Faculty Forum – Public Policy Posted on Tuesday, April 11, 2017

The Effect of the Housing Crisis on the Finances of Central Cities

Howard Chernick Professor of Economics, Hunter College; Member of the Doctoral Faculty at CUNY's Graduate Center

Howard Chernick, Hunter College and City University of New York

Andrew Reschovsky, Lincoln Institute of Land Policy and University of Wisconsin-Madison

Sandra Newman, Johns Hopkins University

Prepared for presentation at policy forum on Housing Markets and the Fiscal Health of US Central Cities, Urban Institute, Washington, DC, April 17, 2017. (Sponsored by the Lincoln Institute of Land Policy and the Urban Institute).

Nearly eight years have passed since the official end of the Great Recession, yet many of the nation’s central cities are still facing substantial fiscal challenges,

  • In a number of central cities, inflation-adjusted per capita revenues and spending remain below their pre-recession levels.
  • As of February 2017, local government public employment was 183,000 (1¼ percent) lower than its peak in June 2009. During the same period, population in the U.S. grew by 5.6 percent.
  • Although most local economies are growing and tax revenues are rising, the Administration’s proposed cuts in federal grants to local governments create new fiscal challenges for many central cities.

The economic and fiscal impacts of the Great Recession were substantially amplified by the near collapse of financial markets, and the boom and bust cycle in housing prices and in a sharp rise in mortgage delinquencies and in housing foreclosures.

In this paper, we focus explicitly on the interactions between the changes in the housing market over the past few years and the financing of local governments in 91 U.S. central cities. Our description of the housing market draws on Census housing data and data on housing prices, mortgage delinquencies, and foreclosures provided by CoreLogic.

 

Click here for a link to the full paper.


Howard Chernick is Professor of Economics at Hunter College and the Graduate Center of the City University of New York. He is a research affiliate of the Institute for Research on Poverty at the Univ. of Wisconsin, a board member of Citizens for Tax Justice, and a past member of the board of the National Tax Association. Research interests include fiscal federalism, urban public finance, anti-poverty policy, and tobacco taxation. In addition to cities in the United States, including his hometown of NYC, Professor Chernick has studied the finances of cities around the world, including Montreal, Stockholm, and Kolkota, India.