Redfin economists analyzed 220K sales in 26 metros over a 13-year period. In most suburbs (18 of the 26) they found no appreciable price difference after affordable housing was built – and in four metros, local prices actually rose higher. But it also lowered prices in four metros.
SEATTLE – What impact does it have on local home prices if affordable housing is built nearby?
In order to find out, Redfin economists looked at long-term data in 26 U.S. metro areas. Their conclusion: “Construction of low-income housing developments has had no consistent impact on the sale prices of nearby homes.”
The report analyzes over 220,000 home sales in neighborhoods with low-income housing developments in 26 metro areas across the U.S. from 2007 through 2019.
In 69% of the metro areas studied (18 of the 26), economists detected no significant difference in nearby home prices sold before and after the construction of a low-income housing development compared with similar homes farther from the development but within the same neighborhood.
In four of the eight metro areas where significant differences were detected – Boston, Philadelphia, Washington, D.C. and Charlotte, NC – homes near low-income housing developments sold for more after the development was constructed.
However, in the remaining four metro areas – Chicago, Las Vegas, Phoenix and Warren, Mich. – homes sold for less after low-income housing developments were built nearby.
“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,” says Redfin senior economist Sheharyar 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.”
Where home values went up
In general, the more expensive a neighborhood’s homes, the more likely the addition of a low-income housing development resulted in an increase in home prices in the neighborhood.
In Washington, D.C., for example, the median price of homes sold near low-income housing developments in the study was $499,000. Prior to construction, homes near the development site sold for 6.3% less than those farther away. After the low-income homes were built, homes nearby sold for 0.9% more than those farther away.
“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,” says Bokhari. “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.”
For homebuyers, economically integrated neighborhoods might be more desirable because they create a more self-contained community, where the people who work in the community (teachers, service workers, etc.) are able to live in the community.
Where home values went down
In lower-priced areas like Phoenix, where the median home price near low-income housing was $149,000, the price gap widened substantially.
Before the introduction of a low-income housing development, homes near the site sold for 3.9% less than those farther away; after the low-income homes were built, nearby homes sold for 11% less than homes farther away.
“One possible explanation for the relative weakening of home prices near some new low-income housing developments may be that low-income housing was put in areas that were in the midst of gentrification and rapid price growth,” Redfin says in a media release. “Had a high-end development instead been built in place of the low-income housing, prices might have continued to grow even higher. There are still many unknown factors, but overall this study supports the idea that low-income housing does not degrade property values.”
“Part of President Joe Biden’s housing plan is to expand the Low-Income Housing Tax Credit,” says Bokhari. “If the Biden administration is successful in ‘dramatically increasing the number of new or rehabilitated affordable housing units,’ it will be a big step in the right direction, and in most cases, homeowners near the new affordable housing communities can rest assured that their home values will be unaffected.”
The study is posted online and includes three Florida metro areas in the data – Miami, Orlando and Tampa.
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Author: kerrys