Olympic Games not a proven positive economic catalyst for host cities, study suggest
The long-held belief that the Olympic Games are a catalyst for urban transformation that may jumpstart social, economic, and political change in host cities does not always hold true, according to a study by NYU Schack Institute of Real Estate’s Constantine E. Kontokosta, PhD, PE.
The Price of Victory: The Impact of the Olympic Games on Residential Real Estate Markets notes that although the Olympics are believed to generate substantial economic benefits – including a lasting marketing image, foreign investment, an increase in tourism, new infrastructure improvements, and more – the new report counters the notion that hosting the Games results in a positive economic legacy.
Kontokosta, a clinical associate professor of real estate at NYU Schack and the director of the Institute’s Center for the Sustainable Built Environment, asserts that the Games’ long-term impact on a host city are dependent on a number of factors, including the coordination of planning, the amount of Olympic-related development required, and the relative scale of the total Olympic investment.
“Hosting the Olympic Games is seen by many cities as an unprecedented opportunity to turn a short-term event into a positive, long-term legacy,” said Kontokosta. “However, the research shows that hosting the games may not yield the desired result and comes with a significant opportunity cost. It’s imperative that a thorough examination of existing economic, social, and political conditions and realistic, long-term expectations are in place before submitting a bid to host the Olympics.“
Although there have been numerous attempts to assess the impact and effects of the Olympic Games on the host city and country, previous studies have omitted an examination of real estate prices, a notable omission since residential real estate assets have become an increasingly important part of national and personal wealth. In 2006, the report reveals that residential real estate accounted for more than half of the United States’ fixed capital stock, one-third of the gross private domestic investment and about one-seventh of all personal consumption expenditures. Residential real estate prices also have significant implications for city residents, both in terms of housing affordability, household wealth, and the level of tax revenues generated to fund and supply city services.
The study employs adjusted interrupted time-series regression models to explore the impact of six Olympic Games between 1984 and 2000 – five Summer Games and one Winter Games – on residential real estate prices over a 16-year period. The cities include: Los Angeles, Seoul, Calgary, Barcelona, Atlanta, and Sydney. For each host city, non-host comparison cities were selected as a control group to create a counter-factual test for house price movements in similar cities that did not host the Games.
The outcomes were found to vary considerably, affected by the city’s motivation for hosting (which influences planning and project funding allocations), its resources, and its position in a regional and global hierarchy of cities.
Of the six Olympic cities studied, Barcelona and Sydney experienced significant positive impacts, while Los Angeles, Calgary, and Atlanta reported findings that indicate negative effects from hosting. The analysis for Seoul revealed in no statistically significant impact.
The results differed based on several factors, including the level of Olympic-related investment, the source of funds and the tax burdens required to repay costs, the scale of the planning effort and its integration into an existing planning framework, and the pre-Olympic political and economic standing of the host city and country.
“Although the Olympic Games can have a positive impact on the residential real estate market of a host city, research shows that it can also have a significant negative outcome, relative to other similar cities, that is not commensurate with the cost of hosting the games,” said Kontokosta. “The Olympics can have a positive outcome, but only when planning and investment for the event fits into a longer-term urban development strategy. The opportunity cost of hosting is substantial, and there is a tendency to fast-track projects under time pressure without fully considering alternative viewpoints and other possible investments. In short, the widely held view of the positive effects of hosting the Olympics seems to have emerged more from feelings of national pride and anecdotal evidence, rather than actual economic analysis.”
About the NYU Schack Institute of Real Estate
The NYU Schack Institute of Real Estate (www.scps.nyu.edu/schack) was founded in 1967, at the initiative of prominent real estate leaders who encouraged NYU to establish an academic center that provided an educational foundation for professionals within their industry. Today, NYU Schack is home to graduate degree and related graduate certificate programs—notably the M.S. in Real Estate, the M.S. in Construction Management, and the M.S. in Real Estate Development—which enroll almost 800 full- and part-time students from more than 30 countries and have nearly 2,500 alumni degree-holders around the globe. In addition, each year approximately 4,200 working professionals enroll in the Institute's professional certificate programs, noncredit courses, and licensure-related offerings in such areas as real estate finance, sales and brokerage, sustainable design, facilities management, and architecture and civil engineering. The Institute also houses the NYU REIT Center and the Center for the Sustainable Built Environment and hosts key industry events, including annual conferences on Real Estate Capital Markets and REITs. NYU Schack is one of several comprehensive academic divisions within the School of Continuing and Professional Studies (NYU-SCPS), the NYU home for study and applied research related to key knowledge-based industries where the New York region leads globally.
Christi Mueller 212-889-0808.
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