South-Western College Publishing - Economics  
Stadiums are Good for Making Your Home More Expensive, but Not for Helping People Find Work
Subject New Stadium Construction Increases Property Values
Topic Supply and Demand
Key Words

Property Taxes, Cost, Benefits, Property Values, Rent

News Story

Economists have tried repeatedly to justify or refute politicians' claims that building new sports stadiums will positively affect jobs, tourism, and local economic growth. However, they have never been successful. They have, however, found a positive relationship between sports stadiums and the cost of housing in the area surrounding such stadiums.

Using statistical analysis, two economists, Edward Coulson and Gerald Carlino, examined rents in 53 cities during the 1990s, including Houston, Dallas, St. Louis, Philadelphia, Memphis, and others. The economists found that rents in central-city areas where stadiums were located were 8% higher. In fact, each resident of a city with a National Football League team paid an additional $184 annually for the privilege of living there. Since higher rents imply higher property values, property tax receipts increase. Government revenues from property taxes were, on average, approximately $50 million higher in 1999 in NFL cities than in other cities. Given that governments rely on property taxes to finance a number of local goods, such as police, fire prevention, and public education, everyone in the city benefits as a result. In fact, they were able to use this information to explain trends in football franchise locations. For example, a few years ago, "the Houston Oilers moved to Tennessee and morphed into the Titans. But Dallas retained its iconic Cowboys. By 1999, rents in Dallas had risen about 37 percent while rents in Houston had grown more slowly, about 22 percent."

(Updated July, 2004)

Questions
1.

Illustrate the effect on property values and rents described in the summary above using a graph of supply and demand in the market for housing in an area close to a stadium.

2. Evidence of positive externalities arises with the construction of a new stadium in an area, as described in the article. What kind of positive externalities exist?
3. Why do you think that economists have not been able to find a positive impact on jobs in the area of a new stadium, but have been able to find a positive impact on rents and property values?
Source Daniel Gross. "A Team Makes a City a High-Rent District." The New York Times. 2 May 2004..

Return to the Supply and Demand Index

©1998-2004  South-Western.  All Rights Reserved   webmaster  |  DISCLAIMER