canyon lake, riverside county. 15 000 inhabitants live behind this fence, in a private and gated...

Canyon Lake, Riverside County.15 000 inhabitants live behind this fence, in a privateand gated community, which is also an independentmunicipality.

Renaud LE GOIX Renaud LE GOIX Université Paris 1 Université Paris 1

Panthéon SorbonnePanthéon Sorbonne

The impact of gated The impact of gated communitiescommunities

on property valueson property valuesEvidences of changes in real estate Evidences of changes in real estate

marketsmarkets(Los Angeles, 1980-2000)(Los Angeles, 1980-2000)

Pretoria, Feb 28 - Mar 3, 2005Pretoria, Feb 28 - Mar 3, 2005

Introduction

• Are gated communities and their Are gated communities and their private governance effort at risk private governance effort at risk because of market failures in the because of market failures in the private provision of collective private provision of collective goods ?goods ?

Introduction

• GCs have a cost (infrastructure and collective goods building and maintenance)

• Efficiency of a GC = satisfaction of residents

• Unsatisfied owners -> turn-over -> risk of urban decayand progressive loss of property values.

Introduction

This paper aims at - assessing the impact of gates and walls

on property values over time (1980-2000)- addressing if gated properties generate

enough value to compensate the cost of private governance.

A systemic analysis:Property values as a key issue 1

A systemic analysis:Property values as a key issue 1

• Protecting property values

Inside the walls:price premium and homogeneity 2

Property values trend inside gated communities, compared to the neighborhood. 1990 Constant US $.

- are consistent with the global trend in L.A. :

- gated communities prices show a better resistance to real estate market crisis than in regular residential neighborhoods,

- After 1996, gated communities values increases faster than in their vicinities.

0

200

400

600

800

1000

1990 1992 1994 1996 1998 2000

Rolling Hills Gated Community

Palos Verdes

1 000 US$ 1990

0

200

400

600

800

1000

1990 1992 1994 1996 1998 2000

Hidden Hills (GC)

Mountain Gate (GC)

Granda Park (GC)

reste city of Calabasas

voisinageSan Fernando Valley

1 000 US$ 1990

• Protecting property values

Inside the walls:price premium and homogeneity 2

Property values trend inside gated communities, compared to the neighborhood. 1990 Constant US $.

- are consistent with the global trend in L.A. :

- gated communities prices show a better resistance to real estate market crisis than in regular residential neighborhoods,

- After 1996, gated communities values increases faster than in their vicinities.

0

100

200

300

400

500

600

1990 1992 1994 1996 1998 2000

Coto de Caza (GC)

Dove Canyon (GC)

Trabucco Canyon

Rancho Santa Margarita

1 000 US$ 1990

Inside the walls:price premium and homogeneity 2

• GCs more expensive than their neighbors ?Discrepancies:

-not signif. : 75%

- the richer the GC, the better the price premium;

-Disadvantage for GCs in middle-class heterogeneous areas.

• 1980-1990: gated communities gain property values...just as the other do...

Price change vs. increasing costof private governance 3

• 1990-2000: the Bubble has burst... And GCs are not as good as expected to make a difference in price.

Price change vs. increasing costof private governance 3

• Price change and risks of market failure.

Price change vs. increasing costof private governance 3

• Price change and risks of market failure.

Price change vs. increasing costof private governance 3

• Leisure World:“Do not bother as long as we are happy”.

Price change vs. increasing costof private governance 3

1980-1990 1990-2000

• Canyon Lake:A threatened “bit of paradise”

Price change vs. increasing costof private governance 3

1980-1990 1990-2000

Epilogue

http://gated.parisgeo.cnrs.frhttp://gated.parisgeo.cnrs.fr