The net benefit of demolishing dilapidated housing: The case of Detroit

We conduct an analysis of the costs and benefits of public investment in demolishing dilapidated residential housing in Detroit. While we estimate a positive net impact of demolitions on nearby property values, we also calculate a low marginal impact on local property tax collections. Under existing housing market conditions in Detroit, demolition costs exceed the present value of additional property tax revenues resulting from demolitions over 50 years. Using efficiency as the criteria for justifying spending public funds on demolition, average property values would have to increase by a factor of five to justify the demolition program.