How Do New Apartments Impact Local Home Values?

In terms of home ownership, Phoenix has officially achieved “cool kids” status. If you live here, you’re one of them. And it everybody else is trying to be one of them. And who can blame people from other states trying to get in on the fun?  People are relocating to Phoenix in record numbers, for lots of reasons. For the sunshine. For job opportunities. For the lack of natural disasters. For the low taxes. For the business-friendly economic climate. Phoenix is simply a great place to live – but you already knew that!

While the population growth does wonders for our local economy, there’s one little problem with all these new neighbors: they need a place to live (and we’re in short supply). Anyone who has tried to buy a house here in the Valley over the past year knows the struggle. Demand is high, and there is often a waiting list of people when a property hits the market. With home builders being conservative with the amount of new construction, that opens up the door to more multi-family housing (i.e., apartments).

Homeowners tend to look at any changes to our neighborhoods through the lens of “home values.” More specifically, people want to know how apartments might impact their home prices. This question has been studied six ways to Sunday, and the results vary. In a 2004 study in Oregon, Yan Song and Gerrit-Jan Knaap found that “… housing prices tended to fall with proximity to multi-family residential units.” But a 2005 Yale University study of Boston found that the construction of multifamily housing had “no negative effects” on single-family home values. So, do apartments impact home values? Yes. And No. Clear as mud, right?

The real answer lies in the bigger picture. Apartments, in of themselves, do not cause home values to fall any more than a park, for example, necessarily causes home values to rise. Think of it this way: Is the park a popular family destination - or is it a haven for drug deals and the homeless? The park’s impact on home prices lies in the answer to that question. It works the same way with apartment buildings. There’s a big difference between a run-down tenement and a luxury, resort-style apartment complex. Look around North Phoenix and you’ll see that the rental communities here lean more toward the latter.

If we’re being honest, individual home values will be affected more by that neighbor with the unmaintained house, nine cars, and a yard full of weeds than by some new apartment community that resembles a five-star Scottsdale resort. Remember: we share a community with a dump, a landfill, a hospital, a granite quarry, and a shooting range – typically the types of businesses that drag down home values. As residents, it’s pretty handy having these services nearby. As homeowners, these things are barely a blip on the radar when it comes to home values. So, when you see that that new apartment with the olympic-sized pool and the brand-new fitness center, you can rest easy knowing your home’s value is safe.