Spillovers and Subsidized Housing: The Impact of Subsidized Rental Housing on Neighborhoods

At a congressional hearing in 1948, representative A.S. Mike Monroney argued that the construction of new, subsidized rental housing improves the surrounding neighborhood, and in so doing, raises property tax revenues. He stated: “One of the principal arguments, with which I go along, is that the establishment of a housing project in a city raises the assessed valuation for blocks around it and puts back onto the municipal tax rolls a great deal more money than is taken off by the land that is occupied by these public housing projects.”1 Congressman Monroney was not alone in his beliefs; when the federal public housing program was first established in the late 1930s, neighborhood benefits were a key justification.

Yet it is hard to imagine a member of Congress making a similar argument today. The current assumption is that the production of subsidized, rental housing, if anything, accelerates neighborhood decline – “there goes the neighborhood” is the common refrain. And partially as a result, we’ve seen the policy pendulum swing away from place-based housing investment towards demand-side housing programs, such as housing vouchers.

Despite this policy shift, many of the local developers and nonprofits who build and manage subsidized rental housing continue to believe that their efforts not only provide shelter but help to revitalize communities as well, which raises the obvious question: Who is right? This paper aims to revisit this critical policy issue, exploring how and why investments in subsidized, rental housing might affect surrounding neighborhoods. 

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