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Here Comes The Neighborhood: Five Reasons Why Affordable Housing Actually Boosts Property Values

By Jeff Vasishta September 22, 2016
Photo courtesy of Martinho Smart/Shutterstock

Hey, let’s throw a block party! Low income housing is coming to our neighborhood,” said no one ever. But maybe they should.

Despite the “There goes the neighborhood” cliché about low income property, a study from Rebecca Diamond and Timothy McQuade of Standford Business School finds that crime rates actually fall and property values rise when subsidized housing is built in a poor neighborhood. But why?

Related: Team Agorafy Picks The Top Five Affordable Rentals For College Grads: Cause That Rent’s Not Gonna Pay Itself

Well, you can read the study—at the risk of situational narcolepsy—but here’s what you need to know:

Data was taken from 129 countries in the US and it said that working class neighborhoods (with an average income of $26,000) saw property values increase by 6.5 percent when low income housing (LIH) came to town.

In the more affluent neighborhoods (with an average income of $54,000), the property values dropped by 2.5 percent (for the same radius of 0.1 miles around LIH).

Another kicker was that LIH actually decreased segregation and crime. Go figure. But don’t start calling the builders in just yet. Here’s our take on what’s really going on and the reasons why affordable housing causes property values to spike in certain areas.

Qualifying for a below market mortgage is not the same as getting a liar loan (no doc, no assets and sometimes no pulse. Like literally, they gave loans to dead people.) which were all the craze before the financial crash. They still have to apply for the space and be approved. Generally approved mortgage applicants for under market homes are working people with decent credit scores. Ditto for renters. They’re good for the community and good people make good neighborhoods.

This is the one that gets many New Yorkers raging. When affordable housing, in places like Bushwick and East New York is attached to new, larger developments with market rent apartments, skeptics argue that it encourages gentrification. The net result, as we all know, is higher price values. Great if you want to sell your home. Not so good if your rent gets jacked up or you’re trying to buy a place.

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People who are approved for affordable housing rentals don’t want to lose a good thing. They pay their rent on time and keep their apartments in decent condition, therefore stabilizing the neighborhood.

Affordable housing is generally new housing. Everyone wants to live near newer buildings. They in turn spur more new development and so a neighborhood takes on a new aesthetic. The net result is an increase in property values.

It’s cost effective. Low income neighborhoods are cheaper to buy and build in. Property values can only go one way and that is up. In more expensive areas, there is less room for equity appreciation.

Jeff Vasishta

ABOUT THE AUTHOR Jeff Vasishta

ABOUT THE AUTHOR Jeff Vasishta

Jeff is a writer, husband and father but not necessarily in that order. As a music journalist he counts Prince, Beyonce and Quincy Jones amongst those he’s interviewed. He's also owned and flipped homes in Brooklyn, NJ, CT and PA.

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