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Study: adding low-income housing to poor neighborhoods lowers crime and boosts property values

If there's one thing absolutely everybody knows about urban politics, it's that nobody wants low-income housing built in their neighborhood. Breaking up concentrations of poverty by building subsidized housing in affluent areas sounds like a great idea, but rich people veto it. So instead we build it in neighborhoods that are already lower-income and disenfranchised, where it creates further burdens on already troubled places. So when possible, poor neighborhoods also veto creating new low-income housing — which leaves the very poorest residents with nowhere to go.

Except a study from Rebecca Diamond and Timothy McQuade of Stanford Business School finds that fear of building low-income housing in poor neighborhoods is entirely misplaced.

People think it will further exacerbate the difficulties of neighborhoods already saddled with difficulties, but the data shows otherwise. Crime rates fall and property values rise when subsidized housing is built in a poor neighborhood.

What the study says

They study this looking specifically at housing built using the Low Income Housing Tax Credit (LIHTC), which provides funding for the construction of subsidized housing. By analyzing transaction and demographic data from 129 counties they find the following striking facts:

  • Neighborhoods with a median income below $26,000 see a 6.5 percent increase in property values within 0.1 miles of the LIHTC development site.
  • By contrast, in mostly white neighborhoods with incomes above $54,000, there are house price declines of approximately 2.5 percent within 0.1 miles of the LIHTC development site.
  • In low-income neighborhoods, the introduction of affordable housing decreases crime and decreases segregation.
  • In high-income neighborhoods, the introduction of affordable housing does not lead to an increase in crime.

This finding is a bit depressing in the context of the behavior of homebuyers in affluent neighborhoods. The low-income housing developments don't increase crime, but people flee the area anyway out of either racial or class prejudice.

But the finding regarding low-income neighborhoods is extremely encouraging.

It suggests that adding new low-income housing in certain neighborhoods can be a win-win policy that not only helps families get a place to live but also improves the circumstances of nearby troubled neighborhoods.

How this works

The authors don't offer much of a causal theory of why adding low-income housing to an already poor neighborhood serves as effective neighborhood development strategy beyond noting that lowering crime rates would probably raise property values.

My guess is that if this result holds up under further scrutiny we will be seeing largely that urban spaces benefit from having more people in them. In an affluent area where housing is already expensive, adding LIHTC developments will likely crowd out market rate developments. But in poorer areas there may be nobody interested in investing in market-rate development. LIHTC development helps because it is development leading to a higher local population, more vibrant streets, more retail, and a general sense of increased activity.

Here's a simple solution to poverty

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