Overview of the MVA Approach

The MVA approach was born from former Philadelphia Mayor John Street's charge to TRF to create a data-based analysis of the city's housing market. TRF created the MVA to give public officials the basis for making informed, objective decisions about how to prioritize resources and services. By 2000, Philadelphia's population had fallen from its 1950 peak of over 2 million to just under 1.52 million.¹ That population loss left Philadelphia with an estimated 30,000 vacant lots and 25,000 vacant homes, as well as 9,000 residential structures in danger of falling under their own weight.²

Many of Philadelphia's neighborhoods were scarred with decades of blight, while some showed just the beginnings of decline. Other areas manifested market strength: well-maintained homes, strong prices, a healthy mixture of residential and commercial uses, and no signs of vacancy or abandonment. Mayor Street recognized that to bring the downtown vitality to the neighborhoods, which then housed more than 95 percent of the city's population, he needed a current assessment of the relative economic health of the neighborhoods in the form of comprehensive, data-based profiles. Because city agencies did not have the data or capacity to prepare the needed profiles, Mayor Street turned to TRF to design and conduct the necessary statistical and spatial analysis. Not only would this analysis help guide the level and nature of municipal services delivered throughout the city (e.g., residential and commercial demolition, acquisition of vacant land, streetscape upgrades, housing rehabilitation), but it also would provide the basis for underwriting a $295 million bond issuance.³

Underlying the MVA is a perspective that residents of all of a city's markets are its customers--of its programs, resources, and services. Moreover, public resources are generally scarce and cannot be singularly relied upon to create a housing market where none exists. Thus, locating and building on local market strength is fundamental. Scarce public resources should be used to prepare a market for the infusion of private capital; public investment should be invested in a way that leverages private capital. Also important is the recognition that neighborhoods--the concept that many community and economic development practitioners use to describe an area--are typically not uniform districts. In fact, most neighborhoods comprise a variety of market types; therefore, governmental activity and resources should be related to the extant conditions in each of the market types, not "the neighborhood."

Since that 2001 analysis, TRF conducted two more MVAs in Philadelphia. TRF also prepared MVAs in Pittsburgh, Pennsylvania; Baltimore, Maryland; Newark and Camden, New Jersey, as well as a set of small towns throughout southern New Jersey; San Antonio, Texas; Washington, DC; Wilmington, Delaware; and most recently, Detroit, Michigan. Funding for these MVAs came from both government and philanthropy (in tandem with the public funding). In addition to their initial purposes for preparing these MVAs, many of these cities used the MVA approach as a means of targeting their federal Neighborhood Stabilization Program activities.

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Preparing a Market Value Analysis

The MVA approach uses a variety of market indicators to analyze, validate, and understand the nature and conditions of existing housing market types throughout a city. Cities can then use this information to better target resources and services as well as tailor development and investment strategies for specific market types.

Indicators

The package of indicators for an MVA includes administrative elements and other secondary data sources. In general, these market indicators were selected because they reflect the conditions that any developer might observe when evaluating areas for investment or intervention. With some variation from city to city, the following indicators are used:

• median and variability of housing sale prices
• housing and land vacancy
• mortgage foreclosures as a percent of units (or sales)
• rate of owner occupancy
• presence of commercial land uses
• share of the rental stock that receives a subsidy
• density

Cities have wide variation in the depth and scope of their administrative databases. Some cities, like Baltimore, can provide a high-quality dataset for each indicator.

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Level of Analysis

Although census tracts and census block groups both provide data by fixed geographic area, the block group--the entity into which a census tract is divided--is the most appropriate level for this analysis. Census tracts are spatially much larger than block groups and their populations range from 2,500 to 8,000 people, whereas block group populations range from only 600 to 3,000.⁴ Thus, the census block group is small enough that the differences that may be observed as you walk through a community can be detected, while large enough that the estimates are reasonably stable because they are based on larger numbers of data points (e.g., housing units, foreclosures, residential sale transactions).

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Process

The MVA process requires acquiring and evaluating each indicator's accuracy, which is usually accomplished by preparing block group maps of each indicator. The maps are then subjected to an on-site inspection and vetted through interviews and/or focus groups with local subject-matter experts (SMEs).⁵

Once the variables are deemed acceptable, they are subjected to a cluster analysis, which is a statistical procedure that creates homogeneous groupings of cases (i.e., block groups). Each group shares a common constellation of characteristics. The groupings are generally designed to maximize the similarity of cases within groups and maximize the differences across groups. Indicators are put on the same scale, typically through a transformation (e.g., z-score). The cluster analysis does not require an a priori decision about what level of any indicator is more or less desirable (e.g., owner occupancy is good and rental occupancy is bad). It is the constellation of characteristics as revealed by the statistical analysis that helps to define the market categories.

The results of the cluster analysis are then mapped and subject to field inspection and SME review. Typically, the field inspection is accomplished by preparing maps and then driving throughout the city with an eye toward understanding whether the map comports with what is observed in the field. Observations focus on whether the appearance of any given market type is similar, regardless of where in the city that given market type is found. Additionally, the degree to which any changes observed from block to block are appropriately reflected on the map are also noted. Experience suggests that field validation takes anywhere from three to five (or more) days depending upon the city's size and complexity of its markets.⁶

TRF's experience is that the validation and modeling process is iterative. Typically, the first statistical solutions do not adequately match with field observations or the review of local SMEs, and this makes some re-modeling, re-mapping, and re-inspection necessary. Some cities have taken the added step of preparing a set of overlays of data reflecting a variety of things like (1) local assets (e.g., large employers, colleges, hospitals, transportation hubs); (2) crime hot spots; (3) social and human service need indicia; (4) history of the city's housing or infrastructure investments; and (5) demographic characteristics and changes.

