Impact of Affordable Housing:
Stable, affordable housing provides benefits to both people with low incomes and local economies overall. For individuals, it reduces homelessness, lifts people out of poverty, and improves health outcomes (Lubell, Crain, and Cohen 2007). It also improves youth educational outcomes and long-term earnings and reduces the likelihood of later adult incarceration (Andersson et al. 2016; Fischer 2015; Cunningham and McDonald 2012).
Affordable housing can help maintain health, daily functioning, quality of life, and maximum independence for adults as they age (Spillman 2012). It supports employment growth and stability because low-wage workers are less willing to travel long distances for minimum-wage jobs (Altali 2017; Chakrabarti 2014). Despite these benefits, property owners who live near proposed affordable housing developments often oppose such projects, citing fear that the developments will cause their property values to decline (Scally 2014).
However, empirical research provides little evidence that subsidized housing depresses neighborhood property values (Ellen et al, 2007; Galster 2002; Center for Housing Policy 2009). Projects financed through the Low-Income Housing Tax Credit (LIHTC), the largest affordable housing financing program in the United States, have been associated with an immediate positive increase of 3.8 percentage points in nearby property values (Ellen et al. 2007).
Another study found that LIHTC properties, on average, revitalize low-income neighborhoods, increasing house prices by 6.5 percent, lowering crime rates, and attracting racially and income-diverse populations (Diamond and McQuade 2016). However, some studies have found that LIHTC developments in higher-income areas are associated with house price declines (Diamond and McQuade 2016; Woo, Joh, and Van Zandt 2016).
Other types of affordable developments, such as those funded by new markets tax credits, have not been found to depress property values and can increase property values under certain conditions (Theodos et al. 2021). It is unclear what conditions and types of affordable housing developments affect property values differentially, and many local governments require their own analyses to help inform community debates.
To add to this knowledge base, we use Zillow’s assessor and real estate database to estimate the relationship between affordable housing developments in Alexandria, Virginia, and sales prices of nearby single-family homes, duplexes, cooperatives, and residential condominiums between 2000 and 2020 (Zillow 2021).
We use a repeat sales model that estimates the change in sales prices before and after an affordable housing development is built near a home. The model compares those changes with changes in the sales prices of other residential units in Alexandria, thus isolating the relationship between the development and changes in property values.
We find that affordable units in the city of Alexandria are associated with a small but statistically significant increase in property values of 0.09 percent within 1/16 of a mile of development, on average—a distance comparable to a typical urban block. These results are robust to other radii and comparison groups, such as comparing homes within a block with homes within a few blocks or comparing homes within a block with homes between half a mile and one mile away. When we remove set-asides—defined as affordable housing units within market-rate developments—the coefficient increases to 0.11 percent, confirming that set-asides are not driving these results.
When we split the effects by the baseline income of neighborhoods to see whether affordable housing construction in lower-income neighborhoods is driving the results, we find the opposite of prior research: in Alexandria, affordable housing in higher-income neighborhoods has a positive and highly significant effect on surrounding home values, as does affordable housing in lower-income neighborhoods. This calls into question prior findings that affordable housing in high-income areas necessarily causes nearby property values to decline.
The positive relationship between affordable units and nearby home sales in Alexandria may reflect strong local oversight and the close relationship between the city and affordable housing developers. Various municipal measures help ensure that new or preserved developments fulfill strict requirements for design, development, maintenance, and operation. Other cities have shared that they are unhappy with affordable housing in their jurisdictions, which they believe is because they have little local oversight over the developments.