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Distressed Properties and Crime in Durham, North Carolina: Revisited by Brian Luo

Following the Great Recession and housing crisis from 2007 to 2009, the United States experienced widespread rates of foreclosure, among other economic turmoil. During this time, new research dedicated to determining the relationship between foreclosure rates and crime rates began to emerge, as researchers and policymakers alike wanted to understand the negative externalities of the falling economy and of the rising foreclosure rates specifically. While there have been a number of studies completed across the country since then, research on the relationship between foreclosure and crime has yet to provide a strong empirical basis for further analysis.

As a result of the relative lack of research, many cities throughout the United States (and abroad), such as Durham, North Carolina, lack a solid foundation on which to model foreclosure and crime relationships. Through this current study, I hope to expand on my previous study and continue analyzing data related to distressed homes in Durham and data related to crime around the sampled homes over the three years from 2012 to 2014. By expanding this study to cover multiple years, I aim to specifically analyze the relationship between crime and a property during the various stages of distress.

Literature Review

The housing crisis that swept the U.S. during the Great Recession contributed to the perceived need to study cities and neighborhoods that have been hit the hardest by poor economic conditions related to foreclosure. Unfortunately, many results of these studies have been inconclusive and mixed. Adding in large part to the confusion is the inconsistency across studies in the units of analysis, definitions and measures of foreclosure and distressed properties, and analytical strategies needed to link these economic events to crime rates (Baumer et al. 2012).

To examine the relationship between foreclosure and crime in a variety of major U.S. cities, Baumer et al. employ foreclosure rates as the primary independent variables and focus on incidents of robbery and burglary as the primary dependent variables. Controlling for neighborhood and prior-crime variables, the researchers found that there was a significant variability across cities. In addition, Baumer et al. find different patterns for their two dependent variables. With respect to robbery, the results suggest that foreclosure is more strongly related to robbery in cities with higher levels of socioeconomic disadvantage and lower overall levels of foreclosure. On the other end, higher rates of foreclosure are more closely associated with higher burglary rates, in addition to other factors such as a shrinking police force and little new housing.

In a similar vein, Katz et al. (2011) focus on the drivers of policy that come from foreclosure-crime research. Namely, the researchers were interested to understand whether and how long foreclosure causes crime rates to rise. Bringing in the context of the most recent U.S. housing crisis, the authors examine whether there is a linear and crisis-specific effect of foreclosure on neighborhood levels of crime and also examine whether there was a time lag in the impact of foreclosure on neighborhood levels of crime. Regarding the first objective, Katz et al. suggest that foreclosed homes may not have long-term negative impacts on crime in a given metropolitan area. Instead, their results show that foreclosure has a short-term impact, typically no more than 3 or 4 months. On the second objective, the authors find that the relationship between the housing crisis and increases in crime are not linear, but rather are characterized by short-term fluctuations.

Jones and Pridemore (2012) contribute to existing research by providing city-level analysis that incorporates nearly 150 major metropolitan areas from across the country. Their approach focuses on data from 2006 forward, so as to capture the trends of foreclosure and crime throughout the period of the Great Recession and in to its aftermath. Jones and Pridemore’s approach differs from previous research in one important aspect: instead of using foreclosure rates as the primary independent variable in their study, the authors instead elect to employ a new indicator, the Housing-Mortgage Stress Index (consisting of three variables: negative equity, loan-to-value ratio, and the monthly mortgage cost-to-income ratio), to capture a more complete and accurate set of information about foreclosure-associated economic stress in a city. Using the Housing-Mortgage Stress Index as the main independent variable, the authors’ results suggest that the housing crisis is not associated with metropolitan rates of serious violent and property crime.

Unlike the previous three teams of researchers, Ellen et al. (2013) employ point-specific and longitudinal crime and foreclosure data to understand the relationship between foreclosure and crime in New York City. Their study uses blockfaces – individual street segments, including properties on both sides of the street – to compare the changes in the crime level of a given blockface before and after homes on the blockface enter foreclosure with the changes in the crime level of a different blockface in the same neighborhood that did not experience a change in foreclosure activity during the same time period. The researchers reason that, as crime trends are likely to be the same along different blockfaces in the same neighborhood, their difference-in-difference model can identify whether foreclosures lead to higher crime rates. They also include estimates that control for future foreclosure notices on a blockface, through which they hope to capture the unobserved trends between blockfaces where foreclosures tend to occur and those where they do not. Their results show that foreclosures on a blockface lead to a small number of additional crimes, with the largest effect on the rate of violent crimes. Furthermore, their results suggest that the effects are largest for foreclosed properties that go all the way through the foreclosure process to an auction. The researchers also note that their methods do not allow for results to determine the net changes in the overall crime in a city, only changes in new crimes around the localized area of a foreclosure.

Similarly, Cui and Walsh (2015) focus on understanding the effects of a given foreclosure on crime levels in the immediate vicinity of properties in Pittsburgh, Pennsylvania. They pay special attention to identify the separate impacts of foreclosure duration and vacancy on the rate of crime observed. Cui and Walsh are unique in defining treated neighborhoods as a 250-foot buffer surrounding each foreclosed house, and they define control neighborhoods as an equal area donut surrounding this buffer, which is the area from 250 feet to 353 feet away from the given property. They elect to use these neighborhood definitions to more specifically lessen concerns regarding the common trends assumption when dealing with larger neighborhood definitions. Their results suggest that the foreclosure process can lead to significant increases in violent crime rates within 250 of the property. In addition, the results suggest that crimes associated with foreclosure do not occur during the early stages of foreclosures, but instead by the vacancies that are associated with the foreclosure process. The impact of vacancy on crime increases when the property stays vacant for longer periods, with effects plateauing between 12 and 18 months of vacancy. Their results also suggest that once a home is reoccupied, the crime impacts of the recent vacancy are reduced.

