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1 Introduction

This project was produced as part of the University of Pennsylvania’s Master of Urban Spatial Analytics Spring 2020 Practicum (MUSA 801) taught by Ken Steif, Michael Fichman, and Matt Harris. We would like to thank the City of Louisville for providing feedback and data.

1.1 How to use this document

The following document presents an analysis of affordable housing in Louisville, KY and EquiLiving, an interactive tool for the Louisville Affordable Housing Trust Fund (LAHTF) that will ultimately help proactively prioritize the allocation of affordable housing in neighborhoods with the greatest opportunity before it becomes more expensive to develop in that part of the City. EquiLiving provides a risk score for market housing areas in the city, indicating each neighborhoods opportunity for affordable housing.

This document begins with a case study predicting home sales prices in Louisville, KY, and is followed by a series of appendices that discuss data wrangling, data visualization, data sources, feature engineering, and model results. Navigate through the document either by using the panel at the left, or by clicking the hyperlinks throughout the document.

1.2 Abstract

Home prices have increased over the last decade throughout Louisville making it more difficult for low-income families to live in neighborhoods of opportunity - areas with good school systems, low crime rates and poverty. The Louisville Affordable Housing Trust Fund has been working on solving this problem by developing affordable housing in areas that allow low-income families to live in these types of neighborhoods. In order for the Trust Fund to provide the greatest amount of opportunity for low-income households, they need to build affordable housing in inexpensive neighborhoods today before they gentrify into neighborhoods of opportunity tomorrow. Therefore, by analyzing Louisville’s current housing market to predict future home prices, we designed a predictive planning tool that uses future trends to help determine where to build affordable housing.

1.3 Motivation:

Louisville, like many American Cities, have experienced high levels of development pressure over the years as demand for living in a city has increased. Single family home prices have increased by almost 6% (accounting for inflation) since 2008. New construction permits have increased 75% (617 to 1,082) since 2010. This new development demand may be making Louisville less affordable to all, and in particular low-income communities and communities of color where there is a shortage of ~30,000 affordable and available housing units in Louisville for extremely low-income households (at or below 30% AMI) (Louisville Housing Needs Assessment, 2019). The goal for Louisville is to ensure that despite recent neighborhood change, Louisville remains a place where all can thrive regardless of race or class.

Among a host of equity-related interventions currently underway in Louisville, the City has created a Louisville Affordable Housing Trust Fund (AHTF) to provide bridge financing for the development of affordable housing. In this project we explore the neighborhood change process in Louisville using parcel and neighborhood level administrative data. We then use this information to develop a price-index that can forecast home sale prices across space and time. Such forecasts may enable planners to better allocate limited affordable housing resources in the communities that will experience major changes in the socioeconomic makeup of neighborhoods in the future.

According to Opportunity Insights, a Harvard University research team, many low-income households are separated into areas with lower economic opportunity decreasing their chance of upward mobility (Opportunity Insights). “Every year a child spends growing up in an area with better outcomes causes the child to have better outcomes in adulthood” (Opportunity Insights). Therefore, having a low-income child grow up in a Neighborhood of Opportunity, some including a higher-income neighborhood with lower crime rates and better school systems, can provide the child with a better chance of earning a higher income than his or her parents. This economic challenge can be improved by developing affordable housing in Louisville’s neighborhoods of opportunity to help low-income families become socially mobile.

1.4 What is the Louisville Affordable Housing Trust Fund (LAHTF)?

The Housing Trust Fund, established in 2008, invests in affordable housing for residents who do not have enough income to afford market rate housing. Since 2014, the AHTF has allocated over $20 Million dollors to fund almost 1600 units throughout Louisville to improve the affordable housing shortage. Currently, they primarily focus on giving grants and loans for affordable housing projects focused on new construction, rehabilitation, rental assistance, and much more where priority is given to projects integrating low income housing with market rate housing (2020 Funding Application Guidelines and Project/Program Policies).

