Pierluigi Morano

An evaluation model of the financial feasibility of social housing in urban redevelopment

Purpose – The purpose of this paper is to develop an evaluation model to support the decisions made by Public Administrations that influence urban regeneration and social housing to be implemented with the involvement of private investors. Design/methodology/approach – Carried out with reference to an Italian regional territory, the model, subject to the constraint of financial feasibility for the private investor and the conditions of the local real estate market, allows to define: the maximum amount of social housing, as a percentage of the housing planned, to be sustained by the private investors; the administered price of sale and/or lease of the social housing; the exchange-factor of the area to be redeveloped. Findings – The outcome of the research highlights the utility of the model as a tool to support the decisions made by Public Administrations in relation to urban planning. Practical implications – The model, in addition to being simple to use, is extremely flexible and can be applied without a...

Land Use, Economic Welfare and Property Values: An Analysis of the Interdependencies of the Real-Estate Market with Zonal and Socio-Economic Variables in the Municipalities of Apulia Region (Italy)

In the paper an analysis of functional correlations of property prices with the main locational and socio-economic variables, which generally contribute to define the market value of properties, has been developed. Locational characteristics are represented by the surfaces of soil used for the main functions, borrowing the logic of the system of classification of CORINE Land Cover (European Commission). The analysis has been contextualized to the 258 municipalities of the Apulia region (Southern Italy), and has been referred to two different moments (years 2006 and 2011), and two different market segments (residential and retail). The functional relationships between property prices and explanatory variables considered, estimated through a software that implements a genetic algorithm, are particularly interesting. The methodology outlined constitutes a valuable reference for the definition of models aimed at supporting, in a more rational and convenient way, public planning decisions and private investment choices.

Evaluation of vacant and redundant public properties and risk control: A model for the definition of the optimal mix of eligible functions

Purpose The purpose of this paper is to propose a decision-support methodology for public and private subjects involved in the enhancement of public properties. In particular, with reference to cases in which the disused public property can be sold and the range of functions that define the highest and best use of the conversion was identified, the developed model allows for the assessment of the financial feasibility of the initiatives, in relation to the corresponding investment risks. Design/methodology/approach The proposed model integrates the mathematical logic of goal programming for the evaluation of the financial conveniences of the parties (public and private) involved in the enhancement of a public property with statistical approaches (value at risk+exponentially weighted moving average) so as to determine the investment risk of the private investor. The application of the model to a real case study highlighted the potentialities of the proposed methodology. Findings The model allows to determine: the optimal mix of intended uses to be realized in the public property under analysis; the fair value of the public property for the parties involved in the transaction; and the Pareto-optimal frontier of the expected profits, as a function of the risk appetite of the private investor. Practical implications The defined model responds to the growing international interest in the enhancement of public buildings, satisfies the objectives of the substantial reduction of soil sealing and urban sustainability, stimulates the urban regeneration of deprived areas of the cities through the reactivation of large buildings that have been disused or underused for too long. Originality/value The present research allows to provide effective evaluation tools capable of outlining the opportunities of redevelopment initiatives and examines the risk factors that often invalidate the initial forecasts of the private entrepreneur and/or stop the activation of investments.

Bare ownership evaluation. Hedonic price model vs. artificial neural network

In the current downturn of European real estate market, the sale of the bare ownership is creating a growing interest of market operators. The attention to this formula is not only local, but also comes from foreign investors, attracted by the substantial saving on the purchase price, the revaluation of the property over time, as well as the breakdown of the tax burden and the costs of management and maintenance. The aim of this research is, first of all, to deepen the knowledge of the bare ownership market of residential properties. Secondly, it is to develop an effective tool for estimating the bare ownership. Therefore, on the same database and with reference to the same explanatory variables of the price of bare ownership, two estimation models are implemented, one based on hedonic prices theory and another using artificial neural networks ANN, in order to compare the respective performance.

