The City of Detroit, once the symbol of industrial prosperity, is an example of a declining city. Urbanized areas that have experienced population loss, reduced employment opportunities, and continued economic decline. For decades, these cities have been in a downward spiral characterized by deteriorating infrastructure and urban residential decay. "Is Detroit Dead?" asked Peter Eisinger in his 2014 essay. In this dissertation, I provide a partial answer to that question and show that Detroit is not dead, but rather in transition. By examining the city's urban policies and their impact on the housing market, I illuminate Detroit's potential for urban renewal and offer important insights into the successes and failures of these efforts, as well as possible alternatives to property taxation. The city's efforts serve as a case study for other shrinking cities around the world.In the first essay, titled “Impact of Demolitions on Neighboring Property Values in Detroit”, I evaluate the impact of demolitions on neighboring property values using a Repeat Sales (RS) regression approach. The Detroit Demolition Program began in 2014 and has since demolished more than 20,800 properties at a cost of over $250 million. In addition, the city demolished 11,400 buildings containing hazardous materials such as asbestos from 2009-2015. I use information on property sales prices from 2009 to 2019, and information from the 2009 Detroit Residential Survey to differentiate by the level of dilapidation prior to the start of the program. I find that, on average across the city, the removal of disrepair through the demolition program does not appear to have affected residential transaction prices. However, when I differentiate the effect by the ex-ante characteristics of the properties, I find that the demolitions have a positive effect on property prices in areas where there was a low level of decay prior to the demolitions. In the second essay, titled “Revitalization in Shrinking Cities: Impact of the Neighborhood Stabilization Program in Detroit”, I evaluate the effectiveness of the Neighborhood Stabilization Program (NSP) in terms of housing valuation, foreclosure decline, and rehabilitation projects. The Great Recession led to the largest housing market collapse in US history. During this time, many homeowners suffered the consequences of the crisis, accumulating unpaid property tax bills and foreclosures. This problem was concentrated primarily in cities that were experiencing long-term economic decline, such as Detroit. In an effort to address the housing crisis, Congress provided funding for emergency assistance to rehabilitate abandoned and foreclosed homes under the NSP, a $7 billion program. In Detroit's case, nine neighborhoods were identified as those most affected by the housing crisis. Overall, the results indicate that the NSP had a stabilizing effect on the housing market in treated neighborhoods, preventing further declines, but did not stimulate pronounced revitalization. In the third essay, titled “Valuing Land in Detroit Using the Option Value Approach”, I present empirical evidence for the option value of residential properties in Detroit and use this to estimate their land values. This is particularly relevant as Detroit considers adopting a split-rate property tax (City of Detroit, 2023), a policy where land is taxed more than improvements, known for its efficiency and equity benefits. Using the option value technique, a novel approach in land valuation, I analyze data from the Zillow ZTRAX database and employ land use intensity variables to construct hedonic models incorporating option value. This method, which considers the relative volume of the structure of the property, reveals that option value positively correlates with property depreciation, increasing sales prices significantly. These findings not only offer a new perspective in measuring option value but also demonstrate the importance of including it in land value assessments, particularly for higher-priced properties, to avoid underestimation.
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