Rethinking the relationship between subsidized housing and surrounding property values

Efforts to construct subsidized apartment complexes in two South Charlotte neighborhoods were recently abandoned after Ballantyne and Ayresley residents raised concerns that the proposed projects would have a detrimental impact on surrounding property values by overburdening public infrastructure and increasing crime.  The failure of these real estate ventures has been described by some as the product of narrow-minded NIMBYism and by others as the result of legitimate worries about the negative externalities associated with low and moderate income housing. Although both positions potentially have merit, existing research suggests the relationship between subsidized housing and nearby property values is nuanced and dependent upon a number of variables.  Addressing each of the questions below may help policymakers disentangle unsubstantiated fears from justifiable opposition when evaluating real estate development projects designed to serve economically distressed residents.

What will the proposed subsidized housing project replace? Studies completed over the last two decades indicate that subsidized housing projects can actually increase surrounding property values because they remove blighting influences or serve as a buffer between residential and commercial areas.  Although opportunities to redevelop dilapidated buildings or vacant lots in affluent neighborhoods may be limited, many real estate developers have constructed subsidized apartments complexes near commercial corridors, which can insulate single-family homes from traffic externalities, while providing low-income residents with convenient access to retail outlets, employment opportunities and public transportation.  Additionally, subsidized housing projects may replace or substitute for market-rate multifamily development leading to minimal differences in impacts on public infrastructure.

Does the proposed subsidized housing project blend into the surrounding neighborhood? Existing research provides clear evidence that design matters.  When subsidized housing has been found to have a detrimental impact on surrounding property values, it is often in situations where it is located in large multifamily complexes that stand in stark contrast to surrounding single-family homes.  Incongruent design accentuates the presence of affordable or public housing, which can serve as a deterrent to market-rate renters and homebuyers evaluating the area.  It is therefore essential to integrate subsidized units into the host neighborhood by ensuring their scale and architectural design complements nearby properties.   

What segment of the population does the proposed subsidized housing project serve? The results of several empirical studies indicate that subsidized apartment complexes can have a modest negative impact on surrounding property values when they serve a large number of residents with income levels substantially below those of other families in the area.  The problem has been addressed in some communities by providing very-low income families with access to mixed-income apartment complexes or scattered-site affordable housing in highly desirable neighborhoods.  Both of these approaches limit the negative externalities associated with concentrated poverty, while promoting the availability of geographically disbursed housing options for targeted populations.  

Has the potential impact of the proposed subsidized housing project been analyzed? Local residents often oppose the development of subsidized apartment complexes because they fear dense residential development in their neighborhood will overburden existing public infrastructure such as roads and schools. Yet, these concerns are expressed in many instances before the project of interest has actually been subjected to a comprehensive impact analysis.  Research conducted at the national level offers compelling evidence that apartment dwellers have fewer children and ride public transportation significantly more often than residents of single-family homes.   These characteristics of multifamily residents reduce the aggregate impact of subsidized apartment complexes on public infrastructure and should be considered in the public debate.   

Are the negative externalities associated with subsidized housing offset by positive externalities? Empirical research supports the concern that subsidized apartment complexes can have a negative impact on surrounding property values in some instances.  However, it is also clear from existing studies that this price effect is generally small and dissipates quickly with distance.  The availability of geographically disbursed affordable housing within a community has also been found to stimulate economic development, encourage higher levels of educational attainment among children in public schools, reduce crime, and address other problems associated with concentrated poverty.  These positive externalities must always be considered when evaluating the potential costs and benefits of a subsidized housing. 

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Dustin Read is an assistant professor of real estate and property management at Virginia Tech. He can be reached at dcread@vt.edu. When he wrote this article he was an assistant professor in the Belk College of Business at UNC Charlotte.