Rust Belt cities have numerous neighborhoods that are sometimes called “transitional.” Unfortunately, it’s not always clear in which direction they are transitioning. On one hand, these neighborhoods often offer proximity to downtown or another immobile amenity such as a waterfront or a university. This makes them desirable to young professionals, couples without children, and some parents who choose to raise their children in an urban setting. On the other hand, these neighborhoods have far more housing units than households due to decades of sprawl and filtering. This keeps rents low and means the neighborhoods cannot offer the exclusivity always found in gentrified core neighborhoods of the coastal cities.
The potential buyers walk around their favorite Rust Belt core neighborhood and see homes for sale that they like, or inexpensive fixer-uppers that they could work wonders on. But they also see tons of “for sale” signs. For every one of those signs, they have to wonder, “who is going to buy that one?” Will it be friendly neighbors who will maintain it attentively, or a neglectful, out-of-state speculator? As the neighborhood continues to transition over the next several years, will it become safer or less safe? When it’s time to sell, will the home have at least held its value, or will they lose everything they invested?
There could very well be enough young professional home buyers to purchase all of the homes for sale on the block, but only a few will have the guts to take the chance. The others may take the safe bet in the suburbs. This situation is what academics (“game theorists” in particular) label a coordination game. Independent actors could be better off if they all choose one action, but any one person is worse off if they choose the action and others don’t. Coordination games end well when there is a way to share information, or better yet, have actors make a commitment. With a little effort and creativity, sellers’ agents or a neighborhood advocate could make this happen.
Here’s the recipe I’m proposing. First, identify a small geographic area in a transitional neighborhood that has several homes on the market–six to twelve homes on two or three face blocks, for example. Schedule a meeting with the agents representing the homes. Choose one or two days in the spring or early summer and schedule short (2-3 hour) joint open houses that we’ll call a block party. The time window should be limited because in addition to viewing the homes, the purpose of the block party is for potential buyers to meet each other. This only works if they’re in the area at the same time, rather than scattered throughout the day. As buyers walk from house to house, the agents should explicitly encourage them to meet each other and talk about where they live now, where they work, why they like the area, and their plans for the future.
Now that the buyers know something about the houses and each other, we bring in the commitment mechanism. Buyers can submit contingent contracts that say, in the necessary legalese, “I will buy the house at 123 Water St. on September 1st for $X if 6 of the 8 other block party homes have offers from block party buyers.” The seller can accept or reject the offer, and they retain the right to sell the home to a higher bidder if one appears before the first of September. Of course, this setup presumes that housing demand is weak and offers are rare. If the block parties fail to generate enough offers to trigger the contracts, the buyers can resume their search. In some cases, they may have set their hearts on the home and opt to buy anyhow. If the parties work, then the neighborhood takes a big step in a good direction. Block party buyers would probably be willing to attend and greet people at a similar party the next year on an adjacent block.
— This article was submitted anonymously by someone very smart.