Green Days

by Jonas Raab

The Wharton School's real estate department is putting dollar figures on the financial cost of allowing neighborhoods to slip into disrepair. Their study, titled "The Determinants of Neighborhood Transformation in Philadelphia—Identification and Analysis," has also determined precisely why it's fiscally wise to revitalize blighted areas. Specifically, researchers found that investing in greening and land management can increase property values by as much as 30 percent. Even planting a tree out front has a wallet-filling impact. Susan M. Wachter, the study's author and the Richard B. Worley professor of management at the Wharton School, says the efforts, which were supported by the William Penn Foundation, are unprecedented.

"For the first time, utilizing new technology that included the satellite Geographic Information System, spatial regression models and econometrics, we were able to measure the steady impact of greening," says Wachter, who is also a professor of real estate finance and city and regional planning. "Philadelphia is at the forefront of using place-based policies to transform cities from decline to vibrant health."

The study's first public report, which focused on Kensington, was issued earlier this month. While its thesis wasn't groundbreaking—blocks with many unmanaged vacant lots meant lower home prices—it was able to pinpoint precisely how much specific improvements boosted property values.

Trees increased property values by 10 percent, while people living next to vacant lots that had been revitalized stood to gain 64 percent.

"Cleaning up vacant lots and investing in quality green spaces is one of the most effective ways to build thriving communities, enhance the quality of life and make Philadelphia one of the most desirable places to live, work and do business," says Patricia Smith, director of the city's Neighborhood Transformation Initiative.

Kensington was helped by a recent land-management initiative that saw the Pennsylvania Horticultural Society (PHS) work with the New Kensington Community Development Corp. to clean up vacant lots. In all, improvements in the study area boosted property values by $12 million.

"We were always convinced that greening has a tremendously positive impact on communities," says J. Blaine Bonham Jr., PHS executive vice president. "The Wharton findings begin to validate the true impact in dollars and cents."

As Wharton prepares to issue more findings in January, Wachter says the results can also be applied to other U.S. cities.