1.5 AHTF Allocation Process

There are six primary steps in the AHTF allocation process:
1. Housing Trust Fund Assessment: an annual assessment is completed to determine the demand for affordable housing in Louisville. This report outlines the City’s current housing market conditions to identify the types of housing projects the City needs.
2. Funding: Based on the recommendations from the Housing Needs Assessment Report, the City of Louisville provides an annual budget to the LAHTF.
3. Budget & Allocation: Based on the funding received, an annual budget is created with specific requirements of how the funds will be allocated. For example, the Louisville Metro Government allocated $5 million in funds where $4.75 Million is used for development activities, $250,000 for program administration, and $25,000 for supportive housing services.
4. Request for Proposals (RFP): Each year the LAHTF issues an RFP for a project that meets that the City’s housing needs. These projects are primarily focused on bridge financing.
5. Review Process: The LAHTF Program Committee, consisting of LAHTF Board Members, Kentucky AHTF Experts, Louisville Metro Housing Authority, and Louisville Metro Government. A variety of factors, including historical projects and current affordability trends are considered, but future change in homes prices are not.
6. Investment: The funds are provided to fund development of affordable housing projects.

Improvement to Allocation Process:
In order to improve the process, EquiLiving, a planning tool will be developed to provide home price prediction to help Trust Fund identify future changes in neighborhood home prices to better allocate funds to invest in affordable housing.

1.6 Modeling Strategy

To predict neighborhoods of opportunity in Louisville, we will forecast the change in home sale prices throughout Louisville using the repeat sales method, a technique that involves calculating changes in the sales price of the same piece of real estate within given timeframes. This relatively simple approach can be used to estimate shifts in home prices over periods extending from months to years. A major difficulty in generating home price indices is the heterogeneity of different units of real estate in terms of their location or features. Moreover, composition of the housing stock and the homes sold changes over time (months or years) adds to the difficulty.

Hedonic variables such as the built area of the house, the number of bedrooms or other house characteristics could be used to control for the differences in real estate features of each home. However, models with hedonic variables could face issues when there are problems concerning data availability or data accuracy. The repeat sales model addresses these problems by using a fixed control for each house in the dataset which can otherwise control for the hedonic variables. Perhaps the most well-known housing index that uses the repeat-sales method is the Case-Shiller National Home Price Index. The Case-Shiller Index measures changes in the value of the U.S. residential housing market by tracking the sale price and resale price of single-family homes that, as the name suggests, have transacted more than one time.

Price Index Example

Price Index Example

2 Data

2.1 Sources

The table below includes the data for our analysis: environmental data from Louisville’s Open Data website, fire data from the Louisville Fire Department, and property valuation data from the City of Louisville..

Dataset Source Years
Historic Home Sales Louisville Property Value Assessment 2000-2019
Historic Permits Open Data Louisville 2003-2019
American Community Survey, 5-Year Estimates US Census Bureau 2000-2018
LAHTF Projects Lousville Affordable Housing Trust Fund 2014-2019
Land Use Open Data Louisville NA

The data was also “wrangled” before being explored in the following section. This process included various transformations of the data in order to optimize predictive ability of each variable. For details on this procedure, please see Appendix.

2.2 Variables

Dataset Variable Description
Census TotalPop Total population
Census change_pct_owner_00_10 Change of homeownership rate from 2000 to 2010
Census gini_index Gini Coefficient
Census medHomePrice Median Home Price
Census medInc/MedHHInc Median household income
Census medGrossRent/MedRent Median Rent Price
Census pct_belowPov Percent of Families Below Poverty Level
Census pct_black Percentage of population that is Black
Census pct_white Percentage of population that is white
Census pct_owner Percentage of owner occupied housing
Census pct_SF Perctentage of single family homes
Census pct_MF Percentage of multi family homes
Census pctPoverty Percentage of population below the poverty line
Census pctBachelors Percentage of population with at least a bachelors degree
Land Use Per_Vacant_Land Percent of vacant land
Land Use tot_Vacant_Parcels Total number of vacant parcels (
Home Sales Price_2019 Home sale price adjusted for inflation
Home Sales Price Home sale price
NA HMA/H_Mkt_Area Housing market area

