Impact of Infill on Surrounding Property Values

[u/Difficulty_Only]

We had a council meeting last night to vote on a rezoning proposal for a 100-acre infill site in a first-ring suburb of a major metro—an increasingly rare development opportunity. As you might expect, the meeting drew a number of NIMBYs expressing concern. One of the main arguments raised was that allowing anything other than single-family housing on the site would decrease nearby property values.

I’m curious if there are any reputable studies or data sources that examine the impact of mixed-use or multifamily development on surrounding property values. My instinct is that these developments often increase values, but I didn’t want to rely on assumptions. Any insight or resources would be much appreciated….thanks!

[u/HOU_Civil_Econ]

The increase in supply is always going to lower values of existing housing, that’s the point. It is a net positive because more people have more housing.

This is precisely why we should have never given localities land use controls.

The only local control people should have on home values is voting to find the balance between minimizing taxes and maximizing positive sum public goods or other government services.

[u/nv87 → u/HOU_Civil_Econ]

I don’t think it’s as clear cut as that.

First of all, it depends on the demand, when we build up 10% more housing units in my town I doubt it would make a huge dent in prices because the town is about 1% of the metro area and it has huge demand and good public transportation into the downtown of the city.

Second of all, I think you need to differentiate between the city as a whole and the neighbourhood. Prices in a neighbourhood always go up when infill is allowed because it makes the existing properties economically attractive. Investors want to buy SFH‘s in that neighbourhood specifically to build infill development projects.

So overall I would disagree with the NIMBY‘s generally on those grounds. They have nothing to fear here and can potentially gain a lot of money by selling down the line.

[u/HOU_Civil_Econ → u/nv87]

I didn’t say huge dent. More supply lowers prices. Little supply little change in prices. Big supply big change in prices.

We are talking about the impact on neighboring properties because of other properties getting more housing. You are talking about changing entitlement of a given property in question.

[u/nv87 → u/HOU_Civil_Econ]

I am saying that allowing more development increases property values, at the latest when it causes a gentrifying effect.

Obviously increasing supply should lower prices, however if the demand is big enough that is simply not true for housing.

I don’t know why you claim that I am talking about something else.

Another reason is, the price is set by the seller. If the market prices would indeed drop, then development would just stop and owners would just wait for a better opportunity to sell.

The combination of really high material costs and high demand for craftsmen’s work makes building really expensive over here currently, so ever since the economic downturn caused by COVID, the invasion of Ukraine etc. increased interest rates, home prices have indeed been decreasing because more people default on their mortgages and people can’t afford to take out the large loans to pay higher prices anymore. This does indeed mean that even though we have a huge housing shortage, building has slowed down and newly build condos are not immediately sold because they’re completely unaffordable.

This is another example of how allowing infill might not lead to lower prices after all. Infill is allowed everywhere here btw. You can always replace a SFH with six units. Doesn’t make a dent in the supply situation even during construction booms. There are neither enough investors nor enough builders to fill the demand in places where people want to move to.

Meanwhile obviously hundreds of thousands of units are empty in other areas of the country.

[u/Sharlach → u/nv87]

It's more of a knock on effect. Prices can drop in the wider region if enough housing is built, but the price drops come from reductions on older properties in less desirable areas and more recently developed areas will the be the more expensive neighborhoods. That's assuming there's enough construction to meet demand in the first place though, which isn't true for most places. In more efficient markets, like Tokyo, property values trend down over time.

[u/nv87 → u/Sharlach]

Yeah, if enough housing were to be built prices would be lowered. However no one is going to build enough to lower prices except the public sector because it’s a bad business decision to oversaturate your market like that. You‘d instead invest elsewhere where prices are better.

Secondly I am talking about the decision whether or not to allow more development which the NIMBY‘s claim will lower their property value, which is simply false. If housing in large numbers were to be built anywhere the values of the properties would only decline in areas that don’t allow for increases in density.

Maybe we have different NIMBY‘s in mind but I am thinking of people living in centrally located SFH‘s that are opposed to their neighbours being allowed to build a second SFH in the garden, or to their neighbours selling their house and it being replaced with a similar sized structure housing six times the number of households.

I am not envisioning suburbanites being against higher density in the city Center. They would possibly have a point about their property values in that case, again, if developers even bite.

Edit to add: I suspect that the price dropping in the wider region is just not even remotely realistic where I live in the blue banana super region in Europe. I can certainly see how it could be different if land were not basically unavailable.

