How Affordable Housing Makes Communities Wealthier
The Urban Institute has a new research brief out on the local economic benefits of affordable housing, focusing on a case study in Alexandria, VA.
Key takeaways:
- New affordable housing projects in Alexandria increased home values within a one-block radius by 0.1%, a “small but statistically significant” increase that confirms prior research on Low Income Housing Tax Credit (LIHTC) projects.
- The effect was less pronounced when including “set-asides” or “inclusionary” affordable units in market-rate projects.
- This effect was stable in both low- and high-income neighborhoods.
Christina Stacy and Christopher Davis at the Urban Institute studied home price data in Alexandria, VA from 2000 to 2020 to observe the effects of affordable housing on nearby property values. Confirming prior research finding positive effects on both the new residents of affordable housing and their neighbors, and contrary to popular NIMBY fears, Stacy and Davis found that affordable housing accounted for a slight boost in property values within a one-block radius.
This is significant because in the same time period, Stacy and Davis report that Alexandria lost 78% of its “market-rate affordable” housing units, “defined as non-subsidized rental units affordable to households earning 60 percent of the area median income (AMI).” The Urban Institute predicts that Alexandria will need 13,600 new homes by 2030, the majority affordable for low- and middle-income households.
The historical data suggests that building this much-needed housing would be a boon to neighborhoods. To study this effect, Stacy and Davis used “an analytic sample that includes properties that were sold more than once between 2000 and 2020 within the city of Alexandria and properties that were sold more than once outside of the city that were also within 1 mile of an affordable housing development in our sample (i.e., properties just outside the city’s borders located near affordable housing developments).” Excluding properties that were only sold once helps counteract potentially noisy data, but still yields a sample size of 57,998 homes.
The results are clear: “Affordable housing units in Alexandria are associated with an increase in property values of 0.09 percent within 1/16 of a mile [one city block] of a development, on average” and “no effect on properties between 1/16 of a mile and 3/16 of a mile.” The rest of the mile-radius shows a much weaker positive effect, potentially reflecting overall neighborhood growth.
Both wealthier and poorer neighborhoods benefited from affordable housing. As Stacy and Davis report: “affordable housing units in above-median-income census tracts are associated with a 0.06 percent increase in property values, and affordable housing units in below-median-income tracts are associated with a 0.17 percent increase in nearby property values.”