Effect of Multi-Family Affordable Housing Developments - Research Paper Example

An Examination of the Effects of Multi-Family Affordable Housing Developments When affordable housing advocates begin planning the placement of upcoming projects, neighborhoods often band together to protest against having the projects in their boundaries as they believe that the value of their properties will go down. Affordable housing developments benefit neighborhoods, especially when developers consider the compatibility between the host neighborhood and the housing project, the density of affordable housing, and the way in which the affordable housing is designed and managed. Before analyzing several studies that indicate these findings, it is important to take a look at the background of the problem. At the dawn of the twenty-first century, the United States was in an era of previously unknown prosperity. Per capita income, stock prices and unemployment rates were at their best levels in the country's history; however, there was not enough affordable housing for those sectors of the population that needed it. Victoria Basolo wrote, “Because of cuts in federal spending on housing, paired with spiking home values in major cities due to the period of prosperity, those at the poorest end of the spectrum began to suffer” (445). Prices for rent soared; certainly, the poorest suffered the most as leases came up for renewal, which altogether led to a major housing affordability crisis (Basolo 451). According to Ma Thi Nguyen, “[a]stounding numbers of extremely low- and very-low-income households having 'severe housing problems'...spurred a plea to the building community to look beyond making a profit” (Ma Thi Nguyen 16). Another factor in this crisis was the opposition that began to build in communities throughout the nation toward the construction of new affordable housing units. Neighborhood associations began to seek injunctions against the placement and construction of new units, which led to a halt in the development of new projects (Pendall 115). There were several reasons for this opposition, including design and quality of the projects, feared changes in the character of the neighborhood, environmental damage, additional traffic, the inclusion of less than desirable people in the neighborhood, and a desire to limit growth in general (Pendall 117). What this meant that people who needed affordable housing were not able to find the shelter they deserved, even though they were willing to work hard and contribute to the economy. Before going into detail on some of the studies, it is worth taking the time to discuss the meaning of the term “affordable housing.” This can have many different connotations, but when it comes up in the context of the decline of property values and the “NIMBY” issue, the aesthetic considerations of the unit, or the physical structure, come into question. For those who oppose affordable housing, they think of it as a separate form of living space. However, within the academic community, when the term “affordable housing” comes up, it has much more to do with the ability of people to afford to live in that house. According to HUD, housing is affordable if a household does not have to pay more than 30 percent of yearly income to live there. This term has some fluidity, though, as there are people at many different points on the socioeconomic spectrum who pay more than 30 percent of their income for rent or mortgage payment, and so there must be some combination between that 30 percent line and having a low income. Several different types of studies have looked at this issue. The earliest studies that analyzed the effect of affordable housing on property values utilized a test versus control area methodology, and took place in the late 1980s. This paradigm involves finding neighborhoods that have units of affordable housing and comparing them with neighborhoods that are similar in terms of a number of characteristics but do not have affordable housing units. The relative property values are calculated to determine whether or not the affordable housing had a negative effect on values (Lee, Culhane and Wachter 79). The end results were that the affordable housing units benefited many of the neighborhoods in which they were placed, although these studies were not very specific because of their methodology. However, there are several problems with this research method. First of all, there could have been many other differences between the two neighborhoods that were not readily apparent to the researchers, such as quality of school system. Second, the researchers themselves drew the boundaries around the neighborhoods for comparison, and the act of drawing those lines may have arbitrarily left out certain streets, or even blocks, that were important parts of those neighborhoods. Third, these studies did not delineate among the different types of affordable housing. Section 8, Section 23, Section 236, public housing, and BMIR (below-market interest rate) projects were all lumped together for consideration in these studies. Because each program has different characteristics, ranging from the people who qualify to the structural and aesthetic elements of the project design, this decision skewed the data. Fourth, these studies usually limited themselves to a particular large neighborhood, or even a particular city. Because each city can have a different vibe in its real estate market at any given time, this limits the universal applicability of the study. Finally, these