, the urban renewal projects of this era have been widely documented as slum-clearing events that displaced tens of thousands of residents in low-income neighborhoods across the United States, widening racial and income disparities while entrenching local business elites as powerful drivers of economic policy and city planning (Gotham, 2000, 2001).
In Portland, Oregon, voters authorized the creation of the Portland Development Commission (PDC, now called Prosper Portland), a quasi-independent public agency with a streamlined organizational structure that enabled rapid and often clandestine deals with real estate developers (Gibson, 2004). Under the leadership of businessman Ira Keller, the PDC initiated the South Auditorium urban renewal project in 1957, which cleared out a neighborhood in that city’s downtown for new public construction, displacing the area’s mainly Jewish and Italian residents and businesses (Campos, 1979; Gibson, 2004; Wollner et al. At the same time, urban renewal efforts and freeway construction in the north and northeast sections of the city displaced thousands of residents in the Albina neighborhood, which was home to more than 4 50% of the city’s African American population (Wollner et al. By the late 1960s, public opposition to further displacement halted the city’s plans for freeway expansion in Southeast Portland, forcing the city to reconsider its approach to urban renewal and adopt a more consensus-driven approach that accommodated public input (Campos, 1979).
However, people of color continued to be disproportionately affected by urban renewal policy; it is estimated that more than 10,000 Black residents were displaced from the Albina area as a result of the Interstate Corridor Urban Renewal Area between 1990 and 2016 (Hughes, 2019). Tax Increment Financing Today, contemporary urban renewal policy in Oregon is conducted via tax-increment financing (TIF), a mechanism designed to capture and redirect property tax revenues in order to fund public investments without raising nominal tax rates. State law empowers a municipality to create an independent urban renewal agency, which is charged with carrying out redevelopment efforts in a “blighted” area, meaning an area with depressed property values, poor planning, inadequate services or infrastructure, substandard or abandoned structures, or conditions that generate more expenses for public services than they bring in tax revenue (ORS 475. The urban renewal agency addresses its mission by capping the total assessed value of all properties within the boundaries of its purview, allowing a fixed amount of tax revenue to flow to tax authorities in the boundaries while accruing any excess tax revenue to fund its redevelopment activities, as shown in Figure 1 (Brimmer & Fitzgerald, 2019, pp.
Thus, the agency is incentivized to engage in activities that maximize return on investment and grow the tax base by increasing property values in the targeted area, with the aims of eliminating blight and revitalizing the local economy. These activities include condemning derelict or dilapidated properties, funding infrastructure projects such as streetlights and water mains, partnering with 5 property developers to build new housing units, environmental cleanup, offering incentives to attract employers to the area, and sponsoring grants to encourage new businesses to open. Eventually, if the efforts at economic revitalization are successful, the agency is dissolved and the frozen tax revenue cap is removed, yielding significantly more revenue to the taxing authorities than was foregone during the period of urban renewal (Tax Increment Finance Best Practices Reference Guide, 2007). Figure 1 Annual Taxes Generated ($) Incremental Tax Revenue (to UR agency) New Tax Base (to taxing authorities) Frozen Tax Base (to taxing authorities) URA Begins URA Ends Years Adapted from Tax Increment Finance Best Practices Reference Guide (2007, p.
2) 6 Literature Review Tax Increment Financing An urban renewal agency’s activities are expected to spur economic revitalization that would not occur “but for” a public intervention in the private market (Dye & Merriman, 2000, p. Therefore, it can be understood to be correcting a market failure in the form of under- provisioned public goods (Brueckner, 2001). However, this raises concerns of opportunity costs, unintended consequences, and perverse incentives. For example, this type of market-oriented redevelopment rarely results in direct displacement of residents in the area via eminent domain; rather, rising property values and changing neighborhood characteristics may indirectly result in the displacement of residents through gentrification.
This is a concern among practitioners of urban renewal in the state of Oregon (Best Practices for Tax Increment Financing Agencies in Oregon, 2019, pp. 12-17), but there is little in the way of empirical research that directly ties TIF to higher rates of displacement or housing insecurity. Brueckner (2001) demonstrates the qualities of TIF as a mechanism for provisioning public goods while sidestepping local opposition to property tax increases, concluding that it is effective in doing so only if the public good is moderately or severely under-provisioned (i., the area is sufficiently blighted). However, the TIF intervention is not necessarily efficient and may result in over-provisioning of the public good beyond the socially optimal level.