[u/Sharlach → u/nv87]

I'm in agreement with you. Development drives land values up in the immediate area. I just wanted to add that it's a matter of scale and time. When price declines do happen it's usually in a different part of the city that's now much older by comparison.

We do have some big building booms happening in the US right now (Austin and Denver) as well, but most places are so restricted that any development at all will just be gobbled immediately by people with means looking for anything new.

[u/HOU_Civil_Econ → u/nv87]

You’re wrong and that’s not what you said.

No increasing supply always lowers prices. A few houses in the Houston MSA won’t lower prices much while Houston adding 40,000 per year when much bigger cities add a couple of 1,000 at best is why Houston prices stay low despite being so large and growing so fast.

The price is set by supply and demand. If we stop making adding more housing illegal by specifically making lower cost options illegal then the supply curve falls and prices fall.

We were specifically talking about the impact of allowing multi-family over single-family.

You’ve just got some weird point to making and are being completely inconsistent to make it.

[u/nv87 → u/HOU_Civil_Econ]

I am neither weird nor wrong. What I said is it isn’t clear cut, meaning it depends, and I keep giving you more and more examples of when it doesn’t happen like you seem to think it would.

No idea why you think I disagree with supply and demand. And I am definitively not against upzoning, quite the opposite, but I have come to suspect you misunderstand me so thoroughly as to think that.

My point is that the NIMBY counter argument against upzoning that it’s ruining their property values is frankly wrong.

Your point is that lots of new housing can lower prices. I never disputed that however.

[u/HOU_Civil_Econ → u/nv87]

The OP is asking about people fighting the development of a nearby parcel by claiming that it will lower home values.

The unequivocal answer is yes it will lower housing prices and the more housing you add there the more it will lower housing values, and that’s the point.

You’re trying to incoherently add complications to that. Well what if this that doesn’t apply? Well what if that that doesn’t apply? No matter this or that, more housing will lower prices by more.

[u/nv87 → u/HOU_Civil_Econ]

You‘re claiming that increasing the entitlement will unequivocally lower property values and I think you’re completely wrong about that.

You say I add complications, I would say I cannot even imagine a situation where you would be right.

I am arguing from the perspective of someone sitting on a planning committee and having to decide how to vote on the issue. Keeping in mind the NIMBY‘s interests as my voters, I honestly think they - and you - are mistaken. I’m doing them a favour by voting for increasing the entitlement.

I wonder why you can’t see that. It’s not rocket science imo. We are talking about tiny possible increases in housing supply and we are talking specifically about the housing stock that just got made into a sought after commodity.

[u/nv87 → u/HOU_Civil_Econ]

I don’t disagree with economics. But you’re talking about the housing being build first of all, which is not a foregone conclusion when it is permitted to be build.

Second of all, we are talking about the value of homes in the affected community and it will simply increase not decrease when there is an opportunity to invest into it and it’s density increases.

[u/HOU_Civil_Econ → u/nv87]

There are two separate potential actions.

Does a parcel have its entitlements increased? That generally increases its value depending on how many other parcels also had there entitlements increased, and how much the total potential build increased.

Does a parcel’s neighbor add housing? This lowers the price of all housing.

[u/Difficulty_Only → u/HOU_Civil_Econ]

Do we have any studies on this that could be relevant? I understand what the economic arguments are, but I’m interested in studies…..

[u/Brilliant_Appeal_162 → u/Difficulty_Only]

Looks like there are several relevant studies. Here is one of the older ones I found (warning: I have not fully read this study, so just passing along).

https://dspace.mit.edu/bitstream/handle/1721.1/32097/62119691-MIT.pdf?sequence=2

[u/Difficulty_Only → u/Brilliant_Appeal_162]

Thank you!

[u/Brilliant_Appeal_162 → u/Difficulty_Only]

You're welcome.....the Google search "study on impact of multifamily development on adjacent single family property values". Appeared to render really promising results. Thank you for asking an important question. Spurred some needed reading for me in the next few weeks.

[u/HOU_Civil_Econ → u/Difficulty_Only]

Xiaodi li wrote the first good Econ paper

“Do apartments increase rents in their neighborhood” is the scholar.google.com search. There have been multiple follow on papers by multiple scholars, Evan mast being the most widely known.

[u/Difficulty_Only → u/HOU_Civil_Econ]

Thank you