Measuring Land Value Increments from Public Action

The 2008 housing crisis significantly impacted the housing market in Detroit, leading to a sharp rise in property abandonment. In response, the Detroit Land Bank Authority (DLBA) launched a public auction program in 2014 aimed at rehabilitating vacant homes and returning them to residential or productive use. By reducing negative externalities, this public intervention had the potential of increasing the value of nearby properties. For this increase to be considered value capture, a direct link must be demonstrated between the intervention and the rise in land value (Cho et al., 2022). Moreover, such private benefits may partially finance the public action, promoting efficiency and equity (Korngold, 2022).

This study evaluates the impact of the auction program on land value, identifying the portion of the effect attributable to the public intervention. Buffers were created around auctioned properties to assess neighborhood-level effects, and the synthetic control method was used to build property-specific counterfactuals and capture heterogeneous impacts. Results indicate that, on average, the auction program positively affected neighboring property prices. However, the impacts were not uniform: spatially heterogeneous effects were observed, including significant price declines in certain treated neighborhoods.