Criminal Activity in Durham

Despite the housing crisis and Great Recession from 2007 to 2009, the total number of crimes per capita in Durham has been trending steadily downward from 2000 to 2014. Looking only at the trend in Figure 1, it would be very difficult to predict any type of economic turmoil around 2007-2009, given the consistent decline in crime rate. However, from 2012 to 2014, the total number of crimes per capita have leveled off slightly, decreasing about 5.9% from 2012 to 2013, but then rising about 12.0% from 2013 to 2014 (which equates to about a 5.4% increase from 2012 to 2014).

bl1Figure 1: Durham crime per 100,000 residents, from 2000-2014

While crime levels appear to be dropping overall since 2000, property crime (defined here as the combination of larceny and burglary) continues to be the type of crime most committed in Durham since 2000, representing at least 80% of the total number of crime incidents in from 2012 to 2014 (see Figures 2-5). Violent crime (defined here as the combination of assault and robbery) is observed in a much smaller proportion, representing from 12-14% of total crime in each of the years from 2012 to 2014.Larceny, which includes any type of theft offense, constitutes over half of the total number of crime incidents from 2012 to 2014. Burglary, which includes any breaking and entering offenses, constitutes over a quarter of the total number of crime incidents during this time period, second only to larceny. The next two most frequent offenses – aggravated assault and robbery – trail significantly, comprising only 8-9% and 5% of total crime incidents, respectively, in the three-year span.

bl2 bl3 bl4Figures 2-5: Durham crime by number of incidents, from 2012-2014

Methodology and Data

Similar to my previous study, I use the Real Property Delinquent Taxpayer list from the Durham County Tax Collector to randomly select 35 delinquent owners and their properties in Durham city. For selection in to the sample, the property must have at least three consecutive years of unpaid (as opposed to partially paid or fully paid) tax bills. The intuition behind this decision is that homes with multiple consecutive years of unpaid bills will be most likely foreclosed by Durham county for failure to pay property taxes; therefore, the homes will be the most distressed.

For each address obtained, I use the Crime Mapper tool from the Durham Police Department (see Figure 6) to show the number of nearby crimes of assault, burglary, larceny, and robbery from January to December in each of the three years from 2012 to 2014. By including data from 2012-2014, I hope to capture the trends in crime over the life of a distressed property. Since most of the sampled properties have been delinquent for exactly three years, the addition of a time characteristic to the data set can provide an understanding about crime rates around a property throughout the distress process.

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Figure 6: Example of crime mapping tool, Denfield Street property

Results from the Crime Mapper, similar to the previous study, are limited and recorded first within a 500-foot radius (which I label the “inner zone”) of the distressed property and then within a 1,320-foot (1/4-mile) radius (which I label the “total zone”)of the distressed property. While the Crime Mapper is also capable of providing crime information within a 1/2-mile radius of a given property, I elected to forgo collecting the 1/2-mile data, as results from this distance were unhelpful for showing the relationship between a distressed property and nearby crime under the assumptions of uniform and random distribution. In each of the first few cases collected at this distance, the numbers of total incidents of crime observed were too low to produce meaningful estimates. Given that a circle with a 500-foot radius has an area that is about 3.6% of the area of a circle with a 1/2-mile radius, there must be at least 28 observations of crime in the larger area to yield a random estimate of at least 1 crime in the inner zone. This means that for each type of crime, any 1 incident within the inner zone would be categorized as “above expected” if there were fewer than 28 incidents in the 1/2-mile radius circle, which holds true for the majority of the sampled properties. Thus, I have chosen to continue calculating the number of observed crime incidents within the inner zone with the number of observed crime incidents within a 1/4-mile radius total zone.

Assuming a distressed property is not a hub for increased crime and that crime is uniformly and randomly distributed within the total zone without the influence of a distressed property, I aim to compare the number of observed crimes in the inner zone with the number of observed crimes in the total zone. Given the radii of the inner and total zones and assuming that the areas of focus are perfectly flat and circular, a quick calculation shows that the area of the inner zone is roughly 14.3% of the area of the total zone. Given the number of crimes in the total zone and the relative sizes of the inner and total zones, I then calculate the average number of crimes expected within the inner zone, given uniform and random distribution (i.e., without the concentrating “pull” of a distressed property in the center).

Taking the “expected” number of crime incidents in the inner zone, I then compare the number of expected incidents with the number of observed incidents. If the number of observed crimes is higher than the number of expected crimes for more properties than not, then there might be evidence to support the hypothesis that the presence of a distressed property is associated with more crime. However, if the number of observed crimes is lower than the number of expected crimes for more properties than not, then there might be evidence to reject the same hypothesis.

In discussing the results, I will define a property as “above expected” (AE) if the observed number of crimes within the property’s inner zone is above the estimate given by the property’s total zone. For example, if a property’s total zone estimates an expected 1.87 burglary crimes in 2014 in the property’s inner zone, and the observed number of crimes is 3, then we can categorize this property as an AE property with respect to burglary in 2014. The AE designation of a property is dependent on both the type(s) of crime and the time period specified.In general, if the number of AE properties rises from 2012 to 2014, there might be evidence to suggest that crime rates rise as homes become more distressed or remain equally as delinquent.

Results and Discussion

Among the 35 sampled properties over the three years from 2012 to 2014, a total of 5,672 crime incidents were observed, with total crime falling from 1,824 in 2012 to 1,771 in 2013 and rising back to 2,077 in 2014 (see Table 1). With respect to the distribution of crime between the four types – assault, burglary, larceny, and robbery – used in this study, the observed crimes were directionally representative of the annual distribution of crime in Durham overall.Larceny, consistent with the citywide distribution, was the type of crime most observed in this sample, followed by burglary, assault, and robbery. While assault was observed in a slightly smaller proportion to burglary in this sample, it is noteworthy that the proportion of assault incidents in this sample is much higher than that of Durham overall. Over the three years covered in this study, assault makes up about 23.3% of this sample, but only about 8.5% of Durham crime (as a percentage of total assault, burglary, larceny, and robbery incidents total). This finding, while notable for showing disparities between this sample and Durham overall, is also consistent in this sample for each of the three years observed.

In terms of the number of “above expected” (AE) properties found, more interesting patterns arise when analyzing results over the three years. With respect to all crime incidents reported in a given year, the number of AE properties has been fairly consistent from 2012 to 2014 (see Table 2). This trend is also true of AE properties with respect to reported incidents of assault and larceny in each of the three years.

With respect to burglary and robbery, the numbers of AE properties were much less consistent. The number of AE properties in burglary increased from 15 in 2012 to 19 in 2013 and 2014, while the number of AE properties in robbery decreased dramatically from 12 in 2012 to 4 in 2013 and 6 in 2014 (see Table 3). Recall that, as a result of the selection criteria for this sample, most of these properties have been in delinquency and distress for exactly three consecutive years. The change in the number of burglary and robbery-related AE properties can possibly fit in to the distressed narrative of these properties: as a property becomes more financially distressed, the property can become more neglected, which could provide more opportunities for breaking and entering type crimes. In Durham, breaking and entering is categorized as a burglary, which could explain the increase in the number of burglary-related AE properties from 2012 to 2014.At the same time, as a property becomes more neglected, it may be more likely that the property will be vacated or abandoned. With fewer people in and around the property itself, there may be fewer people to target in a robbery. The presence of fewer people also decreases the likelihood of having witnesses who can report crimes, which would also affect the number of observed robberies (though this works against the increased observation of burglaries).

