Study Finds Low-Income Housing Unlikely to Affect Nearby Home Prices in Denver

By Robert Davis

An analysis of 26 metro areas across the U.S. found the construction of low-income housing developments has had no consistent impact on the sale prices of nearby homes.

The study was conducted by Redfin, a Seattle-based real estate company. In all, researchers analyzed over 220,000 home sales in neighborhoods with low-income housing developments between 2007 and 2019.

Low-income housing had no significant impact on median home sale prices in 18 of the 26 metro areas analyzed. The metro areas selected for the study range from dense urban cities like New York City to the suburbs of Warren, MI.  

The study found no statistical difference in home prices before and after the construction of nearby low-income housing in Denver. Housing transaction data from Denver made up nearly 10 percent of the entire dataset analyzed for the study. 

Moreover, researchers found the addition of low-income housing near the more expensive homes in a neighborhood resulted in an overall increase in home prices in the neighborhood, in general.

"The data suggests that it can be a win-win to put low-income housing in expensive neighborhoods, benefiting both current homeowners and low-income residents," Redfin Senior Economist Sheharyar Bokhari said in a statement. 

"Because these projects are being built by private developers, they often have an incentive to identify places that have good prospects for growth. On the flip side, they're also less likely to plan projects in areas that are less desirable,” he continued. 

The study goes further to say cities have an incentive to allow developers to economically diversify their neighborhoods.  

“Economically integrated neighborhoods can be more desirable because they create a more self-contained community where the people who work in the community are able to live in the community,” it concludes.   

The debate about increasing the economic diversity in Denver neighborhoods was recently resurrected by the Group Living Amendment (GLA), a text amendment to Denver’s zoning code that expanded the number of unrelated adults allowed to live in a single-family home up to five and erased restrictions of group living facilities. Early versions of the amendment allowed community corrections and residential care facilities to be in single-family zoned neighborhoods. As the proposal meandered through the  Land Use, Transportation & Infrastructure committee hearings, Denver City Council conceded to a continued prohibition. However, the number of parcels across the city that can accommodate these facilities tripled with the amendment’s adoption. 

Another project on S. Holly Street in Denver’s Hilltop neighborhood is causing a similar stir. Known as The South Holly Townhomes, the development will bring six co-living homes to one of Denver’s most expensive neighborhoods. Each unit in a townhome is priced at $150,000 for approximately 600 square feet of personal space. The townhomes have four units apiece and can accommodate as many as 28 people. 

Opponents of both GLA and the townhomes argue that the developments would destabilize home values. But the study found concerns are largely overblown. In Phoenix, for example, homes sold newly-constructed existing low-income housing developments sold for 11 percent higher than homes far away. 

However, homes in Philadelphia that sold near existing low-income developments were valued at seven percent less on average. If a nearby low-income development was newly constructed, the median home sale was 11 percent lower. 

In Warren, MI, the median sale price of homes near low-income developments dropped 21.2 percent in comparison to other homes. Year-over-year home values have increased 23 percent in Warren, according to data by Redfin. The suburb’s median home value now stands at $147,000. 

One possible explanation for this phenomenon the report points to is that the low-income developments were being built in rapidly gentrifying urban areas, which depressed the value of nearby high-dollar units.

“Had a high-end development instead been built in place of the low-income housing, prices might have continued to grow even higher,” the study says. 

Another more nefarious reason is the perception of poverty in the US, according to Bokhari. He argues that socio-economic segregation further exacerbates the social, racial, and housing inequities the country has been more fiercely debating since the summer of 2020. 

"For children in low-income families, living in a neighborhood with less poverty can have a big impact on mental and physical health as well as long-term earnings throughout their life," he said. But economically integrated neighborhoods – those with low-income housing near homes for middle- and high-income households – are so rare because development of low-income housing often faces strong opposition from neighbors who are concerned that the project will lower their home values.”