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3 housing myths, debunked: Poverty, property values, and gentrification

Darcel Rockett, Chicago Tribune on

Published in Home and Consumer News

How can poverty become a thing of the past both in metropolises and outside their boundaries? Strengthen safety nets, Allard said, such as food assistance and the earned income tax credit, which aids low- to moderate-income working citizens. These supports help people provide for their families with the hope that as they work, they'll be able to advance in the labor market.

"There are things we know that can make a difference, we just need to scale them and expand them," he said. "It's a long game, but I think there's a lot that can be accomplished in the near term to not only combat or fight the pernicious stereotypes on poverty and race and place but also come up with solutions that bring people together."

Myth 3: Having low-income housing in your community reduces property values.

Just as the context of gentrification keeps changing and the boundaries of poverty keep shifting, so does our understanding of low-income housing's impact on its neighbors. Anthony DeFusco, assistant professor of finance at Northwestern University's Kellogg School of Management, said the effects of new, affordable housing developments on local home prices is a bit nuanced.

A 2016 Stanford Graduate School of Business analysis reviewed low-income housing developments nationwide that were funded through the low-income housing tax credit program. The impact of that housing on surrounding property values varied based on neighborhoods' economic state and number of minority residents.

"What the study finds is that the effects of putting one of these in a neighborhood depends on the pre-existing conditions in that neighborhood," DeFusco said.

So, he said, if low-incoming housing was placed in a low-income neighborhood, it would actually raise home prices in that neighborhood by about 6.5 percent over a 10-year period -- a sort of neighborhood revitalization effect, which is what the tax credit program is intended to do.

However, if you put a low-income housing development in an already high-income neighborhood, the effect on prices heavily depends on whether the neighborhood has a large or small minority population. In a high-income neighborhood with a small minority population -- sort of a poster child for NIMBYism, a "not in my backyard" attitude, DeFusco said -- you do see declines in prices, not enormous declines, but about a 2.5 percent drop over a 10-year period.


"You don't see changes in crime rates or things like that, but you do see changes in the composition of who lives there," he said. "Building (low-income housing) in high-income neighborhoods with high-minority shares does not seem to have much of an effect."

A better approach to affordable housing, DeFusco said, lies in production.

"Instead of building housing and targeting it" to people with income below a certain level, "if you just built more housing, and housing was more plentiful overall, prices in general would be lower and would be more affordable for everybody."

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