IMPACT OF LOW-INCOME HOUSING ON NEIGHBORING PROPERTY VALUES

Abstract

This study seeks to examine the effects of Low-Income Housing (LIH) on housing prices of neighbouring HDB Resale flats. In many countries, LIH has been stigmatized as undesirable development and deemed to cause negative externalities to neighbourhoods. Such externalities include social ills brought by its residents and deteriorating state of the premises which encourages physical decay, abandonment and poverty concentration, causing surrounding property values to fall. In Singapore LIH refers to Public Rental Scheme (PRS) Flats rented out to low-income household.

Hypotheses developed from literature review conclude three things. First, flats located close to LIH will suffer a fall in values. Second, accumulation of LIH will lower nearby housing values incrementally. Third, property values will increase with distance from LIH. The hypotheses are tested using hedonic regression model with 2,379 HDB resale transactions from three study areas.

Regression findings show PRS flats exert negative influence on proximate housing values. Houses located within a 500m vicinity of a PRS flat are found to suffer a 5.1% discount in prices compared to houses located in a neighbourhood that do not have PRS flats. Home prices also increase by 4.8% with every 1% increase in distance away from the PRS flats cluster. However, accumulation of PRS flats does not have significant negative incremental effect on housing prices. Two possibilities arise from the study. Firstly, PRS flats may face social discrimination from residents. Secondly, PRS may have introduced social problems to the neighbourhood which impair surrounding property values.