While these intuitions about the crime behavior around distressed properties can help begin to uncover the underlying mechanism responsible for these changes in observations and the change in the number of AE properties, they do not help explain the relatively smaller change from 2013 to 2014 (when compared to the change from 2012 to 2013). With respect to robbery, the number of AE properties drops dramatically from 12 in 2012 to 4 in 2013, but rises slightly to 6 in 2014. While the change is significant within the sample, it is also important to note that, in 2013, the Durham Police Department reports that the number of robberies were at a 23-year low in 2013. What remains unclear is whether this change is due to changes in prevention tactics, reporting policies, the climate of crime and criminals, or something else entirely.

In considering all of these results, it is also important to note that results are based on crimes that must first be observed by a witness, and then reported and filed by the Durham Police Department. Clearly, it is unreasonable to assume perfect crime observation within any given area, but as mentioned before, the inability to observe and report crime may be increased in areas of high home distress or foreclosure. This is consistent with the idea that distressed and foreclosed homes result in temporary (or sometimes permanent) decreases in the population of the immediate area, particularly within the defined inner zone of 500 feet around a property. Additionally, the crime data used in this study do not completely account for cases in which a crime is catalogued under multiple types. Inclusion of these results affects interpretations about the distribution of the crime types that are observed within a given area.

For improvement on this study in the future, additional research that compares the results of this study to a sample of properties in good financial standing may highlight differences in the level of AE properties found. Further research can also improve upon this study by following the sampled properties throughout the process of foreclosure to monitor the changes in crime levels. Continuing in research similar to the work of Cui and Walsh (2015), this type of research would provide further insight in to the crime behaviors near a foreclosed property through vacancy and re-occupancy. Unfortunately, studies such as these are limited by data related to specific foreclosed properties in Durham (and other cities). In terms of policy implications, understanding the relationship between crime and a property throughout its foreclosure lifecycle can help shape legislated foreclosure programs and processes to mitigate the increasing rates of crime.

Conclusion

To begin understanding the relationship between property distressed and nearby crime in Durham, North Carolina, this study used publicly available data to map incidents of observed crime from 2012 to 2014 on a sample of distressed properties. Analyzing crime over each of the three years, the study took data related to incidents of larceny, burglary, assault, and robbery to determine an expected number of crimes within an inner zone, representing a 500-foot circle around the property, and compared these figures with the number of observed crimes.

During the three years overall, results showed that the number of observed crimes is higher than the number of expected crimes with respect to only burglary, while the same is untrue for assault, larceny, and burglary. However, with respect to burglary and robbery, there were more dramatic shifts in the number of AE properties from 2012 to 2013, which could reflect a number of factors including the criteria and opportunity for reporting. Ultimately, this study can serve as the foundation for further research, given additional data related to the foreclosure process and crime behaviors of Durham properties.

References

Baumer, Eric P., Kevin T. Wolff, and Ashley N. Arnio, 2012, “A multicity neighborhood analysis of foreclosure and crime,”Social Science Quarterly 93(3), 577-601

Cui, Lin, and Randall Walsh, 2015, “Foreclosure, vacancy, and crime,” Journal of Urban Economics 87, 72-84

Durham County NC, Real Property Delinquent Taxpayer List, Accessed Durham 18 March 2015, http://www.ustaxdata.com/nc/durham/durhampolicy.cfm

Durham Police Department, 2014 Annual Report, Accessed Durham 18 March 2015, http://durhamnc.gov/ich/op/DPD/Documents/2014AnnualReportMarch2.pdf

Durham Police Department, 2013 Annual Report, Accessed Durham 15April 2015, http://durhamnc.gov/ich/op/DPD/Documents/2013AnnualReport.pdf

Durham Police Department, 2012 Annual Report, Accessed Durham 15April 2015, http://durhamnc.gov/ich/op/DPD/Documents/2012AnnualRepor0301FINAL.pdf

Durham Police Department, Crime Mapper, Accessed Durham 18 March 2015, http://gisweb.durhamnc.gov/gis_apps/CrimeData/dsp_entryform.cfm

Ellen, Ingrid G., Johanna Lacoe, and Claudia A. Sharygin, 2013, “Do foreclosures cause crime?,” Journal of Urban Economics 74, 59-70

Jones, Roderick W., and William Alex Pridemore, 2012, “The Foreclosure Crisis and Crime: Is Housing‐Mortgage Stress Associated with Violent and Property Crime in US Metropolitan Areas?,” Social Science Quarterly 93(3), 671-691

Katz, Charles M., Danielle Wallace, and E. C. Hedberg, 2011, “A longitudinal assessment of the impact of foreclosure on neighborhood crime,” Journal of Research in Crime and Delinquency 000(00), 1-31

Figures and Tables

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Figure 1: Durham crime per 100,000 residents, from 2000-2014

The figure depicts the trend of violent and property crimes since 2000 in Durham, notably showing the overall downward trend (despite the economic shocks of 2007-2009), though property crime continues to occur more frequently than property crime.

Durham Police Department, 2014 Annual Report

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Figures 2-5: Durham crime by number of incidents, from 2012-2014

The figures depicts the breakdown of the six most frequent types of crime from 2012-2014, showing that the property crimes of larceny and burglary have consistently total for about 80% of total crime for each of the last three years.

Durham Police Department, 2012 Annual Report, 2013 Annual Report, and 2014 Annual Report

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Figure 6: Example of crime mapping tool, Denfield Street property

The figure depicts the results from the Crime Mapper tool available publicly online by the Durham Police Department. For a given address, the tool maps incidents of crime that can by a variety of criteria, including distance, time period (up to 12 months), and type of crime.

Durham Police Department, Crime Mapper

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Table 1: Observed crimes in sample by type

This table shows the number of observed crimes by type in each of the three years from 2012 to 2014, along with the percentage of each type observed within a given span of time.

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Table 2: Expected number of crimes within 500 ft. of distressed properties, given number of crimes observed within ¼ mile, total totals from 2012-2014

This table shows the number of expected crimes within the inner zone by type of crime. Data points bolded in red text and highlighted pink represent cases in which the number of observed crimes is higher than the number of expected crimes for a given property. Data points in green text represent the opposite. Data points with grey text had zero total observations for the given property.

