The Controversial Legacy of Slum Clearance

A new study by Vanderbilt economist William J. Collins and Ph.D. candidate Katharine L. Shester looks at the long-term economic impact of the ambitious (and highly controversial) Housing Act of 1949, which used federal subsidies and the powers of eminent domain to "revitalize" American cities, i.e., to clear out the slums. By the time the program ended in 1974, 2,100 distinct urban renewal projects had been completed using grants that totaled about $53 billion (in 2009 dollars).

In one of the rare papers to collect and analyze data related to the program, Collins and Shester come up with a positive picture of its effects - at least in some ways. The authors are clear that the ugliness involved with pushing people out of low-income housing was the reason the program was shut down, and that their results do not “imply that the dislocation costs for displaced residents and businesses were unimportant.” From the abstract:

We use an instrumental variable strategy to estimate the program’s effects on city-level measures of median income, property values, employment and poverty rates, and population. The estimates are generally positive and economically significant, and they are not driven by differential changes in cities’ demographic composition.