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Fears over low-income housing hurting home values are overblown, research shows
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When developers work to bring low-income housing to cities, it's often met with concern about urban decay and lowered property values. Research, however, indicates that these fears are often overblown. - photo by Daniel Bendtsen
Chicago has the notorious reputation as the most racial segregated city in the country.

When public radio station WBEZ mapped the distribution of low-income housing projects in the city earlier this month, it was no surprise that the vast majority were placed in areas with already high poverty rates.

That may come as no surprise, but those who fight against poverty see that as a problem. Poor neighborhoods offer less opportunity for upward mobility, and when low-income housing is placed in already poor neighborhoods, it exacerbates the cyclical poverty that entraps the vulnerable.

President Barack Obama announced this summer that cities across the U.S. would be mandated to create more low-income housing in wealthier neighborhoods. Last month, the Housing and Urban Development Department granted $30 million to five cities each for such projects. Widespread access to low-income housing is considered a key to preventing people from slipping into homelessness.

But residents of more affluent neighborhoods have long been concerned that an influx of low-income housing to their areas will devalue their property.

That was the reaction in Chicago, WBEZ reported. When one church tried to bring low-income housing to Deerfield, they received letters from upset locals who worried it would impose a "ghetto tax" on their neighborhoods.

Fears of property values dropping were once valid.

Last year, when The Atlantics Ta-Nehisi Coates investigated redlining the practice of denying blacks mortgage loans he found that an influx of poor black residents to Chicago neighborhoods in the 50s and 60s did indeed lead to white flight and lower property values.

But housing practices have changed a lot since then, and the National Association of Realtors now argues that "most studies indicate that affordable housing has no long-term negative impact on surrounding home values."

In fact, a 2007 study by Harvard University found that when low-income housing was added to neighborhoods, the surrounding properties actually disproportionately appreciated.

Joseph Shuldiner, executive director of Yonkers housing authority, said in an online discussion last month that cities need to take more direct action to quell these fears.

I would propose some reserve or guarantee that would reimburse homeowners if housing prices fell as a result of the affordable housing, Shuldiner said. My own experience is that payouts from this fund would be few and far between.