What helped cities recover: UW economist awarded $450,000 MacArthur Foundation grant to find out

November 18, 2013

Contact: Andrew Reschovsky, (608) 332-8252; (617) 503-2129; Reschovsky@lafollette.wisc.edu

MADISON—Some cities did better than others at recovering from the housing market collapse and the Great Recession in the late 2000s. Sorting out which policies worked best will become clearer thanks to a $450,000 two-year grant won by Andrew Reschovsky, an Institute for Research on Poverty (IRP) faculty affiliate and La Follette School of Public Affairs economist at UW–Madison.

The MacArthur Foundation awarded the grant to Reschovsky and fellow principal investigators Howard Chernick of Hunter College, who also is an IRP faculty affiliate, and Sandra Newman of Johns Hopkins University. It was one of six grants awarded from a pool of more than 300 proposals.

"The collapse of the housing market, combined with the Great Recession of 2007–2009 and the sluggish recovery, have had substantial consequences for the fiscal health of the nation's largest central cities," Reschovsky says. "We will explore the linkages between changes in housing prices, foreclosures, and other developments in the housing market, as well as the fiscal problems facing 112 large central cities. We anticipate we will identify which fiscal and housing policies enabled these central cities to recover most quickly."

They also will investigate how fiscal decisions of cities in response to the pressures engendered by the housing market collapse affected their ability to promote safe and attractive neighborhoods and well-functioning housing markets.

Previous work by two of the PIs identified substantial lags between changes in housing prices and changes in tax revenue. This project builds on that work using data through 2012 and richer data on central city housing markets. The research will offer new insights into the importance of housing to city public finances, which, in turn, are vital to a well-functioning housing market, particularly for lower-income residents. (See more at: http://www.macfound.org/press/press-releases/macarthur-awards-28-million-support-research-how-housing-matters/#IRP.)

The research will build on the concept of fiscally standardized cities (FiSCs) that Reschovsky and Chernick developed with Adam H. Langley of the Lincoln Institute of Land Policy. FiSCs are a comprehensive accounting of all revenues and expenditures of each central city municipal government and of the portion of independent school districts, county governments and special districts that overlay municipal boundaries.

With the new grant, Reschovsky, Chernick and Newman will construct a database that adds detailed housing, economic and demographic data to the fiscal data for 112 of the nation's largest central cities.

"We will use these data to explore relationships between changes in the housing market and changes in property tax revenues, and between housing market developments and the pattern of government expenditures in FiSCs," Reschovsky says. "We expect the results to be of great interest to local, state and federal government officials, as well as non-profit and private-sector organizations interested in the well-being of city residents and the vitality of central city housing markets."

—Deborah Johnson