Least median of squares regression and minimum volume ellipsoid estimator for outliers detection in housing appraisal

In the real estate sector, regression analysis is the most used method for interpretative and predictive purposes. However, the presence of outliers in the estimative sample can lead to ordinary last squared regression models that do not represent the investigated market phenomenon, with the consequence of producing unreliable assessments. In the present research, the issues of the identification and the removal of outliers are discussed. The outliers identified by the least median of squares (LMS) regression and the minimum volume ellipsoid (MVE) estimator are compared in order to test the coincidence or the diversity. A complete diagnosis of the data of the initial estimative sample is carried out, combining the robust residuals obtained with LMS and the robust distances obtained with MVE. The data are classified into regular observations, vertical outliers, good leverage points and bad leverage points, and cases to delete and those to keep in the sample are identified.

Fuzzy logic and coherence control in multi-criteria evaluation of urban redevelopment projects

In the decision-making process of urban regeneration projects, the lack of transparency is one of the most frequent causes of the deceleration and the stopping of initiatives. In the present work, with reference to a multi-criteria model recently developed for the municipality of Rome Italy, a solution to this issue has been proposed. Borrowing the formal logic of fuzzy systems, the possibility to assign a different importance to the parameters which explain the objectives of the redevelopment, to compare the projects submitted by different operators, as well as to make it clear the phase in which the public administration evaluates the priorities of the projects, has been introduced. A measure of the coherence of the projects submitted by private operators with the importance of the objectives of redevelopment set by the public administration has been computed. The result is a flexible structure of the algorithm developed, able to adapt to the specificities of the case study and to the changes that, over time, could arise in the evaluation mechanism of the decision maker.

Estimative Analysis of a Segment of the Bare Ownership Market of Residential Property

Estimative analysis of the property market aims to identify the parameters, economic variables and mechanisms at the basis of negotiations that take place in the market. The aims are explanatory and predictive. In this work, a multiple regression analysis is carried out to evaluate a segment of the bare ownership market of residential properties in a district of an Italian city. In particular, using regression, the explanatory variables in the price of the bare ownership are selected among those initially identified with the empirical observation of this phenomenon, the hedonic prices and weights of the explanatory variables are estimated, the estimation function of the bare ownership price is specified as well as the average depreciation rate determined by the usufruct. The discrepancy between the depreciation rates estimated with the regression and those set out by the law for tax purposes, but applied when estimating the bare ownership value, leads to distrusting the practical use of the latter in matters other than tax purposes.

Break Even Analysis for the Financial Verification of Urban Regeneration Projects

The involvement of the private investor in urban regeneration projects makes the verification of the financial feasibility of the initiative inevitable. Thus, the applicability of Break Even Analysis (BEA) is tested in this study. BEA is a financial analysis technique that allows to study the impact that technical, economic and organizational decisions may have on the financial feasibility of the project. The main methodological and operational aspects of BEA are discussed, with the application of an urban regeneration of a former brownfield site located in a city of Southern Italy being developed. The success of the experiment confirms the possibility to use BEA for the financial analysis of projects, especially in the early design stages.

Urban Redevelopment: A Multi-criteria Valuation Model Optimized through the Fuzzy Logic

In decision-making processes related to urban redevelopment, the clarity and the transparency play a primary role. In these contexts, the multi-criteria techniques, despite having a wide application, are not always adequate to represent and to quantify the quality effects of the urban initiatives, as well as to compare the alternatives for choosing the best solution, phases in which the logical rules followed by the decision-maker are not usually explicited. In the present work, with reference to a multi-criteria model recently developed for the municipality of Rome (Italy) to streamline and make more transparent the definition of urban regeneration projects, a solution to these issues is proposed, through the use of a fuzzy logic system. Using linguistic variables and expressions of ordinary language, logical rules followed by the decision-maker in performing the evaluations have been formalized. The result is a decision-making process clear and easy to understand, with positive effects on the legitimacy of the decisions of the Public Administration.

The Transfer of Development Rights for the Regeneration of Brownfield Sites

The redevelopment of brownfield sites requires the involvement of the skills and resources of the private operator for the technical risks associated with the transformation and the high financial commitments. In the current scarcity of public resources, among the most widely used schemes there is one that provides development rights of equivalent value to locate on the areas to recover in order to compensate the amounts incurred by the private investor. The model developed and tested in this paper deals with this theme. It produces a wide range of possible urban parameters to attribute to the regenerated areas, upon which it is possible to develop the negotiation between the public and private sectors in order to define the solution to be implemented. The experimental results of the model highlight the usefulness of activating regeneration initiatives, and in particular of contaminated sites.