HOZ Interim Evaluation Concluding Observations

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The interim evaluation of the Homeownership Zone (HOZ) demonstration found that the U.S. Department of Housing and Urban Development's (HUD's) Homeownership Zone initiative has successfully demonstrated that cities can use mixed-income homeownership housing to transform their blighted areas. Today, many of the HOZ demonstration sites have become, or are becoming, viable homeownership communities. Clear evidence exists that the Homeownership Zone approach has improved the quality of life in these communities.

Signs of revitalization are greatest for those cities that also have growing populations and strong economies. However, even these cities credit HUD's Homeownership Zone initiative for their success. The federal Homeownership Zone grant provided a critical incentive at a time when market forces had not taken hold, and enabled the Homeownership Zone cities to target their resources, mobilize their communities and build investor confidence. Of equal importance, each city's federal contractual obligation required that the city maintain its commitment over many years, despite unexpected delays, competing demands for scarce resources or changes in city administrations.

Most of the Homeownership Zone cities are meeting or exceeding their goals for selling new homes to low- and moderate-income households and increasing the homeownership rates within their HOZ neighborhoods. Many of the new homeowners are first-time homebuyers from underserved groups, including many of the original residents. Most cities have blended the architectural styles of the new homes with existing buildings and applied other New Urbanist design principles.

The speed of execution is the one area where none of the cities met HUD's expectations. Initial timelines were overly optimistic given the preexisting conditions and problems associated with each of the Homeownership Zone sites. Delays were caused by land acquisition and site control issues, unforeseen subsurface conditions, and difficulty in obtaining required financing. In addition, not all of the Homeownership Zone cities have been able to attract middle-income homebuyers or commercial development.

Success also created obstacles for some of the cities. Escalating land values increased costs. Many long-time residents also expressed fears that the Homeownership Zone would become a higher income area as homes were resold, resulting is a less diverse area.

In retrospect, it is tempting to say that the most successful cities would have succeeded without the federal Homeownership Zone designation and demonstration grant. However, the success of these cities appears inevitable only in retrospect. For example, the residents and other local observers of the Indianapolis HOZ expressed only cautious optimism that the HOZ site could be transformed. It took many committed people with a shared vision and some very hard work over many years to turn a crime-ridden Indianapolis neighborhood nicknamed "Dodge City" into Fall Creek Place.

Perhaps the most important policy lesson learned from this study is that transforming a severely distressed neighborhood into a successful homeownership community takes time, but it can be done with sufficient commitment, vision, and concentration of resources.

The full Interim Evaluation of HUD's Homeownership Zone Initiative (PDF).

Print copies of the report can be ordered from Community Connections, HUD's information service, by calling 800-998-9999.