Low-Income Housing Unlikely To Affect Nearby Home Prices
A new study shows there are no major before-and-after price differences in 26 US metros.
The specter of declining property values is a frequent objection lobbed by locals when an affordable housing community is proposed nearby. But a new Redfin study may allay those fears.
Redfin’s analysis of more than 220,000 home sales nationwide found no consistent relationship between the addition of low-income housing and nearby home prices in most metro areas. The study, which spans 2007 to 2019, showed no significant pricing difference between homes in 18 of 26 metro markets surveyed after the construction of low-income housing developments nearby.
Eight markets surveyed showed significant difference, whether negative or positive. In Boston, Philadelphia, Washington, D.C. and Charlotte, homes near low-income housing developments sold for more after the development was constructed. Of particular interest: typically, the more expensive the homes were a neighborhood studied, the more likely it was that the low-income housing nearby would result in increased home prices in the neighborhood.
“The data suggests that it can be a win-win to put low income housing in expensive neighborhoods, benefiting both current homeowners and low-income residents,” said Redfin senior economist Sheharyar Bokhari in prepared remarks. “Because these projects are being built by private developers, they often have an incentive to identify places that have good prospects for growth. On the flip side, they’re also less likely to plan projects in areas that are less desirable.”
In four markets, however—Chicago, Las Vegas, Phoenix and Warren, MI—homes sold for less after affordable housing moved in nearby. In Phoenix, for example, where the median home price near low-income housing was $149,000, homes near low-income housing sites sold for 3.9% less than those farther away before the sites were constructed; after the low-income homes were built, that gap jumped to 11% less. One possible theory Redfin economists floated to explain this is that in some areas, new low-income developments are being put into areas that are in the midst of gentrification and skyrocketing price increases.
The remaining 18 markets showed no significant difference, according to the report.
“For children in low-income families, living in a neighborhood with less poverty can have a big impact on mental and physical health as well as long-term earnings throughout their life,” said Bokhari. “But economically integrated neighborhoods—those with low-income housing near homes for middle- and high-income households—are so rare because development of low-income housing often faces strong opposition from neighbors who are concerned that the project will lower their home values. These perceptions have made socio-economic segregation even more pervasive throughout the United States, further exacerbating social, racial and housing inequalities.”
If President Biden follows through on plans to expand the Low-Income Housing Tax Credit—which would “dramatically increase” the number of new or rehabbed affordable units—homeowners near those communities can “rest assured” their home values will be unaffected, Bokhari said.