How does an affordable housing development affect surrounding property values?
There’s no simple answer to this question, in part because of the many variables that come into play– the siting, for example, and the nature of the neighborhood (blighted? well-to-do?), the scale of the development, the design, and so on. 
Not surprisingly, though, the question has spawned a large literature. A rather dated survey of the research, from the Furman Center at NYU, found that “the vast majority of studies have found that affordable housing does not depress neighboring property values, and may even raise them in some cases.” A “Field Guide to Effects of Low-Income Housing on Property Values,” put out by the National Association of Realtors and citing numerous references, updated last year, agrees: “Most studies indicate that affordable housing has no long term negative impact on surrounding home values.”
Indeed, that’s the standard pitch that affordable-housing advocates make in the face of NIMBY opposition: The notion that affordable housing drives down property values is a “myth.”
Then, along comes a study with an inconvenient conclusion, seemingly muddying the water. That would be “Who Wants Affordable Housing in their Backyard? An Equilibrium Analysis of Low Income Property Development,” by Stanford economists Rebecca Diamond and Tim McQuade. Their finding is that, within a 0.1-mile radius, Low Income Housing Tax Credit-financed developments raise property values over the long run in low-income neighborhoods but lower them in higher-income neighborhoods. They conclude: “Given the goals of many affordable housing polices is to decrease income and racial segregation in housing markets, these goals might be better achieved by investing in affordable housing in low income and high minority areas, which will then spark in-migration of high income and a more racially diverse set of residents.” 
This conclusion runs contrary to the spirit of affirmatively furthering fair housing, which advocates a balanced approach for affordable housing investment: revitalizing blighted areas, on one hand, and desegregating higher-income areas, on the other. This dual approach also has the imprimatur of the U.S. Supreme Court, which effectively endorsed it in its ruling this summer upholding the disparate impact doctrine. (For our previous post on this, click here.) The court’s ruling favored a Texas plaintiff who argued that affordable housing projects should NOT be disproportionately sited in low-income minority neighborhoods.
While we await critiques of the Stanford study from the affordable-housing commentariat, we take note of various examples where affordable housing has not depressed property values in higher-income communities: Places such as Mount Laurel, N.J., epicenter of New Jersey’s fair/affordable housing movement, where a Princeton study found that values in surrounding neighborhoods were unaffected (for the New York Times account, click here). Or Weston or Wellesley, two of Massachusetts’ wealthiest communities, where a Tufts study found that mixed-income developments had no effect on surrounding property values, as reported via Shelterforce.
One factor that might well have a bearing, and that would not show up in the Census-tract-type data used by the Stanford researchers, is design. Affordable housing doesn’t have to look cheap or barracks-y. In fact, if the design is done well, affordable units can be hard to distinguish from market-rate units.
Planning consultant Julie Campoli demonstrates this in her “Thriving Communities” webinar/seminar presentation. She shows each of the following two slides of four photos each and asks viewers to guess which is affordable and which market-rate. We’re giving the answer away by showing the labeled versions here, but her point should be obvious.
