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Beyond Aesthetics: How Billboards Affect Economic Prosperity Jonathan Snyder Samuel S. Fels Fund December 2011 Introduction This paper seeks to answer the question of how billboards affect the economic prosperity of their surrounding areas. By combining US Census data, local home price data, and zoning code data with geographic information system (GIS) and statistical analysis tools, one can examine the complex interplay between billboards and economic prosperity. After a brief examination of the history of billboards and billboard regulation and a review of the available literature, this paper will analyze three fundamental questions: 1. What impact do billboards have on real estate prices in the City of Philadelphia? 2. What impact do billboards have on home value within census tracts in the City of Philadelphia? 3. What impact do billboard regulations have on median income, poverty rates, and vacancy rates in different cities in the United States? Philadelphia was selected for this research for several reasons. It is large enough to make a careful examination of the interplay between billboards and real estate prices. Further, it has elements of both weak and strong market cities in that it has an affluent residential downtown area with significant purchasing power1, but as a whole the city has a lower median income compared to the national average.2 Lastly, Philadelphia has a zoning code that caps billboards and attempts to decrease their number through attrition, but it also has a history of allowing billboard companies to bypass the restrictions within the zoning code.3 1 $74,317 household income according to the Center City District’s November 2010 retail report. 2 US median household income is $51,425 according to US Census 2005-9 estimates, Philadelphia median household income is $36,669. 3 The passage of Bill 100720 creates a signage district in Center City. 1 In short, Philadelphia presents a good case study for this analysis as it embodies the different arguments and tools of the debate while containing both strong and weak market characteristics. Additionally, because of research conducted at the University of Pennsylvania, the locations of all billboards are known, thus allowing much of the spatial analysis to occur. Literature Review A review of available literature reveals a dearth of information on the economic impact of outdoor advertising billboards on the surrounding community. A number of articles have focused on the economic benefit to businesses, and one study examined how billboards affect the values of the property on which they reside, but we found no studies that examined how billboards affect the surrounding area. Further, we found no studies that have been conducted which examine the relationship between billboard controls and the economic condition of cities within the United States. The argument against outdoor advertising which appears most often focuses on billboards’ adverse visual and aesthetic impact on the surrounding community. Harvey K. Flad, emeritus professor of geography at Vassar College, comments on the “visual pollution” created by billboards4 and how they “desecrate the landscape.”5 Similarly, Charles R. Taylor, professor of marketing and Weih Chang of Villanova University describe how the public and law makers responded to the growth of outdoor advertising with legislation designed to curtail it.6 An article in the Journal of Law and Politics made the comment that “…the American public has consistently found outdoor advertising to be intrusive, ugly, crassly commercial, and a taint on nature. The story of billboards in America is thus characterized by an ongoing struggle between an expanding industry and a resistant public.”7 The arguments against billboards traditionally have followed this aesthetic narrative with varying degrees of success in terms of restricting the proliferation of billboards. In its assessment of its billboard regulations, the City of San Jose notes that “Signs play a significant role in the visual environment of a city in that they are prominent structures that are typically, and deliberately, highly visible in the public 4 Flad, Harvey K, "Country Clutter: Visual Pollution and the Rural Roadscape," Annals of the American Academy of Political and Social Science, 533: September 1997, pp. 124-125. 5 Ibid, p. 123. 6 Taylor, Charles R. and Weih Chang, "The History of Outdoor Advertising Regulation in the United States," Journal of Macromarketing, 15(47): 1995, pp. 48. 7 “Note: Judging the Aesthetics of Billboards," Journal of Law and Politics, 23: 2007, pp. 173. 2 realm. Billboards are more prominent than most other signs due to their size and height.”8 Flad goes further in stating that “they [billboards] actively seek the eye and tend to dominate the visual field.”9 From their first appearance in the late 19th Century through today, billboards have met resistance on aesthetic grounds. However, the arguments against billboards often did not discuss their impact on the surrounding area. Some anti-billboard writers do discuss the economic impact of billboards but do not find the argument compelling. For example Flad comments that “…they [billboards] also do not perform an effective function. They simply encourage consumption.”10 Other researchers such as Taylor and Chang, in referencing a previous study, note that “…billboards had critics long before the turn of the century. While public opinion and legislation managed to curb some of the most blatant abuses, outdoor advertising was such a valuable and economical medium for many advertisers that it was difficult to control (Wood 1958).”11 They further comment that “the [billboard] industry was quick to point out that billposting had a positive effect on the economy, both by helping landowners better utilize their property and by 8 "Billboards on Private Property & Off-Site Advertising on City Property: An Assessment of City of San Jose Sign Ordinance Regulations," City of San Jose, p. 7. 9 Flad, p. 124. 10 Flad, p. 123. 