Irrational market : facts and fiction behind affordable housing in the San Francisco Bay Area

Abstract

This thesis explores the belief that affordable housing has a negative impact on surrounding housing values. Currently, the San Francisco Bay Area is experiencing a housing shortage. The results of this housing crunch are most acutely felt by low income families who can no longer afford to live in the region. The housing shortage also threatens to undermine the economic competitiveness of the San Francisco Bay Area as it becomes increasingly difficult for employers to attract employees due the area's high cost of living. In order to solve the housing shortage, affordable housing needs to be developed on a regional scale, in both urban and suburban areas. However, affordable housing developers often face extreme opposition to new developments. The most common argument against affordable housing is the belief that housing for low income families will lead to property and neighborhood degradation, resulting in decreased housing values. Through a rigorous quantitative analysis this thesis argues that the introduction of an affordable housing development into a neighborhood does not reduce surrounding housing sales prices.