studies were cross-sectional rather than longitudinal in nature, which means that they are not applicable when it comes to looking for results over time. They leave open the sort of “chicken and egg” questions that bedevil researchers in many fields. Is the quality of a neighborhood changing because the affordable housing project was placed there? Or was the neighborhood already changing? Do the relationships between supply and demand in a particular city's housing market have an effect on this phenomenon independent of the affordable housing project? Which types of affordable housing units will bring the greatest benefit to neighborhoods? These are the sort of questions that the next wave of research on this question sought to answer. Because of the advent of information services such as Geographic Information Systems (GIS), researchers have been able to conduct more in-depth analyses of property value changes over time. Using hedonic models to run multiple regression on values has enabled more sophisticated research, allowing for the inclusion of such factors as neighborhood characteristics, housing sales cycles, type of affordable project, quality of the building being used, and overall demographics. One of the assumptions that this model uses is that home buyers give each characteristic of a potential home purchase a set monetary value – but that each home buyer can vary. For example, one home buyer might need a three-car garage, while another one might be looking for more square footage in bathrooms because of a disabled relative who would be living in the home. By gathering enough samples, though, it is possible to run this research and gain statistically significant results. This second wave of research found that there are three ways to keep affordable housing units from harming property values. First, the unit must be designed and managed in such a way as to bring quality to the community. Second, the units must be compatible with the neighborhood in which they are placed. Finally, these units should be distributed evenly, not stacked together in the same neighborhood or community. The Importance of Quality Lyons and Loveridge rendered a study which found that “adding one subsidized unit within a quarter mile radius of a house has the same dollar impact on that house's value as removing half a square foot from their house” (Lyons and Loveridge 59). In other words, even if having a tiny percentage point removed from property value on that basis happens, the other benefits are much more valuable. After all, affordable housing projects take crumbling properties in the neighborhood and revitalize them. Cummings and Landis found that the design and quality of a particular affordable housing structure has more of an effect on property values. Designers that work to put together units which “match their neighborhoods in terms of size, scale, design and amenities,” (3) generally make an even greater contribution to the positivity in a neighborhood. Despite the initial hypothesis that property values would drop more, the closer a property was to the affordable housing unit, Cummings and Landis found that proximity had no real effect on value. Indeed, as Santiago, Galster and Tatian found out, projects that have quality can actually raise property values, especially “[i]f the neighborhood in which they are placed has homes that have been neglected or abandoned” (68). Indeed, multifamily affordable housing projects not only brought up property values, but they also provided more opportunities for planners to include “green” space because the buildings used space more efficiently. Also, planners can focus growth more toward areas that already have an infrastructure, rather than building out neighborhoods in outlying exurbs, because the affordable housing developments tend to cluster in areas that already receive services from public facilities. Areas in city centers that have emptied out suddenly find themselves booming again, with families all along the socioeconomic spectrum moving back in to the city – and the revitalization that began with the inclusion of a multifamily affordable housing development was the beginning. This concentration also keeps traffic from increasing because all of the infrastructure to handle traffic is present – in fact, those parts of the city tend to be underused before revitalization begins. Quality of management is also important. As Goetz, Lam and Heitlinger found out, by analyzing two different CDC (Community Development Corporations) projects in Minneapolis, the net effect on property values had to do with the quality of the management. CDC housing is generally managed by organizations based in the neighborhood (19). Usually, this means that the managing organization is faster when it comes to assuaging community concerns than would be the case of a distant private property firm managing the property. Indeed, this study found out that independently of the presence of affordable housing, the way that private owners in a neighborhood maintain their property has more to do with property values than the presence (or absence) of affordable housing units. The Importance of Compatibility It is also significant that affordable housing projects be located in neighborhoods with which they are compatible. Lee, Culhand and Wachter's study found that when affordable housing projects went up in suburban neighborhoods, they made property values decline by 35 percent more than projects that went up in urban neighborhoods. They explained this by saying that “[s]uburban homes are probably more adversely affected by new housing units than urban houses... [because of] the difference in the value of homes in the city and in the suburbs” (78). One should understand that if there are significant differences between what affordable housing would be worth and what the existing neighborhood values are, it might not be sound policy to put affordable housing there. Also, compatibility can involve demographics as well. Galster, Tatian and Smith analyzed Section 8 sites in Baltimore County (Maryland) with an eye toward their effect on housing sales prices. In neighborhoods that were going up in value and had mostly white residents, the property value effects were not nearly as negative as they were when the neighborhoods were declining and had mostly black residents. They theorized that the existing social problems that tend to plague black neighborhoods, particularly poorer ones, may also have had an effect on the property values (Galster, Tatian and Smith 887). Counterpoint Galster, Tatian and Smith found that if a house had more than six Section 8 properties within 500 feet of each other, then the surrounding values of homes would decline (911). The conclusion was that dispersing these projects farther apart would be wiser social policy. Other studies (Lyons and Loveridge, 1993; Lee, Culhane and Wachter, 1999) corroborated the negative effect that clustering of affordable housing units can have on property values. With all of these things being said, though, there are so many effective benefits to having a multifamily affordable housing development added to a neighborhood that over time, planners will want to spread them around a city because of the revitalization they bring to each quarter. Conclusions Obviously, there can always be more study on a question of policy, but the fears of many community members that affordable housing will harm the quality of a neighborhood are not warranted. As Nguyen writes: Future work on this topic might employ qualitative techniques to provide deeper insights into the reasons why different types of affordable housing might signal price changes in property values that are nearby. Does price decline because of the structure or because of the tenants of affordable housing? What are the reasons homeowners are willing to sell their homes at lower prices? Is it because they predict negative changes to the neighborhood? Are these predictions real or perceived? These are all questions that may be better answered using qualitative research, such as case studies of neighborhoods and in-depth interviews with buyers and sellers to understand the motives for their actions (25). Those who fight against affordable housing in their communities clearly need to reconsider their attitudes on this situation. Just because families are having a difficult time making ends meet, or because they have gone through some sort of tragedy or setback, does not mean that they do not have the right to shelter, or the right to build themselves back up into prosperity. “Affordable housing” should not mean tenements clustered down in abandoned parts of the city. It should mean the right to live in a pleasant, comfortable home – and the right to enjoy life and work hard. Works Cited Basolo, Victoria. “Passing the Housing Baton in the U.S.: Will Cities Take the Lead?” Housing Studies 4: 433-452. Print. Briggs, Xavier de, Joe T. Darden, and Angela Aidala. “In the Wake of Desegregation: Early Impacts of Scattered-site Public Housing on Neighborhoods in Yonkers, New York.” Journal of the American Planning Association 65.1: 27-49. Print. Cummings, Paul M., and John D. Landis. “Relationships between Affordable Housing Development and Neighboring Property Values.” Working Paper ed.: 599. University of California at Berkeley, Institute of Urban and Regional Development. Print. Galster, George C., Peter Tatian, and Robin Smith. “The Impact of Neighbors Who Use Section 8 Certificates on Property Values.” Housing Policy Debate 10.4: 879-917. Print. Goetz, Edward G., Hin Kim Lam, and Anne Heitlinger. There Goes the Neighborhood? The Impact of Subsidized Multi-family Housing on Urban Neighborhoods. Minneapolis-St. Paul: University of Minnesota, Center for Urban and Regional Affairs, 1996. Print. Harris, David R. “Property Values Drop When Blacks Move in, because . . .: Racial and Socioeconomic Determinants of Neighborhood Desirability.” American Sociological Review 64: 461-79. Print. Lee, Chang-Moo, Dennis P. Culhane, and SusanM.Wachter. “The Differential Impacts of Federally Assisted Housing Programs on Nearby Property Values: A Philadelphia Case Study.” Housing Policy Debate 10.1: 75-93. Print. Lyons, Robert F. and Scott Loveridge. “A Hedonic Estimation of the Effect of Federally Subsidized Housing on Nearby Residential Property Values.” Staff Paper. University of Minnesota at Minneapolis-St. Paul, Department of Agricultural and Applied Economics. P93-6. Print. Nguyen, Ma Thi. “Does Affordable Housing Detrimentally Affect Property Values? A Review of the Literature. Journal of Planning Literature 20: 15-26. Web. http://www.keystonecd.com/i/maple_ridge/pdf/Does%20Affordable%20Housing%20Detrimentally%20Affect%20Property%20Values.pdf. Pendall, Rolf. “Opposition to Housing: NIMBY and beyond.” Urban Affairs Review 35.1: 112-36. Print. Santiago, Anna M., George C. Galster, and Peter Tatian. “Assessing the Property Value Impacts of the Dispersed Housing Subsidy Program in Denver.” Journal of Policy Analysis and Management 20.1: 65-88. Print. Read More