11 Taylor and Chang, p. 50. creating positive publicity for products and services.”12 Despite the number of articles arguing for and against billboards on aesthetic, constitutional, and economic grounds, we are not aware of any studies that have been conducted which examine how billboards impact the area adjacent to them. Nor have any studies of which we are aware been conducted which examine whether billboard restrictions in different cities impact economic prosperity. A study conducted by Lilley III, DeFranco, and Buffalo of iMapData, Inc. entitled “The Outdoor Advertising Market and its Impact on Tampa Property Values” examined how billboards impacted the value of property in Tampa, Florida.13 However, the study only examined the value of the property on which the billboards were located and determined that their presence elevated the property value. This is not an unexpected conclusion as the billboards represent income to the property owner. However the study did not attempt to assess whether those same billboards had any impact on the property values in the surrounding area. In their paper “Ghettoizing Outdoor Advertising: Disadvantage and Ad Panel Density in Black Neighborhoods”, Kwate and Lee 12 Ibid, p. 53. Lilley III, William, Laurence J. DeFranco, and Clarence W. Buffalo, “The Outdoor Advertising Market and its Impact on Tampa Property Values,”iMap Data Inc. July 24, 2001. 13 3 examined how the quantity of outdoor advertising varies between neighborhoods which are predominantly black and predominantly white.14 Their research showed that “black neighborhoods have more total billboards…than white neighborhoods”15, however “income level was not significantly related to ad density after controlling for vacant lots.”16 More directly related to the discussion of billboards and economic prosperity, they concluded that “…the visual disorder caused by a high density of outdoor ads may reproduce inequality by marking neighborhoods as ‘the ghetto’ and reducing assessed value by residents and business owners.”17 One reason for the paucity of studies on the issues of the economic impact of billboards on the surrounding area could be the difficulty in the valuation of open space. In their article “The Economic Value of Open Space,” Fausold and Lilleholm comment: Like all natural ecosystems, open space provides a variety of functions that satisfy human needs. However, attempting to assign monetary values to these functions presents several challenges. First, open space typically provides several functions simultaneously. Second, different types 14 Kwate, Naa Oyo A. and Tammy H. Lee, “Ghettoizing Outdoor Advertising: Disadvantage and Ad Panel Density in Black Neighborhoods,” Journal of Urban Health: Bulletin of the New York Academy of Medicine. 84(1): 2006. 15 Ibid, p. 21. 16 Ibid p. 27. 17 Ibid, p. 29. of value are measured by different methodologies and expressed in different units. Converting to a standard unit (such as dollars) involves subjective judgments and is not always feasible. Third, values are often not additive, and “double counting” is an ever-present problem. Finally, some would argue that it is morally wrong to try to value something that is by definition invaluable. relevant regulation might be appropriate. An examination of billboard controls between cities could also provide useful information in order for cities to make informed decisions as to which regulations (if any) to apply in order to provide the most benefit to their city. Findings Analytical Overview21 At a minimum, they say, open space will always possess intangible values that are above and beyond any calculation of monetary values.18 They do mention that “the most direct measure of the economic value of open space is its real estate market value”19 which suggests that the market value of the real estate could be a useful proxy for evaluating whether billboards impact adjacent home values. A study examining home value and proximity to cell phone antenna towers demonstrated the effectiveness of using this approach to analyze home values in relation to the homes’ distance from a tower.20 Using a similar methodology in evaluating billboards could provide useful indicators of the true economic benefits and costs to a community of such billboards in order to determine whether This paper attempts to determine how billboards affect economic prosperity. Economic prosperity is a broad concept, and the paper analyzes several characteristics that can be easily measured and captured: median income, poverty rate, vacancy rate, and home values. For the city of Philadelphia, this data is publicly available through the US Census, the University of Pennsylvania’s Cartographic Modeling Lab, and the City’s Recorder of Deeds Office. Using ArcGIS and SPSS software, this paper marshals the data to answer the general question of how billboards affect economic prosperity. Question 1: What impact do billboards have on real estate prices in the City of Philadelphia? 18 Fausold, Charles J. and Robert J. Lilieholm, “The Economic Value of Open Space," Landlines, 8(5): September 1996, p. 2 19 Ibid, p. 3 20 Bond, Sandy, “The Effect of Distance to Cell Phone Towers on House Prices in Florida,” Appraisal Journal, Fall 2007 4 21 This section presents a brief examination of the analysis which follows. For a more thorough review of the methodological considerations, please examine Appendix XX. In Philadelphia, there is a statistically significant correlation between real estate value (as measured by sales price) and proximity to billboards. Using 2010 sale price data, and taking into account adjacent amenities such as libraries and parks, residential real estate within 500 feet of a billboard is $30,826 less valuable (p=.035) at the time of purchase, according to the statistical model shown in Table 1 below, and further described in Appendix A. According to the model, the amount of livable area is the most important factor in determining the price of a property. For each additional SQ FT of livable area, there is an $89.34 increase in price. Similarly, properties located within 1,000 ft. of amenities (such as Bike Paths, Libraries, and Parks) are associated with a higher price. Properties purchased within 500 ft. of billboards Statistical Model for the Price of Properties within 500 ft. of a Billboard Standardized Unstandardized Coefficients Model 22 1 25 B (Constant) Coefficients 26 27 Std. Error Beta -4936882.57 315905.74 89.34 .46 82254.61 Library 1000 Ft Park 1000 Ft Livable Area Bike Path 1000 Ft Year Built Billboard 500 Ft t 23 24 Sig. -15.628 .000 .820 195.084 .000 11494.54 .030 7.156 .000 120130.59 17703.46 .029 6.786 .000 102946.99 11027.36 .040 9.336 .000 2510.88 162.52 .065 15.450 .000 -30825.85 14634.00 -.009 -2.106 .035 a. Dependent Variable: Sales Price Table 1 22 Multiple variables were tested in different combinations, most of which were found not to be statistically significant. This model includes only statistically significant variables (p < .05). 