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Table 3: Expected number of crimes within 500 ft. of distressed properties, given number of crimes observed within ¼ mile

This table shows the number of expected crimes within the inner zone by type of crime. Data points bolded in red text and highlighted pink represent cases in which the number of observed crimes is higher than the number of expected crimes for a given property. Data points in green text represent the opposite. Data points with grey text had zero total observations for the given property.

Effects of Grocery Store Openings and Closings on Durham Housing Prices by Li Ding

Introduction and Background

Extending my previous work, this paper explores the effects of opening and closing food retail stores on nearby housing prices in Durham, North Carolina. While the opening of a new grocer provides nearby residents with increased access to food and other goods, the full economic impacts of new stores are not always clear. In particular, there is often resistance to larger retail stores like Walmart being opened in a neighborhood, with arguments that a new supercenter will negatively affect local businesses and wage levels. Additionally, increased traffic, crime, noise pollution, and so on are also potential concerns regarding new stores. As such, it is not apparent how, if at all, new stores affect nearby home prices. Changes in housing prices can be used as a signal to evaluate these various competing effects and so the results of this study will help Durham residents and government officials evaluate whether to support or oppose new stores in their local areas.

Pope and Pope (2014) examined the effects of opening a Walmart on nearby home prices from 2000 to 2006, and this paper will use a similar framework to their study. Using a difference-in-differences specification, the authors found that houses located within 0.5 miles of a new Walmart saw an increase of 2-3 percent in sale price in the following two and a half years, and houses 0.5 to 1 mile away saw a 1-2 percent increase. These results would suggest a positive impact for new stores in Durham as well, though the authors are careful to note that their results only reflect a national average.

Publicly available home sale data for Durham extends ten years back (to 2005), so this study will analyze store openings and closings that have occurred in that time frame. This includes Walmart, Harris Teeter, TROSA Grocery, ALDI, and Save-a-lot stores. Stores like Target and Food Lion are not included in the study because their newest stores were opened 2004 or earlier.

Housing Data

This paper analyzes data provided by the Durham County Tax Administration on home sales in Durham, NC. Through the county’s online record search, I collected the electronic summary record of each single-family residential home sale in Durham since 2005, the earliest year for which data is provided. These searches yielded approximately 27,000 results, and an Excel VBA macro was used to access the details page for each sale and record characteristics of the property (bedrooms, bathrooms, and so on). This data were filtered to remove a small number—around one percent—of entries with incomplete information.

Next, I used the Rest-CSV interface provided through Geocoder.us to find the longitude and latitude of the homes in the dataset. A macro was written to query the Geocoder.us servers and record the geographic coordinates for the homes included in the service’s dataset. Geocoder.us uses TIGER/Line street and highway information provided by the US Census Bureau from 2004, and as a result, not all the addresses were able to be geocoded. Approximately 10,000 of the 27,000 home sales were not able to be located on the 2004 TIGER/Line maps; these are homes that were built on streets that did not exist a decade ago. This introduces a significant potential for bias in the data, and a re-examination of this paper’s analysis with fully geocoded data may prove insightful. Summary statistics for the full and geocoded datasets are provided below.

Table 1: Summary statistics for the full and geocoded datasets

li_table_1

As expected, the geocoded dataset contains homes that are older, and as a result this reduced dataset contains homes with a lower average sale price, heated area, number of bedrooms, and number of bathrooms. The below graph and table show the data in both datasets distributed by sale year, both in terms of absolute sale numbers and as a percentage of the overall dataset.

Figure 1: Distribution of sales by year for the full and geocoded datasets

li_figure_1

Table 2: Distribution of sales by year for the full and geocoded  datasets

li_table_2

Even though the geocoded dataset skews older and cheaper, the proportion of sales occurring in each calendar year is still roughly the same as the full dataset, indicating that the geocoded dataset is still very similar temporally to the full dataset. The effects of the subprime mortgage crisis on Durham home sales can be seen in both datasets; sales in 2008 and the years following are clearly depressed compared to 2005 through 2007. There is also evidence for a strong recovery in the past few years, and 2014 sales were at approximately the same level as the 2006 and 2007 peak.

We now run a hedonic regression on the logarithm of sale price for the geocoded data to examine the dataset. The regression used is below:

li_eq_1The sale price, heated area (in square feet), and bedrooms term are straightforward. The β3 is for the “bedroom/bathroom differential” which is the absolute value of the number of bedrooms minus the number of bathrooms for a house. This was motivated by a model developed by the National Association for Home Builders (NAHB) that aims to estimate home values. As Emrath (2006) describes, their data indicated that home buyers tend to prefer a rough balance between the number of bedrooms and the number of bathrooms. If a home has more bedrooms than bathrooms, an additional bathroom will increase the value of the home by a higher percentage than if the differential were smaller. The β4 is associated with a dummy variable for whether a property has a garage or not. The results of this regression are below.

Table 3: Regression on the geocoded dataset

li_table_3

The p-values for each of the variables is virtually zero. All else equal, an additional bedroom will add 15.3% to a home’s value and a garage will add 13.4%. The previously discussed bedroom/bathroom differential shows a fairly strong negative effect as expected. The NAHB model predicted that an additional full bath would add approximately 20 percent to a home’s value which is very consistent with the derived 19.8%. Heated area is measured in square feet and so an additional square foot has a very small positive effect as would be expected.

To make sure that there were no abnormal price trends present in the dataset, I established a price index using the data. This index is graphed below along with the Case-Shiller national home price index and the Case-Shiller home price index for Charlotte, NC, the nearest metropolitan area to Durham for which an index is provided. For each month, the Durham index is calculated as the average price per square foot of single-family residential home sales in the past three months; the Case-Shiller indices use a three-month moving average as well. The Case-Shiller indices use repeat sales of the same home to track changes, but the Durham market is not large enough to create an accurate index using this same method. As seen in the graph below, however, the price per square foot measure for Durham roughly approximates the Case-Shiller indices, suggesting that Durham home values have followed the same trends as other North Carolina cities (Charlotte) and the nation as a whole. It should be noted that it is merely a coincidence that the Durham index is similar in magnitude to the Case-Shiller indices.

