A new affordable housing development and the adjacent housing-market response

Abstract

Background: Cities continue to grapple with a rising demand for housing, which affects affordability and the well-being of its citizens. This growth continues to put pressure on the delivery of adequate, affordable housing in well-located areas while the availability of infrastructure and proximity to economic nodes remains a challenge. This has led to increasing infill development of medium-density to high-density affordable housing in greenfield areas located adjacent to higher-income neighbourhoods.

Aim: This study investigates how a new affordable housing development influences the locational and structural values of the adjacent, existing housing market.

Setting: Transactional data of residential sales for two areas in South Africa are used to measure the value change. Both areas are located within an urban setting next to an open, greenfield area that was redeveloped for affordable housing.

Methods: Two case studies are used and analysed with hedonic pricing modelling to identify and measure the value change for the locational and structural characteristics before and after the development of affordable housing.

Results: The results reveal a changing housing market as the locational and structural characteristics change in value, further highlighting the importance of careful planning that preserves the existing market and also supplies affordable housing.

Conclusion: The value of several structural characteristics of properties will change, revealing just how consumer preference responds when affordable housing is introduced in an existing housing market. Distance to an affordable housing project continues to influence the house market value and careful consideration should be made when planning to integrate an affordable housing development in an existing neighbourhood.