The Impact of State Enterprise Zones on Urban Housing Markets

State-sponsored enterprise zones are a major economic development tool for over forty states. In many cases, the impact of these geographically targeted tax-based policies has never been evaluated. One roadblock to evaluation is the difficulty of controlling for the persistent effect of distressed local economic conditions while searching for possible programmatic effects. We examine the impact of enterprise zone programs on a variety of local economic growth rates in Florida, Pennsylvania and Virginia. We focus on housing prices because they capitalize expected long run changes in prosperity. We find that the states established zones in very distressed areas. The housing markets in zone areas are surprisingly strong following zone designation, in spite of continued weak income and employment growth. Estimates that distinguish the programmatic impact from differences arising due to pre-designation conditions indicate that two of the programs stimulated housing demand as measured by increases in home ownership and occupancy rates. However, the programs’ negative impact on labor market conditions offset the increased demand, causing housing prices to remain stable. JEL Classification Codes: R5, O1, H2