Neighborhood renewal does not raise values of all aged residential properties: case from Hangzhou, China

The paper adopts a difference-in-difference method to investigate the impacts of government-initiated neighborhood renewal programs on the values of aged housing properties in Hangzhou, China. Three empirical findings are obtained. First, the renewal raised living utility values and thus rents of the renewed properties. Second, the improvement in living utility value is partially offset by a reduction in the option value of housing redevelopment, because government planning policy specifies that the renewed neighborhoods will not be redeveloped at least in the next 5–10 years. Third, housing prices in neighborhoods farther away from scenic spots, which were generally lower, even dropped after the renewal. This evidences the complementarity between housing conditions and external environment, i.e., the renewal raises housing values less if the external environment is more inferior. These findings have important policy implications for urban renewals.