Contradicting NIMBY

6 min read

New Study Finds Subsidized Low-Income Housing Increases Property Values 

Property values increase an average of 13 percent when multiple Low Income Housing Tax Credit developments are built in a neighborhood, a newly published study found.

Adding one LIHTC property increases the property values of homes within a quarter mile by ten percent, the study published in the June issue of the Journal of Housing Economics, says. Noteworthy, researchers found that adding a second and third LIHTC property increases property values by an additional three percent, bucking any preconceived notions the public may have about LIHTC developments.

“People might think that concentrating all of these properties is going to lead to a negative outcome,” says Anthony Orlando, one of the researchers. “But it doesn’t disappear; and in fact, it even goes up a little bit more. That’s the major finding.”

Isolating the Effects of LIHTC Developments
While previous studies show that LIHTC developments typically have positive impacts on surrounding property values, this study is notable because it’s the first to look at the impact of several projects in one neighborhood.

Past research typically treated LIHTC’s effect on property values as a yes or no question – does the homeowner live near a LIHTC property and how does that affect the property value, Orlando says.

“The problem with that is that some people live near one LIHTC property, some live near two or three or even four,” Orlando says. “And those could be very different neighborhoods and very different effects.”

In the study titled, “Effects of Concentrated LIHTC Development On Surrounding House Prices,” Orlando and fellow researchers looked at 508 developments financed through the LIHTC program, built between 1997 and 2016 in Chicago and surrounding Cook County. They filtered out senior-only housing and developments that had incomplete data. The researchers then examined developments’ influence on more than 60,000 nearby residential sales using data from local property assessments and tax records. To make sure that the study was isolating the effects of the LIHTC developments, researchers also took into consideration preexisting neighborhood market trends.

Clusters of low-income housing often bring a negative image to the public’s mind due to images of publicly owned and managed properties of the past, Orlando says. LIHTC properties, which are privately owned but government-subsidized, are built and maintained at a higher quality standard.

“So, there’s a reason to believe that maybe this isn’t like the past,” Orlando says. “Maybe this program that we’ve been doing since 1986 doesn’t look at all like public housing did, and so if you cluster multiple low-income housing properties in a neighborhood, it doesn’t have those negative effects, and that’s what we found.”

Community Benefits
The study helps demonstrate empirically that property values are not negatively affected by affordable housing and supports anecdotal experience by Chicago-area LIHTC developers.

“Well-designed and well-managed affordable housing provides community benefits that far outweigh any negative impact, such as over-burdening schools/public services or increasing traffic,” Richard Sciortino, co-founder and principal at Brinshore Development says. The Chicago-based developer has over 11,000 units in 17 states.

“The community benefits include affordability and diversity, as well as revitalization and program initiatives,” Sciortino says.

Chicago Community Development Corporation and Bickerdike Redevelopment Corporation have also seen positive neighborhood impacts from their projects. 

“We saw that neighborhood values started to go up from the very beginning, whether it is because there’s an investment in an area that has not seen investment for a while or that people are inspired to make improvements at their own home because there’s something new that happened in the neighborhood,” Joy Aruguete, Bickerdike chief executive officer, says.

The 55-year-old community development corporation owns about 1,200 apartments in 140 buildings, on the North side of Chicago. Because the housing stock in the area doesn’t have a lot of tall buildings, a single development may have five buildings, which may or may not be right next to each other, Aruguete says.

A Rise in Property Value
The study also found that property value increases were sustained over time. Researchers followed property values of homes near LIHTC developments for up to 15 years, where possible. In the first year, property values increased slightly, but that increase continued to build over time.

“[People] may look at a study like this and say, ‘Maybe there’s a temporary increase in value, but it disappears over time,’ and the answer is no,” Orlando says. “We found that it builds over time and that ten percent number that I mentioned is an average over all those years. It starts out lower than ten percent and it actually finishes up a little bit bigger than ten percent.”

While the study doesn’t answer the question of why property values increased, it found that the positive effects occurred regardless of whether the developments were in low- or high-income neighborhoods and no matter their racial composition.

In less affluent areas, affordable housing has a revitalizing effect by reducing blight, improving security through more eyes on the street and adding density to support community amenities, Sciortino says. In more affluent communities, affordable housing supports workers who otherwise could not afford to live close by.

“This is particularly relevant in the current environment where workers are in high demand and traveling long distances is an impediment,” Sciortino says. 

Sciortino adds, that many affordable housing developments, like Brinshore, provide other community benefits, such as community facilities, like an art space or community center, and programming that is shared with the surrounding community.

“These types of initiatives add vitality, commonality and enrichment that, once again, add value,” Sciortino says.

Both Orlando and the LIHTC developers agree that studies like this are important to help counter negative attitudes towards affordable housing developments often referred to as NIMBY, Not in My Backyard.

For Bickerdike, most of their projects are built in areas where they have been invited to build, but the opposition they see is due to people fearing what they don’t know, Aruguete says.

“The minute that you get a shovel in the ground, the opposition falls away,” Aruguete says. “Because as you build that building, people realize this is a nice building. They’re taking a building and making improvements to it. To me, it’s not surprising that LIHTC properties both individually and aggregate have a positive impact on neighborhoods across the country.”

More to the Story
For the study’s researchers, in addition to the Why? there are other questions that remain, Orlando says. For example, the researchers don’t know LIHTC developments’ impact on the rental market. Researchers also wanted to find out if their findings in Chicago would translate to other cities. They recently finished a similar study, yet to be published, in Los Angeles, where they are finding comparable results.

“So, I think it’s not just a Chicago story,” Orlando says, “I think this is true of, at the very least, large cities.”

Nushin Huq is a Houston-based freelance journalist. She has worked as a reporter covering energy markets and regulation, business and government – both federal and state.