Figure 2: Indices for home prices

li_figure_2

Store Data             

This study analyzes the effects that the openings and closings of Walmart, Harris Teeter, TROSA Grocery, ALDI, and Save-a-lot grocery stores have had on nearby housing prices. The locations to be examined are listed below along with relevant dates. Other grocery stores can be found in Durham today, but the previously listed stores are the ones who have opened or closed stores in the past decade. These locations were manually geocoded using Bing Maps.

Table 4: Locations to be studied and relevant dates

li_table_4

Methodology

The distance between each home and store was found using the Haversine formula which gives the great circle distance between two points on a sphere:

li_eq_2where

d = the distance between the two points

r = the radius of the Earth (3961 miles)

lat1, lat2, long1, long2 = the latitudes and longitudes of the two points

Borrowing from Pope and Pope (2014), the hedonic regression used was:

li_eq_3

The logarithm of the sale price of a home can be explained through its property characteristics as previously defined and its geographic relation to a given store. Three indicator variables (D0.5, D1, D2) represent whether the given house is within 0.5 miles of a store, between 0.5 and 1 mile, or between 1 and 2 miles, and whether the home is between 2 and 4 miles away is the omitted indicator. Holmes (2011) in his research on Walmart considered a radius of two miles to properly constitute a store’s neighborhood, and this study will do the same for all the stores. The last group of homes 2 to 4 miles away will act as a control group for the homes inside the neighborhood that we are interested in examining.

The variable Post represents whether the sale occurred after the opening or closing of the given store. A sale occurring before the relevant date will have the relevant indicator (D0.5, D1, D2) set to 1, and the interaction between the Post term and the indicator variables inside the parentheses will lead to the corresponding indicator becoming zero. A sale after the relevant date will have both indicator variables at 1, and so the estimates for the second set of spatial estimators ( ) will provide information on whether the store impacted housing prices. This study uses home sales two years before and after each store’s opening or closing.

The difference-in-differences specification is used in order to remove the effects of omitted time-invariant variables that could bias estimates. Comparing homes sold before and after the store opening or closing allows one to more safely disregard neighborhood characteristics that would influence housing prices since these characteristics should more or less influence both the pre and post home sales in the same way. Holmes (2011) created and argued for a model in which Walmart stores are not placed based on characteristics of the nearby markets but rather on distribution and shipping costs. This would imply that the less than two and two to four mile ranges should be similar enough to properly control for broader housing market trends. For time-related variables, Figure 2 presented previously shows that the price per square foot for single-family residential homes in Durham has remained within a $20/sqft range for the past decade. While this is not an insignificant fluctuation, this index shows a reasonably flat trend as a whole so it is unlikely that including time-related variables would significantly influence the analysis.

Results

Walmart

The results for the first Walmart store located at 1010 Martin Luther Jr Pkwy showed a positive 14.4% effect on homes 0.5 to 1 mile away and positive 8.3% effect on homes 1 to 2 miles away after the store was opened. The Walmart store located at 1525 Glenn School Rd showed no significant effects at any distance, both before and after the store opened. This means that the Walmart was placed into a neighborhood which was similar price-wise to its surrounding area and that the opening of the Walmart did not influence nearby prices. It should be noted that this Walmart featured fewer home sales in its relevant subset of the dataset; its opening was in 2009 during the housing crisis when fewer homes were being sold, and it is located in the northeastern part of the city which is less dense. This Walmart had 1343 sales within four miles in its four year window compared to 2281 for the first Walmart store. This smaller dataset perhaps contributed to the lack of significant coefficients found in the regression.

The Walmart store at 3500 Roxboro Rd closed around the same time the previous Walmart opened. Before the closing, homes 0.5 to 1 mile away sold for 12.4% more than homes 2 to 4 miles away and homes 1 to 2 miles away sold for 23.0% more. The coefficients associated with the post-closing indicator variables were not statistically significant, so the closing of the store did not change nearby housing prices from the previous baselines. Only one of the three Walmart stores openings/closings in Durham caused nearby housing prices to change, indicating that the positive average effects found in Pope and Pope (2014) are not necessarily applicable to the stores local Durham area.

Harris Teeter

The three Harris Teeter store openings had significant results in terms of the neighborhoods they were placed in though none of the three showed any significant effects on nearby housing prices after the stores were opened. The Harris Teeter store at 2017 Hillsborough Rd was placed in a location where houses 1 to 2 miles away were worth 9.3% less than homes slightly farther away. The 1501 Horton Rd store was placed where homes 0.5 to 1 mile away were worth 10.2% less and homes 1 to 2 miles away were worth 9.2% less. The 1125 West NC 54 Hwy store was placed where homes 0.5 to 1 mile away were worth 11.8% more and homes 1 to 2 miles away were worth 8.5% more. While the coefficients are similar in magnitude, the differing signs suggest that there was no deliberate effort by Harris Teeter to locate its stores in certain kinds of neighborhoods. The regressions also show that none of the three stores had an impact on surrounding housing prices after they were opened. Homes near the first two Harris Teeter stores were still worth approximately 10% less and homes near the third store were still worth about 10% more.

TROSA Grocery

TROSA, Triangle Residential Options for Substance Abusers, Inc., opened a grocery store in East Durham, at 2104 Angier Ave, in 2010. East Durham is a significantly poorer area of the city, and the regression quantified this economic difference. Before the store opened, homes within 0.5 miles of the location were worth 74.7% less, homes 0.5 to 1 mile away were worth 70.0% less, and homes 1 to 2 miles away were worth 53.6% less as compared to homes slightly farther away. After the store opened, prices of homes within 0.5 miles fell 65.3% further, and homes 0.5 to 1 mile away fell a further 24.3%. Due to low traffic and high operating costs, the store closed in 2012. As expected from the previous regression, before the closing, the homes near the store were worth significantly less than homes farther away. After the store closed, home prices near the store actually increased; homes less than 0.5 miles away experienced a 35.9% increase from the previous baseline, and homes 1 to 2 miles away experienced a 33.3% increase.

These results do not necessarily mean that the grocery store exacerbated the poor economic conditions of the East Durham area. The store was located two miles from downtown Durham, an area that has seen significant investment and growth in recent years. Since the control group for the regression uses home sales two to four miles away, increasing prices in the downtown area would lead to homes within two miles becoming worth relatively less. While the grocery store was the first in fifty years to open in the neighborhood, offering nearby residents a source of fresh produce within walking distance, these results show that any positive effects that this increased food access provided were not significant when comparing East Durham’s poor economic conditions to downtown.

