Affordable Housing Development Is Good for the Neighborhood

Written By Ricardo Álvarez-Díaz

ABOUT THE AUTHOR | Ricardo Álvarez-Díaz is the founder and principal of the architectural firm Álvarez-Díaz & Villalón, with offices in Miami and San Juan, Puerto Rico.

Study: Low-Income Housing Does Not Lower Nearby Home Values.

For years, a common and strong objection to affordable housing development has been that it lowers the real estate value of homes in the surrounding areas. That, it turns out, is a myth.

Research shows that affordable housing does not have a long-term negative impact on nearby property values.

As a matter of fact, sometimes the opposite occurs—values go up. Low- and mixed-income projects can boost real estate values by building communities and replacing dilapidated structures.

A report published by residential real estate website Trulia late last year contradicts the age-old "Not in my backyard!" (NIMBY) argument. Trulia tracked housing prices and affordable projects developed during a 10-year span in the 20 most expensive U.S. metro areas—cities in dire need of affordable housing—and found no significant effect on nearby home values, with few exceptions.

Trulia looked at 3,080 projects financed through the federal Low-Income Housing Tax Credit (LIHTC) program between 1996 and 2006 and compared the values of buildings located within 2,000 feet of the projects with a control group located further away at 2,000 to 4,000 feet. Property values of the first group were near identical to those in the second group, showing that proximity to affordable projects did not have a negative impact on real estate values.

The exceptions were in Boston and Cambridge, which registered drops of $18 to $19 per square foot in housing prices, suggesting too-much-too-fast affordable housing development in those areas. The opposite was true in Denver, where values rose $7 per square foot.

The Affordable Housing Problem

Affordable housing generally describes housing, rental or owner-occupied, that costs 30 percent or less of the occupant's income. Due to runaway rent prices and lack of adequate and available affordable housing, the U.S. is facing an affordable housing crisis.

Economical and political forces, high land prices, community opposition, restrictive zoning laws and inadequate financing prevent cities from building affordable housing to meet growing demand.

Public Perception of Affordable Housing

Property values do not exist on their own. They are a product of perception. Clearly, we need to change peoples' mindset about affordable housing and what it can do for their communities.

It is extremely difficult to persuade homeowners to let go of a deep-seated belief that affordable housing will ruin their neighborhoods by (1) lowering real estate values and (2) by attracting the "wrong kind" of people who will damage property and drive crime rates up. They fear the worst, but their fears are unfounded, says Trulia.

“The bottom line for NIMBYs who fear that property values will take a hit when a low-income housing project locates nearby is that their anxiety is largely unfounded—at least in cities where housing is either expensive or in short supply,” Trulia reported.

Previous Studies, Similar Findings

Trulia is not the first organization to demonstrate that affordable housing development does not inevitably lower the nearby home values.

A literature review of quantitative studies conducted by University of North Carolina's Department of City and Regional planning showed that affordable housing's impact on property values is less significant than other variables and that its influence grows when projects are clustered.

A 2015 study by Stanford Graduate School of Business professors Rebecca Diamond and Timothy McQuade revealed that affordable housing development could be an effective policy to help revitalize and integrate low-income areas. After pulling data on 16 million transactions from 15 states as well as homebuyer race and income information over a 10-year span, they found that new LIHTC projects in poorer neighborhoods increased surrounding home prices and reduced crime.

A 2014 report on the relationship between affordable housing and home values prepared by Maxfield Research for the Family Housing Fund in Minneapolis showed little or no evidence to support the claim that affordable or low-income rental housing has a negative impact on owner-occupied housing in the surrounding area.

A 2012 study conducted for the Delaware Housing Coalition concluded that proximity to a project did not affect home values. According to the study, which analyzed data on home sales between 1970 and 2011, any correlation between lower property values and the presence of affordable housing was due to projects being built in areas where the property values were declining or already low.

The Bottom Line

Negative attitudes about affordable housing are deeply ingrained in our society. The NIMBY way of thinking will continue to linger until enough people are convinced—through educational initiatives by local governments, housing advocates and real estate associations—that affordable housing helps build, not destroy, communities.

1 Trulia defines low-income housing projects as those funded through the U.S. Low-Income Housing Tax Credit (LIHTC) program, using data collected by the U.S. Department of Housing and Urban Development (HUD). Trulia used its home value data to examine changes in nearby home values before and after low-income housing projects were completed, focusing on the time period prior to the start of the housing bubble in 2007.