Study Reveals Low-Income Housing Does Not Affect Local Property Values
A new study by Trulia shatters the assumption that affordable housing is bad for the neighborhood.
Some things in real estate are absolutes. Location is everything, the worst house on the best street is a sure-fire investment, and low-income housing projects decrease the value of their surrounding neighborhoods. Right?
Well, according to a new study conducted by Trulia, the assumption that affordable housing units negatively impact their neighboring areas is, in fact, false. Focusing on America’s 20 most expensive housing markets, the study looked at 3,083 low-income housing projects completed between 1996 and 2006, and the effect of their construction on the values of nearby homes. The conclusion? “With a few exceptions, the presence of low-income housing seems to have had no impact,” throwing a spanner in the works of widely accepted real estate lore.
Rather than simply reassuring potential buyers that local low-income projects won’t tank their future investments, this revelation could actually go some way to establishing increased opportunities for new affordable housing units. It’s no secret that in the country’s least affordable markets there is often significant resistance to the construction of low-income housing units, based on the very assumption that this study eradicates. With statistical evidence to back up countering ideology, government initiatives and construction firms have a larger and more stable arsenal with which to ward off local dissenters.
So, how did Trulia’s economists reach this conclusion? They compared median price per square foot of homes within 2,000 feet of low-income housing projects with that of homes farther away—2,001 to 4,000 square feet—built over a 20-year period. Covering the decades before and after each housing project was built, the study comprised projects funded by the Low-Income Housing Tax Credit program abd administered by the Department of Housing and Urban Development. En masse, homes nearby and homes farther away from the projects increased in value at the same rate.
There are, however, always exceptions to the rule: In Boston and Cambridge, Mass., nearby home values decreased by $18 and $19 per square foot respectively, while in Denver, nearby homes actually increased by $7.35 per square foot. There could be a number of reasons why both increase and decrease occurred, but the most convincing is that in both Boston and Cambridge, the housing projects included in the study were already located in areas dense with low-income and affordable housing. If these area’s demographics and housing populations changed little over the 20-year period, this would explain the lack of nearby value increase. Similarly, the area in which Denver’s low-income projects are situated is likely to have undergone a regeneration, transforming from low-income neighborhood to in-demand, “cool” locale. Hence the increase in value.
So how can this study actually make an impact on the low-housing market? Naming and shaming could be the most powerful tenet of Trulia’s report, revealing as they did that San Jose is the most aggressive in adding low-incoming housing units (7.81 per 1,000 people) while Oakland added the fewest units per capita (0.52 per 1,000 residents).
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