ALDI

The ALDI store that opened at 7906 NC 751 South showed no significance for any of the distance indicator coefficients. This store is located near Southpoint Mall, and so it is unsurprising that the store opening did not change nearby housing prices given the very large number of shopping options already available in the area.

Save-a-lot

The regression for the Save-a-lot store opening was unique in that it showed significance for all of the distance coefficients. Before the store opening, homes within 0.5 miles were worth 75.6% less than farther homes, homes 0.5 to 1 mile away were worth 78.8% less, and homes 1 to 2 miles away were worth 8.4% less. Save-a-lot is located about a mile away from downtown Durham in the same East Durham area as the TROSA Grocery store was, and so these results make sense considering the much higher value of homes downtown compared to East Durham. After the store opened, homes within 0.5 miles experienced a 45.4% price increase, homes 0.5 to 1 mile away experienced a 33.2% increase, and homes 1 to 2 miles away experienced an 11.4% increase. It is unlikely that the opening of a single discount grocery store single-handedly led to these dramatic price increases, and so these results need to be interpreted with caution. We should note that the closing of the TROSA Grocery store led to similar increases; both the opening of the Save-a-lot and closing of the TROSA Grocery occurred in 2012, and we can hypothesize that East Durham experienced some sort of revitalization during this time that led to these results.

Conclusion

This paper shows varying results for the impacts of store openings and closings in Durham. While Pope and Pope (2014) found that new Walmart stores slightly increase nearby housing prices, this study did not find conclusive support for their conclusion. As a whole, the results for the different stores were difficult to interpret, and no retailer as a whole showed a definitively positive causal impact. This study shows that while there may be beneficial trends on a larger scale from introducing a new store into a neighborhood, the impacts of individual stores on home prices can be difficult to predict.


References

Emrath, P (2006). “How Much is a Bathroom Worth?” National Association of Home Builders. Retrieved from http://www.nahb.org/generic.aspx?genericContentID=62422.

Holmes, M. (2011). “The Diffusion of Wal-Mart and Economies of Density.” Econometrica 79: 253-302.

Pope, D. and J. Pope (2014). “When Walmart comes to town: Always low housing prices? Always?” Journal of Urban Economics 87: 1-13.

New Hotel Development in Downtown Durham by Natasha Catrakilis

Introduction

Over the last two decades, Durham has undergone a significant revitalization of its downtown area. Both private and public investments have contributed to a large number of redevelopment projects that have transformed the face of a once decaying tobacco town into what is now considered one of the nation’s most desirable cities to live in (Carmichael). The transformation first began in the 1980s and 90s with the original conversion of Brightleaf Square, the completion of a downtown Civic Center, the restoration of the Carolina Theater, and the construction of the Durham Bulls Park Stadium – but the major turning point came in 2004 with the start of the American Tobacco Campus redevelopment project (Wong and Wolf, 9). The American Tobacco Campus, along with several simultaneous and subsequent large-scale downtown projects, led to the proliferation of new businesses, restaurants, bars, and shops that have contributed to the city’s “live, work, play” environment and growing economy.

Durham’s promising future has continued to attract both commercial and residential investors and developers who are seeking to capitalize on this growing market. More recently, however, there has been a rapid growth in the number of hotel development/redevelopment projects over the last five years. Much of downtown’s rebirth is the result of a strategic plan led by Durham’s city and county participation in public-private partnerships, and the recent influx of hotel developments is no exception. Four out of the five new hotels that will be opening their doors in downtown within the coming year are funded by city and county incentives. Although public sector financing in support of urban developments is a common practice, the trend in relation to the hotel industry is relatively new, particularly in Durham. For these reasons, my paper seeks to provide a two-part analysis explaining the new growth in public-private partnerships funding Durham’s downtown hotel development.

I will begin by providing a brief overview of the specific downtown area and the new hotels that have been approved for funding and development, followed by a general discussion about the roles of hotels within the city and the recent national trend towards public sector funding. Then I will analyze the trend in relation to Durham specifically: first, by discussing the motivating factors behind Durham’s city and county incentives for these new hotel projects – including the current supply shortage, perceived economic benefits, and historic preservation; and secondly, by addressing the concern of a potential oversupply – including demand indicators and generators and product differentiation. I will conclude with a brief overview of the analysis and final considerations regarding the future success of these investments. All numerical and statistical data used throughout this paper come from the Durham Convention and Visitor Bureau and the Durham Chamber of Commerce unless otherwise cited.

Downtown Durham

The downtown area of Durham, according to the Downtown Durham Inc., is approximately .751 square miles. As shown in Figure 1.1, the 6-distrcit area encompasses 14 x 12 blocks that span from the intersection of Buchanan Boulevard and W. Main Street to the intersection of Fayetteville Street and E. Main Street. The map in Figure 1.2 depicts the approximate downtown locations for each of the five new hotels that have secured funding and are scheduled to open their doors by the end of next year. They include the 21c Museum Hotel (opening March 2015), an Aloft Hotel (opening April 2015), the Durham Hotel (opening May 2015), a Residence Inn by Marriott (opening June 2015), and the Jack Tar Hotel (opening Q1 2016). While several other hotels have been developed in the surrounding neighborhoods, these are the only hotels that will be directly located in the delineated downtown area. The map also shows the only hotel that currently serves the downtown, the Marriot City Center, as well as several completed downtown development projects (ATC, DPAC, and the Durham Bulls Park) that have attracted many real estate developers to the area. With the Aloft Hotel being the only exception, all of downtown’s new hotel projects have been backed by some degree of city and county funding (data was taken from official City and County contracts and agreements from www.durhamnc.gov):

  • 21c Museum Hotel: 125 room project estimated cost is $48 million; received $5.7 million incentive from the city and $2 million from the county
  • The Durham Hotel: 54 room project estimated cost is $11 million; received $1.2 million incentive from city and county
  • Residence Inn by Marriott: 143 room project estimated cost is $29.5 million; received $1.3 million incentive from city and $400,00 incentive from the county
  • Jack Tar Hotel (74 room hotel included in the larger City Center development project): project estimated cost is $85 million; received $3.9 million incentive from city and county

*Note that this hotel is unique in that its development is in support of the lager 26-story mixed-use City Center project

It should be noted that all of these incentives are guided by specific requirements, including start/finish construction dates, and are “performance-based,” meaning the contracted firm will not receive any payments from the city or county until after the project construction is complete. In other words, public dollars will follow private performance and investment.

natasha1Figure 1.1 Source: DCVB

natasha2Figure 1.2 Source: Google Maps

Hotels, Cities, and Public Investment

Before I can analyze specifically why Durham’s local government approved a total of $10.6 million towards the development of five new downtown hotels opening within one year, it is important to understand the general role that hotels play in relation to the city, and why the public sector has increasingly become a major contributor to the funding of large hospitality projects. With regard to the hotel’s role within the city, McNeil (2008) asserts that hotels have become a crucial component to urban renewal strategies and the notion of the “circulatory” city. He notes that changes in hotel developments are part of a broader reconfiguration of the central business district, in which hotel location is increasingly driven by proximity to the “diverse workforce of office markets.” Hotels locate themselves in accordance to their market, and in turn they become nodes of circulation, “operating between fixity and flow, locating and refreshing mobile bodies, embedding them in relatively fixed networks within particular cities.”

