As Fed Reserve Scholar, Professor Cohen Explores Airport Noise, Housing Vacancy Ripple Effects
Jeffrey Cohen, a professor of finance and real estate, served as a visiting scholar at the Federal Reserve Bank of St. Louis for four days in May.
During that time, he collaborated with Cletus Coughlin, the Bank’s senior vice president, on research projects addressing airport noise on nearby neighborhood demographics and the ripple effect of housing vacancies.
In the first project, Cohen and Coughlin examined how changes in the geographic concentrations of Hispanic and African-American populations are correlated with changes in the likelihood of being exposed to more airport noise. Their study focused on Atlanta during 2003 and 2012.
“While the level of noise has declined over the geographic area in 2012, compared with 2003, we find that the distribution of noise among Hispanics and blacks became more inequitable,” he said.
“At least two potential mechanisms could generate these correlations,” Cohen said. “Due to residential mobility, income and preferences could combine to produce a concentration of minorities in certain neighborhoods. Or, perhaps, noisier flight paths are imposed upon neighborhoods with a higher minority population, as a result of discrimination. Our findings contribute to the broader literature on environmental justice.”
They also explored how housing vacancies in particular parts of the country might be impacted by vacancies elsewhere, and other factors.
“Some vacancies in the housing market, for example, unoccupied housing units, similar to unemployment in the labor market, are a “natural” feature of a well-functioning market,” Cohen said. “For example, homeowners may experience changes in their family or employment situations such that the existing house no longer meets the homeowners’ needs, and, after a search, more appropriate housing is purchased.”
While those reasons may be viewed as contributing to producing a natural rate of vacancy, there are circumstances that cause vacancies to rise above some “natural” rate.
Similar to involuntary unemployment, recessions that lead to foreclosures can cause vacancies to exceed their natural rate. During the housing crisis associated with the Great Recession, homeowner vacancy rates reached levels far greater than at any time since measurement began in the mid-1950s.
Pinning down the natural vacancy rate can be challenging. Similar to the natural rate of unemployment, the natural rate of vacancy likely differs across regions of the country, and even within various cities, and can change over time. Using models, the researchers were able to provide insights relating to these issues nationally and regionally as well as links between regions within the United States.
“The Great Recession merits special attention in our analysis because of the depth and duration of its national and regional impacts on homeowner vacancy,” Cohen said.