Last year, Raquel Favela took inspiration from witnessing a Citizens Bond Task Force help to craft a billion dollar bond package that Dallas voters passed in November.
As the city’s Chief of Economic Development and Neighborhood Services, Favela’s office is getting a $55 million chunk of that package. Now she’s excited to begin laying out a more transparent process than the city has been using to allocate those and other housing and economic development incentives within her purview.
“I think it will affect all our housing and economic development tools,” Favela says.
Favela came into her current position last year, working under City Manager T.C. Broadnax, for whom she worked previously in San Antonio. The city had a reputation for handing out such subsidies using an opaque, sometimes wasteful process. Favela hopes to change that, by first creating “a transparent data framework from which the public can see where the resources are needed.”
That framework begins with something called a Market Value Analysis. “It lays the groundwork of what the current conditions are as it relates to real estate,” Favela explains. “In concept, the idea of place-based investment is great, but you’ve got to know which place to select, it has to be based on some kind of analysis, that there is some market potential there.”
The idea is to use data to determine where city investments will catalyze private sector investment, magnifying its impact on housing or economic development.
“So that, as we make allocation of these resources, we make decisions about where it takes the least amount of public investment to yield the highest visible impact,” Favela adds.
Since 2001, Market Value Analyses have been used in around 40 cities or regions, starting in Philadelphia. They’re a product of the policy shop at Reinvestment Fund, a community development financial institution.
“I would say that by 2003 or 2004, other cities around the country started to see the Market Value Analysis work and commission it from us,” says Ira Goldstein, President of Policy Solutions at Reinvestment Fund.
A market value analysis is rooted in eight to 12 different market indicators, drawn almost exclusively from administrative data collected by cities, counties or states. The indicators typically include things like home sale prices, code enforcement activity, demolitions, vacant property, renter- versus owner-occupied housing, eviction rates, utility shut-offs, foreclosures, and so on. Reinvestment Fund staff spend a week or more driving around the city, validating the data. This data is used to create a map, color-coded into market types based on census block groups whose indicators are similar to each other.
Once the map is done, a stakeholder group sits down to look over and scrutinize the data. In Dallas, the stakeholder group was selected by the City Council’s Economic Development & Housing Committee, and consisted of a cross-section of local industry experts in real estate development, finance, zoning, planning, and development codes.
Ultimately, the goal is to produce a report for a city council or a mayor’s office. In Dallas, the report will go to the city council, which will, Favela hopes, use it to inform decisions.
A market value analysis for Kansas City, Missouri shows the variation in markets across the city. Some neighborhoods, for example, might have similar home sale prices, but vary widely when it comes to renters vs. owners. (Credit: Kansas City)
“My professional opinion and advice to the governing body is to leverage public dollars with private dollars, and the way you do that is by investing in areas where there is market potential for investment,” Favela adds. “It’s very difficult to create a market where none exists. There are a lot of examples of where that has been attempted in Dallas and did not work.”
Favela points out the example of a costly mixed-use redevelopment project in Dallas that had difficulty sustaining commercial tenants after completion. The area wasn’t yet ready for a large influx of commercial development, and the city was not prepared to subsidize those tenants until then. She hopes the Market Value Analysis will help avert similar troubled projects by setting realistic expectations for policymakers and the public.
“In the case where a council or governing body decides they want to invest in an area that has great market distress, then they do so knowing that the level of subsidy will have to be deep and will have to occur for a long period of time, meaning they make that decision with their eyes wide open,” Favela says.
It’s better to invest in an area, Favela says, where banks and developers are more likely to follow the city. In other markets where private investment is already happening, the city should instead focus on allocating resources to protect housing affordability in those areas—the final Dallas Market Value Analysis will include “displacement risk” markers showing where resources will likely be needed along those lines.
“In a perfect world, every neighborhood would be accessible to everyone,” Favela says.
Favela also hopes the Market Value Analysis can provide a starting point for Dallas to begin the work of undoing its historical pattern of segregating minority populations into low-income areas. That pattern made national headlines two years ago, when the Supreme Court ruled that policies even inadvertently relegating minorities to low-income areas, like those in Dallas from 1995 and 2009, violated the Fair Housing Act.
A city or even a state can use a market value analysis as a data-driven, impartial way to identify where new subsidized housing for low-income households should go, instead of concentrating them in existing low-income areas.
“The market value analysis provides a starting point,” Favela explains. “It tells us the market type in which we know we have a high percentage of subsidized rental housing, the last thing we need to do is add more subsidized rental housing in that market type.”
The state of Delaware, for example, incorporated a Market Value Analysis into its allocation process for Low-Income Housing Tax Credits, incentivizing proposals that placed new subsidized housing in locations that weren’t already saturated with such housing.
Transparency and data, Favela believes, will help others in influential positions behave in ways that align with the city’s public policy goals.
“If a bank is meeting with a developer who says ‘I’d like to do a Low-Income Housing Tax Credit project in this area,’ and the lender can see it’s in a high-rental, high-subsidized area, they can say to the developer you’ll never get it approved,” she says.
Oscar is Next City's senior economics correspondent. He previously served as Next City’s editor from 2018-2019, and was a Next City Equitable Cities Fellow from 2015-2016. Since 2011, Oscar has covered community development finance, community banking, impact investing, economic development, housing and more for media outlets such as Shelterforce, B Magazine, Impact Alpha, and Fast Company.