In recent years, the public sector, either on its own or in partnership with the private sector, has gradually become a major contributor in the urban renewal of cities across the nation. Tress (2003) emphasizes that a key component of urban revitalization often begins with or incorporates the development of a large hospitality projects. However, the high risk of hotel development, primarily due to high replacement costs, often results in less available returns on investment than those desired by private investors. Furthermore, Tress points out that private sector investment in the hotel industry has become increasingly conservative – loan to value (LTV) ratios have shifted downward and debt service coverage (DSC) ratios upward, further emphasizing the associated high risk with the hotel industry. As a result of these two trends, the public sector has emerged by providing incentives to alleviate some of the risk and bridge the gap between return on investments.

Public Sector Motivations

There are several reasons that motivate the local public sector to provide the financial support of hotel development projects. In the context of Durham, the most obvious reason is the significant shortage in the supply of hotels directly servicing the downtown area. Until very recently, the only hotel located in downtown Durham has been the 190-room Marriott City Center, which opened in 1986 and was last renovated in 2008 (Oleniacz). Adjacent to the hotel is the 40,00 square foot Durham Convention Center. The convention center is equally co-owned by Durham City and Durham County and until 2011 was managed by Shaner Hotels Group, the owner-operator of the Marriott City Center (Oleniacz). Historically, convention centers have acted as loss leaders, but several factors contributed to the DCC’s largely increasing operating deficit. Under new management by Global Spectrum, the center’s operating deficit has significantly decreased (Oleniacz). However, the fact remains that the Marriott City Center hotel only has 20% of the necessary guest rooms for a convention center of its size (Arai). One of the primary motivations, thus, behind Durham’s public sector funding of these new hotel developments is to provide the necessary additional hotel rooms that would help generate convention center business.

Aside from the obvious supply shortage of hotel rooms in the downtown area, another important motivating factor behind public sector funding is the economic benefits that are expected to come from these developments. The economic impact of hotels is most commonly assessed by the fiscal (tax base revenue), direct (job creation), and induced (visitor spending) impact (Tress). In each one of the incentive agreements signed by the city and hotel development companies, approval was given because of the likely expansion to Durham’s tax base from new property, sales and occupancy taxes and the creation of new jobs in accordance with the Durham-Based Business Plan and Durham Workforce Development Plan (which stipulate good faith efforts to engage Durham-based firms in the construction work for the project and engage the Durham JobLink Career Center System in efforts to hire temporary and permanent staff related to the project). Based on each hotel’s proposed agreements and contracts, below are numerical calculations of their respective estimated fiscal and direct impacts:

  1. 21c Museum Hotel
    1. Fiscal Impact: over $1.9 million in incremental property taxes and $8.5 million in occupancy and retail sales taxes would be generated as a result of this project, yielding a net revenue gain to the City of over $2.6 million over 20 years
    2. Direct Impact: project is slated to create more than 150 permanent jobs with a substantial percentage paying in excess of livable wage
  2. The Durham Hotel
    1. Fiscal Impact: over $107,363 in incremental property taxes and $686,213 in occupancy and retail sales taxes, yielding a net revenue gain to the City of over $188,576 over 7 years
    2. Direct Impact: project is slated to create 91 new permanent downtown-based jobs and over 100 temporary construction jobs
  3. Residence Inn by Marriott
    1. Fiscal Impact: over $640,736 in incremental property taxes and $1,138,000 in occupancy and retail sales taxes would be generated as a result of this project, yielding a net revenue gain to the City of $446,634 over 8 years
    2. Direct Impact: new jobs, expected to be created by the project, would consist of 14 part-time positions and 31 new full-time paying jobs with benefits; including 8 salaried positions
  4. Jack Tar Hotel
    1. Fiscal Impact (included in the larger City Center development project): over $4,911,118 in incremental property taxes and $3,402,472 in occupancy and retail sales taxes, yielding a net revenue gain to the City of $4,340,446 over 15 years
    2. Direct Impact: new jobs, expected to be created by the project, would consist of 250 construction jobs, 500 office workers, 75 retail-based employees; and 10 hotel jobs with benefits

While the fiscal and direct impact of a hotel can be numerically calculated and predicted, the induced impact associated with the “spillover effect” – the money that visitors spend on services in other downtown industries – is often more difficult to assess. According to the DCVB’s data on Visitors’ Economic Impact on Durham in 2014, the number of visitors in Durham has steadily increased of the last decade with approximately 9 million visitors spending a collective total of $765.8 million each year. Most visitors spend the largest proportion (26.7%) their money in the food & beverage industry – reinforcing downtown Durham’s vibrant and prolific local restaurant industry. Consequently, all of the city’s and county’s approvals for the public funding of these projects were made with the belief that they will bring more visitors to downtown, thereby increasing visitors’ net economic benefit for Durham.

One final motivating factor behind Durham’s public sector support for downtown’s recent hotel development is the city’s emphasis on historic preservation. Many of downtown Durham’s older buildings lend themselves to this nature, and in fact all of the publicly incentivized hotels in downtown are planned to either preserve or include some historical element unique to Durham in their design. The Residence Inn by Marriott is of particular importance because its public funding was needed primarily to cover the increased costs associated with preserving certain architectural elements of the historic McPherson hospital into the hotel structure (Hoyle). Similarly, the Jack Tar Hotel project would also involve the rehabilitation of a contributing building that is part of the Downtown Durham Historic District. The developer of the boutique hotel has agreed to maintain as much original material as possible while designing the project in order to preserve the building’s unique connection to Durham’s past (Hoyle). On a similar note, both the 21c Museum Hotel and the Durham Hotel are boutique hotels that have structured their design to reflect and incorporate the art, culture, and history of Durham in some form. McNeil (2008) points out that boutique hotels are often located “within the discourse of urban renaissance fostered through the refurbishment of historic buildings (including ex-factories and warehouses),” which is very much the type of landscape that defines downtown Durham.

