Monthly Myth: Low-Income Housing Means Low Home Value


Affordable housing is a major concern for our society. It’s a concern for the world, a concern for the country as a whole, and a concern for states and cities.

The lack of quality affordable housing was a problem long before the COVID-19 pandemic struck the globe and impacted our economy. But since the virus has gripped the nation, the lack of affordable housing has become even more problematic. People who were just getting by before the pandemic are now close to homelessness, if they are not there already. 

But there are efforts to create affordable housing all across the country. For example, in the “North County” region of the San Diego metro area, two cities are planning to build housing for people with lower incomes. These are just two examples of efforts to make housing more affordable in regions from coast to coast.

Affordable housing can bring many benefits, especially to those who are able to occupy the properties. But there is often resistance to these developments, and much of this resistance comes from a myth related to housing prices.

 

The Myth: Low-Income Housing Means Low Home Value

If you read news stories about neighborhood resistance to low-income housing, the opponents of these developments often bring a variety of concerns. They may be concerned with crime, drug use, and other illegal activities. Right or wrong, all of these concerns can be, at least on some level, connected to lower incomes.

Another concern that homeowners have is property prices. They assume, with legitimate concern if not factual evidence, that when low-income developments are erected in their neighborhood, property prices will inevitably decline.

This, in its simplest form, is the myth: when a low-income property is built, it will mean nearby houses lose value. Or, similarly, nearby homes won’t gain value as rapidly as they would have.

But this is not the case, at least not according to most studies. In fact, if you look at some studies and reports, you could make the claim that the opposite is true: under the right circumstances, low-income housing and affordable housing can actually have a positive impact on property values! 

 

Real Estate Reality: Low-Income Housing Does NOT Lower Home Values

The accuracy or falsehood of this myth is difficult to pin down, largely because the issue is so complicated.

It seems like a simple matter for research. Just look at neighborhoods with low-income and affordable housing, then look at nearby property value growth, then compare that to state, regional, or national housing-value growth rates. Easy.

But studying this issue is complex, largely because there is no specific definition of “affordable housing” or “low-income housing.” What may qualify as “low-income” in one region of the country may not qualify in another.

Despite the challenges and complexities, when you sort through the data and take a broad-level approach, it becomes clear that this myth is false.

And there is plenty of evidence that busts this myth…

In Raleigh, North Carolina, there was a growing concern over affordable housing built by Habitat for Humanity. This non-profit organization, which has a positive reputation for building affordable, moderate, quality homes, was building a variety of residential houses in the area. Property owners, however, became concerned that these homes, however important to the greater community, may be harming their property values. The Raleigh Regional Association of REALTORS® commissioned a study with rather surprising results. Their results showed that homes built by the non-profit do not have a significant impact on the values of surrounding homes.

A report from The Center for Housing Policy cites a variety of studies that reach the same conclusions. In their report, they reference studies that include:

•   A 1999 survey from California that examined 31 studies that examined affordable housing and their impact on nearby property values. 19 found no effect at all, while 7 of the studies showed a positive impact on home values. Only 1 showed a negative impact, while others were inconclusive.

•   Another review from a North Carolina civic group look at 36 different studies. The “vast majority” found no measurable effect on property values, while “several” found a positive impact. Again, only one study found a negative impact on housing prices.

•   A research review from a Wayne State professor described how subsidized housing does not always have a negative effect. Only when highly concentrated in vulnerable neighborhoods will the housing lower property values.

Overall, the research suggests that the presence of low-income and affordable housing does not lower property values, and can, in many cases, have a positive impact on the neighborhood. Instead, it’s the quality of the housing development, the design, the management, and the maintenance that has a stronger impact. 

A report from the Minnesota Housing Finance Agency, written by a public-affairs graduate student at the University of Minnesota, broke down the implications of affordable housing into even smaller segments. Their findings show that many projects have a positive impact, including projects managed by non-profit organizations, largely because these projects have consistent management. Project managed by for-profit businesses, in general, have a positive impact on property values, but the benefits tend to be less consistent and sustained.

The report says that large public-housing works, on the other hand, tends to have a negative or mixed effect on the neighborhood, although small, scattered projects perform well.

The report appears to conclude that the scale of affordable-housing projects will make a big difference. Large projects tend to enhance property values in low-income neighborhoods, the report said, while small projects have no impact or a positive impact on wealthier areas.

But evidence that low-income housing lowers nearby property values is lacking. Quite frankly, it’s dwarfed by evidence showing that affordable housing increases home values or, at the very least, has no impact.
 

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