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The Baltimore Experience: Uncovering the Dimensions of Market Vitality and Distress

TRF completed two MVAs (2005 and 2008) for Baltimore and is now working on a third for the city.⁷ The 2008 MVA was based on the following indicators: (1) median sale price; (2) housing density; (3) tenure; (4) foreclosure filings as a percent of owner-occupied properties; (5) vacant lots and vacant housing; (6) percent of rental units with a subsidy; (7) mixture of commercial and residential uses; and (8) density. Representatives of Baltimore's Housing and Planning departments were the main SMEs, and those who would be responsible for implementing programs based on the MVA. The resulting 2008 Baltimore MVA is displayed in figure 1. The constellation of characteristics for each market type is displayed in table 1.

What the City's 2008 MVA Revealed

One of the 2008 MVA's key contributions to Baltimore's strategy development was the recognition of the spatial arrangement of market types:

• Stronger markets, displayed in the blue and purple ranges, can often operate as nodes of strength upon which interventions in markets that manifest early signs of blight can be based.
• Large areas of distress dictate larger-scale interventions because the degree of blighting influences is so great that minor interventions (e.g., a small number of scattered site housing rehabilitations) are not likely to promote market change.
• Yellow markets (labeled in some cities as "transitional markets") draw attention, especially when adjacent to more stable (blue) markets because, in Baltimore, they may be being undermined by high levels of financial distress as evidenced by elevated foreclosure levels. That which is destabilizing the yellow markets may threaten the blue areas.

Baltimore is also unique, compared to some other cities, in the degree to which it has made the data and results of its MVAs available to the public.⁸ One of Baltimore's efforts to inform the public describes the MVA as follows:

Baltimore's housing market typology was developed to assist the City strategically match available public resources to neighborhood housing market conditions; the housing market typology was a key tool used in LIVE EARN PLAY LEARN, the City's 2006 Comprehensive Master Plan. The typology informs neighborhood planning efforts by helping neighborhood residents understand the housing market forces impacting their communities. The financial and resource tools the City uses to intervene in the housing market are applied appropriately to the conditions in the neighborhoods. Some tools, such as demolition, may be necessary in distressed markets to bring about change in whole blocks yet may be applied more selectively in stable markets on properties that may lead to destabilization in the future.⁹

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How Baltimore Is Using the MVA to Aid Revitalization Efforts

Encouraging Collaborative Solutions

According to current and former officials of the City of Baltimore,¹⁰ the MVA approach is an accurate and useful diagnostic of localized market conditions. A diagnostic is not an answer, but it provides the basis for government and nongovernment experts to collaborate to create a set of solutions tailored for Baltimore. Thus, to inform local discourse and municipal action, Baltimore made its MVAs available to the public.¹¹ The city also took steps to share the information more broadly--for example, by submitting its 2005 MVA for publication in the ESRI Map Book Gallery, a tool intended for use primarily by GIS professionals around the world.¹²

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Informing Planning and Development

In addition, the MVA approach helped change the city's development mindset, which had previously been targeted based on level of need. As time passed and resources became increasingly scarce, MVA helped the city to understand government resources as a catalyst to be targeted where there was market strength upon which to build. As a result, targeting resources to market conditions became a critical component of the city's effort.¹³

That mindset was affirmed in city's comprehensive and area master plans. The first Baltimore MVA, completed in 2005, formed a critical information overlay in those plans. Planners and other government officials created a set of responses to each of the different market types and conditions.

The MVA served as the information base for multiple city agencies, nonprofit housing and community development organizations, and foundations to develop a unified set of strategies for Baltimore's neighborhoods. For example, Baltimore's Vacants to Value program, designed to encourage the rehabilitation of more than 1,000 vacant housing units across the city, had targeting and resource prescriptions tied to the MVA market conditions (the Vacants to Value program is described elsewhere in this compilation in the article by Janes and Davis).¹⁴

Additionally, Baltimore used the MVA as a measure of market demand in its cooperative forecast for transportation planning. For the same reason, the city also used it in much of its transit-oriented development strategic planning efforts.

Moreover, city departments including Planning and Housing adopted the MVA approach in order to tailor the level and nature of municipal action, zoning, code enforcement, demolition, and other interventions. These departments also began incorporating the MVA in their Notices of Funding Availability.

Lastly, as testament to the MVA's value to its housing and community development efforts, one former city official noted that during transition discussions between Mayors O'Malley, Dixon, and Rawlings-Blake, the transition committees encouraged continued use of the MVA as a tool to assist city efforts.

Although Baltimore, like many cities, will still face challenges in revitalizing its neighborhoods for years to come, data from the MVAs have already made valuable contributions to the city's efforts. In addition to helping the city better understand the unique dynamics of its real estate markets, the MVA approach has helped Baltimore set priorities for service delivery and intervention according to market type as well as design strategies that are tailored for specifically for those markets.

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