Concern for Oversupply

The second part of my analysis regarding the new hotel development occurring in downtown Durham involves addressing the primary concern of a potential oversupply to the area. Upon completion of the five new downtown hotels, the inventory of hotel rooms in Durham will nearly triple in size, jumping from 190 to 530 rooms in less than a year. Although the need for more hotel rooms in downtown was previously stated as a primary motivation for public investment in these projects, this drastic increase has, nonetheless, caught the concerning eye of government officials, industry leaders, and local residents.

The belief of many Durham leaders in support of the development, however, is similar to the “Field of Dreams” theory suggested by Culligan (1990), which is, “If you build it, they will come.” After looking at both supply and demand in the hotel industry from 1965 to 1990, Culligan noted that growth in demand occurred in remarkably close relationship to growth in supply, and in some cases, such as with new niche hotels, supply could actually stimulate demand growth. His conclusions are based on the simple assumption that the market tends toward equilibrium, but his evidence comes only from historical examples in which demand growth followed supply booms.

Geoff Durham, president of Downtown Durham Inc., said he believes demand will exceed expectations for the new downtown hotels because of the “success and growth” in the entertainment, restaurant, and retail venues downtown and “to a large extent, these new hotel developments are playing catch-up to this demand,” (Oleniacz). On the same note, Shelly Green, President & CEO of the Durham Convention and Visitors Bureau, told City Council that the economic and domestic tourism demand in Durham could accommodate 1,200 rooms (Oleniacz). She further explained that greater marketing efforts by the DCVB will help fill the additional hotel rooms. The DCVB receives a third of the occupancy tax revenue collected by hotels and uses that for marketing to attract more visitors: “As the inventory of hotel rooms grows we have more marketing dollars to fuel that demand and visitation,” (Oleniacz).

The evidence in support of this increased visitor demand comes largely from the city’s two major leisure attractions, the recently built Durham Performing Arts Center and the Durham Bulls Park Stadium. Built in 2008, DPAC is a 2,800-seat multi-use performance theater that houses nationally renowned Nederlander productions, including Broadway shows and various other performances throughout the year. A year-round schedule of national entertainment acts supplemented with local entertainment events has added marketing and entertainment cache to the thriving Durham arts scene. According to the Durham Convention and Visitors Bureau, total visitor spending by DPAC guests in Durham exceeded $66.3 million last year, with an economic impact of $48.4 million. The Durham Bulls Athletic Park was originally built in 1995 through public funding and has served as an integral catalyst to downtown’s revitalization. The stadium, home to the Durham Bulls as well as the Duke Blue Devils’ and North Carolina Central Eagles’ college baseball teams, was renovated this past year in preparation to host the 2014 Triple-A All-Star Game. This nationally televised game brought in visitors from across the country for a 5-day festival, resulting in an estimated $3.3 million in visitor spending to the area. The $20 million renovation has made an enormous impact on the stadium’s success, with last year’s final paid attendance equaling a record high of 533,033. The amount of visitors that come to Durham to attend events hosted by DPAC and the Bulls Stadium indicates that there is an unmet demand ready to fill the new supply of hotel rooms in downtown. Developers of these new hotels have strategically placed them in the downtown location to be in close proximity to Durham’s demand generators, hoping to capitalize on a market of visitors who would stay longer/overnight – and thereby spend more money in downtown – if more hotel options were available.

In addition to these demand generators that target leisure travelers (who make up 73% of Durham’s visitors according), Durham also has several indicators that support an increase in the business traveler demand. Several studies show that a strong economy and employment rate are signs of increases in demand for the hospitality industry (O’Neill). The 2014 edition of PKF Hospitality Research states that rising levels of employment, combined with increased geographic expansion of the national economic recovery, will result in revenue per available room growth in excess of long-run averages for all hotel markets from 2014 through 2017. In fact, PFK projected demand growth to outpace changes in supply in the U.S. through 2016. Durham currently has an unemployment rate of 4.4%, which is below the national average of 6.3%. Over $1.3 billion dollars in private and public investment have been put forth into new development projects that will generate even more employment opportunities for downtown. Downtown’s proximity to Duke University and Medical Center, major global companies, and a wealth of entrepreneurial activity ensure further employment growth. According to Durham’s Chamber of Commerce, Durham County has enjoyed a 10.2% increase in jobs located within the county since 2000, far exceeding North Carolina’s 2.7% growth. Another important factor to consider is that hotel demand in university towns has generally proven to be more stable than national averages, which has proven to be true for Durham for the past two decades (O’Neill).

One final point should be made addressing the potential concern for oversupply, and that is the product differentiation in the types of hotels that will be developed. From boutique to branded, select- to full-service, each of the five hotels caters to a relatively different market of customers with little overlap. The 21c Museum Hotel and the Durham Hotel provide truly unique “boutique” experiences for guests that might be willing to pay a higher price for greater amenities and personalized service, while the Residence Inn and Aloft Hotel primarily cater to travelers who value convenience and practicality over luxury. This creates a variance in the price scale for hotel rooms serving the area, making sure that the new supply of hotel rooms reaches all spectrums of the market.

Conclusion

In summary, whether built by the public sector or private sector, a crucial element in deciding to build a hotel is evaluating and ensuring sufficient demand for the rooms once built. When the private sector provides a significant portion of the financing needed to build a hotel, this is a good indication the demand is there. Public sector funding for urban development purposes is a common practice, but has not been as common for hotel development projects until recently, especially in Durham. Throughout this paper, I have provided reasons explaining the new growth in public-private partnerships funding of hotels specifically in Durham’s downtown, focusing on the motivations on behalf of the public provide these incentives, and addressing the potential concern for an oversupply of hotel rooms in the area. Although the success of these new development projects can not be properly assessed until hotel operations have been underway for a substantial amount of time, many other cities across the United States have provided significant public funding and financing for downtown hotel projects when faced with similar challenges — the lack of downtown hotel rooms. Nonetheless, the key factor to ensuring that the supply of these new hotel rooms is met relies heavily on the effective marketing strategies for each hotel. None of these new hotel development projects (aside from the Aloft Hotel) would have been feasible without the financial support of Durham’s city and council. Public sector involvement has been crucial in the revitalization of downtown Durham, and the development of these new hotel projects will further enhance the city’s goal for continued growth and a strengthening economy.


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