Last Updated on October 28, 2024 by CREW Editorial
Social or affordable housing is designed to provide accommodation for individuals and families who cannot afford market-rate housing. In Canada, the development of these types of housing has become increasingly relevant as cities grapple with rising real estate prices and a growing need for affordable living options. A key area of concern for real estate investors is the impact of social housing developments on nearby property values.
Perception vs. Reality: Social or Affordable Housing and Property Values
Many people share the perception that affordable housing negatively impacts property values. However, multiple studies challenge this belief. The National Bureau of Economic Research finds little to no consistent negative impact on home values near affordable housing projects, especially in urban areas where housing supply is constrained. In fact, certain affordable housing developments have revitalized underdeveloped areas, contributing to property value appreciation.
In Canada, the CMHC highlights several examples where affordable housing projects have improved neighbourhood conditions, stabilizing or even raising property values. In some cases, supportive housing projects also introduce community improvements, such as upgraded infrastructure, which can enhance the appeal of nearby properties.
Factors Affecting Property Values Near Social or Affordable Housing
Not all neighbourhoods are impacted equally by social or affordable housing developments. A report by Civida in 2021 identifies key factors that determine whether property values will increase, decrease, or remain stable near such projects.
Design and Integration
Affordable housing projects that integrate well with existing architecture and community aesthetics face less stigma. High-quality design and construction often result in a positive impact on nearby property values, as these developments are seen as enhancing the neighbourhood.
Location
Proximity to amenities like schools, parks, and public transit is a critical factor. Affordable housing in high-demand areas tends to have a neutral or even positive effect on surrounding property values, while projects in lower-demand areas may face more challenges.
Pre-existing Neighbourhood Conditions
Affordable housing in declining areas can help revitalize the community, leading to rising property values. In contrast, in stable or affluent neighbourhoods, property values may appreciate more slowly, though a decrease in values is rare.
Local Policy and Support
Cities that prioritize community consultation and ensure affordable housing projects are well-planned and supported by local services tend to see better outcomes. Research from the Furman Center shows that well-managed affordable housing developments, backed by proper oversight and funding, can lead to neutral or positive impacts on surrounding property values.
Risk or Opportunity?
For investors, affordable housing may initially seem like a risk to property values, but the reality is often more complex. The impact of well-designed, integrated affordable housing is often neutral or positive, especially when developments align with the needs of the community and improve local infrastructure. Real Estate Economics suggests that in strong housing markets, these developments can offer unique investment opportunities. Public investments in infrastructure and services typically accompany affordable housing projects, enhancing the area’s long-term appeal and potential for growth.
Moreover, projects involving public-private partnerships frequently offer attractive financial incentives, such as tax benefits and reduced regulatory hurdles, making them a favourable option for investors willing to diversify. The CMHC notes that affordable housing investments also benefit from steady demand, ensuring consistent rental income, even during economic downturns.
Investors should consider the potential for benefits from nearby affordable or social housing projects, from infrastructure improvements to steady rental demand. In many cases, these projects do not lower property values and may even serve as catalysts for neighbourhood growth and investment returns. Thorough research and analysis are needed to accurately determine the impacts of specific social or affordable housing projects on an individual property or area.
