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Forthcoming 2022

1960s Interstate Highways and Homeowner Wealth Distribution

by Jeffrey P. Cohen, Nicholas Lownes, and Bo Zhang

Abstract

This article studies house-level real estate wealth distribution changes nearby a major interstate highway, comparing values before the announcement of the highway's construction (1940) with those during and shortly after the construction period (1961-74). We also develop Lorenz curves to examine the distribution of housing wealth among various demographic groups of homeowners. First, we find that properties at least a half-mile away from I-84 experienced statistically significant appreciation (on average). Houses further away, in 0.25 mile increments up to 1.25 miles, appreciated less. Our Lorenz curves exhibit a small inequitable distribution of wealth gains among all homeowners experiencing appreciation. But there was a large inequitable distribution of wealth losses among homeowners whose houses depreciated in value during and after construction compared with 1940 (pre-announcement). The Lorenz curves imply that, for the 10th percentile of homes with wealth increases, the majority-White-population Census tracts experienced over 25 percent higher house price appreciation than the majority-Black-population Census tracts. Finally, we observe that approximately 0.5 percent of the houses in our 1940 Census sample of around 2,500 homes had a Black homeowner.


Jeffrey P. Cohen is professor at the University of Connecticut and a research fellow at the Institute for Economic Equity at the Federal Reserve Bank of St. Louis. Nicholas Lownes is an associate professor at the University of Connecticut. Bo Zhang is a lecturer at Loyola University Chicago. The authors acknowledge funding from a 2018-19 research grant awarded by the Center for Advanced Multimodal Mobility Solutions and Education (CAMMSE) at the University of North Carolina-Charlotte (a Tier I University Transportation Center supported by the U.S. Department of Transportation). Some of the research for this project was done by Cohen as a research fellow with the Institute for Economic Equity at the Federal Reserve Bank of St. Louis. The authors appreciate excellent research assistance from Jibing Lin, Saki Rezwana, and Robert Smith. Bingxin Yu and Lowell Ricketts provided helpful comments, and John Logan shared some of the 1940 Census data. 



INTRODUCTION

Many interstate highways in the United States were built at a time of dramatic changes in America's land-use patterns. Where they were built may be correlated with homeowner wealth differences across various demographic groups that lived near the planned highways. Housing is the largest expenditure item for many American households, and it is one of the major mechanisms for households to accumulate wealth. The introduction of new highways can be associated with land-use pattern changes and the values of real estate nearby. Geospatial analyses are crucial tools to examine highways and wealth distribution. Relatively little research has been published on the relationships between the introduction of the U.S. interstate highway system and household-level real estate values. The major focuses of this research are to leverage geospatial analysis to test the hypothesis that house values have risen near a highway and to explore the homeowner wealth distribution among various levels of house prices and across demographic groups (i.e., houses in neighborhoods with majority-Black populations and majority-White populations). 

The objectives of this research are to consider the above-described issues for one particular interstate highway in Hartford, Connecticut. Specifically, we (i) use regression analysis to evaluate how the implementation of Interstate 84 (I-84) in Hartford, Connecticut (the state capital), is correlated with real estate values over the 20-to-30-year period spanning from the planning stages (circa 1940) through the years near the opening of the highway (1961-74) and (ii) construct Lorenz curves to demonstrate visually how this homeowner wealth creation varied across different groups of residents in Hartford, Connecticut. 

To accomplish these objectives, several tasks have been undertaken. Data have been manually collected on nearly 2,500 home values near I-84 from the 1940 Census (before the development of the interstate highway plans) and matched with the corresponding home values from when the homes sold between 1961 and 1974 (after the opening of I-84 in Hartford). For each property address, we then have two observations on that property's estimated value: one from 1940, before the development of the interstate highway system, and one from between 1961 and 1974. These data were geocoded and maps developed that demonstrate how the appreciation/depreciation in property values (i.e., "wealth" changes) have varied across these homes. Included among these maps is one showing percentage changes for properties that appreciated or depreciated and one showing dollar ranges for house value appreciation/depreciation. While some patterns are evident from visual inspection of these maps, a more rigorous analysis using multiple regression analysis finds the following correlations.

First, we find insignificant statistical evidence of depreciation between 1940 and the 1961-74 period for houses that are very close to the highway (i.e., within 0.25 miles), after holding constant other factors. Second, properties that are 0.5 miles or more away from I-84 experienced 55 percent appreciation, and as the distance to I-84 increases, the appreciation is less, falling to 27 percent appreciation for houses within 1.25 miles. But at a distance of within 1.5 miles from I-84, property values appreciate again, rising to 45 percent, as those houses are closer to another interstate highway (I-91). Next, we find that properties that were worth more in 1940 actually appreciated less between 1940 and the 1961-74 period, after controlling for highway proximity and drive time to I-84. 

For properties that increased in value between 1940 and the 1961-74 period, there was an inequitable distribution of wealth gains. When comparing Census tracts with a majority- (more than 50 percent) Black population and tracts with a majority-White population (based on 1960 tract-level Census data), there are some differences. As one example, we consider the 10th percentile of homes with price appreciation in these two demographic groups. The house price appreciation inequality among tracts with majority-Black populations was over 25 percent higher than among tracts with majority-White populations. The racial disparity in housing wealth accumulation over this period may have precluded many Black residents from accruing housing wealth in the same manner as other residents. This finding is underscored by our observation that approximately 0.5 percent of the houses in our 1940 Census sample of nearly 2,500 homes had a Black homeowner (based on 1940 Census individual-level demographics). 

We also develop Lorenz curves to examine the extent of housing wealth inequality among the homeowners near I-84 who experienced property value decreases. There was a relatively small number of properties that experienced declines in value, but there was a large inequitable distribution of wealth losses among homeowners whose houses decreased in value. For instance, more than 70 percent of the wealth losses that occurred with the construction of I-84 were experienced by roughly 20 percent of the homeowners.

From a policy perspective, our findings could support future planning and policy to reconfigure and revamp I-84 (i.e., elevated, at grade level, or underground) given its current state of age-­related deterioration. This research is also intended to lay the foundation for future research using similar techniques to address these issues for other U.S. cities where interstate highways have been built. It is important as a potential methodology to place a value on the interstate highway system in the United States. It can additionally be used as a tool for comparing inequality in real estate wealth accumulation within and across cities due to interstate highway construction, enabling researchers to uncover new information about where the net benefits of highway construction have been equitable or inequitable. These regional disparities could also inform future highway construction decisions that may be helpful to policymakers choosing how to allocate future highway construction funds across different regions of the United States. Other transportation modes (e.g., transit or airports) could be amenable to these techniques as well.


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