2.3 Unit of Geometry

For this analyisis, we use housing market areas (HMAs) as our geographic unit of analysis to predict home sale values. Louisville’s 21 housing market areas, defined by Louisville Metro Government based on residential neighborhoods, employment centers, and landmarks, are comprised of the 2010 census tracts, as shown in the map below (Louisville Housing Needs Assessment, 2019). Since the socioeconomic data is only available at the census tract level, part of our exploratory data analysis will be at census tracts levels. However, we try to spatailly show and analyze trends at the HMA level when possible since our model predictions are for each HMA. As shown in the map below, the HMAs located inside interstate 264 are considered the urban core, an urban setting including 8 HMAs (Northwest Core, West Core, Southwest Core, Downtown, University, Norteast Core, East Core, Southeast Core), while the non-urban core, a more suburban environment, consist of 13 HMAs. Throughout this study, we will compare trends inside and outside the urban core.

3 Exploratory Data Analysis:

The goal of exploratory analysis is to first explore where the LAHTF has invested in projects and backwards engineer the allocation process of HTF investments. Second, to explore the process of neighborhood change in Louisville focusing on development and socioeconomic trends across space.

Through our exploratory analysis, we answer the following questions:
  • Where has Louisville’s Affordable Housing Trust Fund allocated funds?
  • What is the relationship between key variables and neighborhoods receiving LAHTF projects?
  • What are the time and space trends of home prices across Louisville?
  • What are the time and space trends of permits across Louisville?
  • What are the relationships between socioeconomic characteristics and home prices across Louisville?

3.1. Where has LAHTF allocated funds?

Between 2014 and 2019, the LAHTF funded $20.3 million for 184 projects resulting in ~1600 units. Since 2016, the total amount of dollars invested in AHTF projects has increased each year resulting in more affordable units being developed. The chart below shows an annual summary of the LAHTF’s investments.

Year Projects Units Dollars ($)
2014 12 15 282,000
2015 9 9 152,000
2016 7 7 197,000
2017 37 331 2,390,000
2018 58 734 6,347,000
2019 61 477 9,976,000

The maps below show the spatial distribution of AHTF projects, units developed, and dollars invested in Louisville’s housing market areas. Even though a majority of the AHTF projects occurred inside the urban core, along the northwest portion, most of these projects resulted in single family homes while a greater amount of dollars were invested outside the urban core in multi-family units. There are a couple neighborhoods in the urban core that have multi-family units, but a majority of the multi-family units are outside.

Figure 3.1: Allocation of AHTF Investments by Housing Market Area (2014-2019)

3.2 What is the relationship between key variables and neighborhoods receiving LAHTF projects?

Louisville’s Affordable Housing Trust Fund allocation process prioritizes projects in neighborhoods based on the following criteria:

  • Declining homeownership
  • Blocks with multiple vacant or abandoned buildings or lots to develop complete blocks
  • Single-family homes in the urban core (typically the urban area with lower income levels)
  • Multi-family homes outside the urban core (typically the suburbs with higher income levels)

Comparing neighborhoods with and without AHTF projects provides a strong basis for understanding the relationships between neighborhoods with AHTF projects and exploratory variables. This allows up to see which variables see higher in neighborhoods with AHTF projects.

The 2010 mean values of different variables are plotted in groups (Affordable Housings vs. Not Affordable Housing) to determine which types of neighborhoods received LAHTF investments from 2014-2019. These plots provide supporting evidence to confirm the allocation criteria that the LAHTF considers for prioritizing investments. As shown in the charts below, AHTF were allocated to projects from 2014-19 in neighborhoods that have a lower percent change in homeownership, higher percentage of vacant land, lower median household income, higher income inequality, higher percent black.

Figure 3.2:Feature associations with the likelihood of Funded Affordable Housing Project through LAHTF