23 A measure of how well the variable fits the model. 24 Denotes whether the variable is statistically significant. Numbers less than .05 are statistically significant. 25 The unstandardized coefficient indicates the strength of a relationship between an independent variable (e.g. Livable Area) and a dependent variable (e.g. Sales Price). Results are expressed as a change in the dependent variable per unit change of the independent variable. i.e., for each additional square foot of Livable Area, a property increase in value $89.40. 26 Standard error of the independent variable 27 The Standardized Coefficient or beta weight is the relative strength of each independent variable in the regression equation. The larger the absolute value of the beta weight, the larger the influence of the independent variable. 5 have a decrease in sale price of $30,826 and the correlation is statistically significant (p ≤ .05). Question 2: What impact do billboards have on home values within census tracts in the city of Philadelphia? An analysis of Philadelphia census tracts and various economic prosperity indicators such as median income, percentage of vacant parcels, and population decrease do not reveal a correlation between billboards and economic prosperity. However, the analysis reveals a correlation between billboard density and home value. Billboards negatively impact home values. For each additional billboard in a census tract, there is a $947 decrease in home value. Considering that the mean number of billboards in a census tract is 4.8, the resulting decrease in value is $4,546 per house for homes in such districts when compared to the price of an equivalent home in a census tract without billboards. Each additional billboard further degrades home value, but the reason behind the depression in home values is a nuanced one. Of course, billboards tend to be located along commercial corridors, yet our analysis shows that it is not the presence of the commercial corridor itself which has a negative impact on home values. Indeed when the variable “Percent of commercial properties” was included in the regression model, it was found to be not statistically significant. Thus, in this analysis, it is the billboard itself that has a depressing effect on the whole of the census tract. What this analysis cannot tell us is what characteristics of the billboard contribute to this problem. Is it the pole, the billboard itself, the lights upon it, or the commercialization of the viewscape28 of local residents? It is likely that it is all, or some combination, of these factors that leads to this impact, but such analysis is beyond the scope of this paper. Question 3: What impact do billboard regulations have on median income, poverty rates, and vacancy rates in different cities in the United States? The sign codes of 20 cities listed to the right in Table 2 were condensed into a series of yes or no questions indicating the presence of a regulation or restriction pertaining to billboards. After all of the cities’ answers were tabulated, a cluster analysis was undertaken which divided the cities into those having higher restriction (labeled “strict” in the following charts) and those having fewer restrictions (labeled “not strict” in the following charts). 28 Lise Burcher in the case study “Urban Character and Viewscape Assessment “ Isocarp Congress 2005 define viewscape as “a visual connection that occurs between a person and the spatial arrangement of urban and landscape features.” 6 These cities were divided into strict and not strict, and added as a variable to a chart listing median income, vacancy rates, and poverty rates. The medians of these rates were compared for strict and not-strict cities as seen below in Figures 1, 2, and 3. Table 2 Philadelphia Jacksonville Indianapolis San Francisco Youngstown Austin Tampa bay Columbus Houston Fort Worth Phoenix Charlotte San Antonio Detroit Chicago El Paso San Diego Memphis San Jose Baltimore Median Income The mean of the median income for strict control cities is higher than that for not-strict cities. Figure 1 Billboard Control CpControl Poverty Rate The mean poverty rate for cities with stricter sign controls is lower than for cities without strict sign controls. Figure 2 7 Billboard Control Home Vacancy Rates The mean home vacancy rate is lower for strict sign control cities. Figure 3 Billboard Control Conclusion This paper provides an approach and findings in an attempt to quantify the effects of billboards on real estate values in Philadelphia, and multiple measures of prosperity in 20 cities across the United States. Across these multiple measures, billboards were found to have negative financial and economic impacts. In Philadelphia, there is a statistically significant correlation between real estate value (as measured by sales price) and proximity to billboards. Properties located within 500 ft. of a billboard have a decreased real estate value of $30,826. Additionally, homes located further than 500 ft. but within a census tract/community where billboards are present experience a decrease of $947 for every billboard in that census tract. Income for strict sign control cities is higher than that for not-strict cities. Furthermore, the home vacancy and poverty rates for strict control cities are lower. Having strict sign controls does not negatively impact the economic prosperity of a city. About the Author: Jonathan Snyder is an urban planner from Philadelphia, Pennsylvania. He is a graduate of the University of Pennsylvania, with a Master in City Planning degree and a concentration in Community and Economic Development. 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