What Do We Mean When We Say Housing Has Value?

A really interesting housing conversation is occurring in Monroe County, New York, thanks to the work of Reimagine ROC Housing. ReImagine ROC Housing is engaging community, business, non-profit, and elected leaders to promote creative solutions to the critical housing shortage in the Rochester region. These leaders drafted the ReImagine ROC Housing White Paper to make the case for expanding housing choices throughout the Rochester region. The paper calls for more starter homes, townhouses, duplexes, small multifamily buildings and other forms of incremental infill. 

ReImagine ROC Housing is traveling to communities to share these recommendations. One of the communities cited in the report is Pittsford, New York. The report identifies a substantial gap between housing demand and housing production and points toward smaller homes and condominiums as ways to create additional entry points into the community.  

During the presentation, a board member raised a reasonable question: If the community allows less expensive homes to be built among more expensive homes, what happens to the value of the existing houses? There is research that can help answer that question, but before getting to the research, it is worth examining the question itself. Hidden inside it is one of the fundamental tensions of America’s housing conversation.

A Home Has Two Jobs

We ask housing to perform two very different functions. First, a home is shelter. It is the place where someone lives, raises a family, grows old or simply establishes a life in a community. When we talk about a housing shortage, we are talking about whether teachers, nurses, young families, retirees, restaurant workers and everyone else who makes a community function can find a place to live that meets their needs at a price they can afford.

But a house is also a financial asset. For millions of Americans, their home is the largest investment they will ever make, and they understandably want that investment to hold or increase its value. Those two objectives can come into conflict. If I own a scarce commodity, scarcity can be good for the value of my asset. If I am trying to obtain that same commodity, scarcity is decidedly less helpful.

That is essentially the tension playing out in many local housing debates. One person is asking, “How do we create enough homes for people who want to live here?” Another is asking, “What will increasing the supply of homes do to the investment I already own?” Neither question should simply be dismissed. But they are different questions, and recognizing the difference can make for a much more productive conversation.

“Less Expensive” Does Not Mean “Less Valuable”

There is another assumption embedded in this debate that deserves examination: that a less expensive house is necessarily a less valuable addition to a community. Those are not the same thing.

We are accustomed to thinking about property values in absolute terms. A $700,000 house appears more valuable than a $300,000 house because we are comparing the price of one property to another. But that tells us very little about how productive those properties are for the community.

This is where the work of Urban3 is particularly useful. Urban3 evaluates development using value per acre, which normalizes property value by the amount of land required to produce it. It is similar to evaluating the efficiency of a vehicle by miles per gallon rather than simply looking at the size of its gas tank. Instead of asking only, “How much is this property worth?,” value per acre asks, “How much value is this land producing?”

That distinction matters because land is finite, and every development pattern comes with public obligations. Communities build and maintain streets, pipes, sidewalks and other infrastructure. They provide emergency services and other public services across that geography. A property may have a high market value while requiring a significant amount of land and infrastructure to produce that value.

Smaller homes can produce a very different pattern. A modest house on a small parcel may have a lower purchase price while producing substantially more value per acre than a much more expensive house occupying several times as much land. Put several of those modest homes on the amount of land otherwise occupied by one large house, and the community can gain more housing, more private investment and a larger tax base without a proportional increase in the amount of infrastructure it must maintain.

This is the distinction between price and productivity. For the individual household, the price of the home matters enormously. For the community, another question matters as well: How much private wealth and tax base are we creating relative to the amount of land and public infrastructure required to support it?

The ReImagine ROC White Paper recognizes this opportunity. Its Neighborhood Economics strategy calls for value-per-acre analysis, while its broader recommendations include an Urban3-style tax-solvency assessment. That gives us a very different way to talk about the value of new housing. The question is no longer simply, “How much does this house sell for?” It becomes, “How productive is this pattern of development for the community over time?”

Seen through that lens, making room for smaller, less expensive homes is not necessarily a concession communities make in order to address housing affordability. It can also be a strategy for building more productive neighborhoods and a stronger local tax base.

What Happens to the House Next Door?

Of course, this still leaves the original question: Does adding less expensive housing reduce nearby property values? That is an empirical question, and it should be treated as one rather than assumed in either direction.

Research does not support the blanket assumption that affordable housing automatically reduces surrounding property values. A 2022 Urban Institute study examined sales of single-family homes, duplexes, cooperatives, and condominiums in Alexandria, Virginia, between 2000 and 2020. Using a repeat-sales model, the researchers compared changes in home prices before and after affordable housing was built nearby. They found that affordable units were associated with a small but statistically significant 0.09% increase in property values within one-sixteenth of a mile, roughly the distance of a typical urban block. The researchers caution that the positive relationship observed in Alexandria may reflect local conditions, including strong city oversight and close coordination with affordable housing developers. In other words, this study does not establish that affordable housing will increase nearby property values everywhere, but it does provide evidence against the assumption that introducing lower-cost housing necessarily diminishes the value of neighboring homes.  

But I think communities like Pittsford can ask an even more useful question. Instead of only asking, “Will this new house affect the value of the house next door?” we should also ask, “Will this investment increase the productive value and resilience of the neighborhood?” That opens up a much richer conversation about what the community is actually trying to accomplish.

Opening the Door to More Investment

This suggests a different way to describe what ReImagine ROC is proposing. It is easy to hear “affordable housing” and imagine that the community is being asked to accept something of lesser value. What if we instead described the proposal as opening the door for additional investment in Pittsford?

A young family purchasing a small house is investing in Pittsford. A homeowner constructing an accessory dwelling unit (ADU) is investing in Pittsford. A local builder replacing a vacant or underused parcel with a duplex is investing in Pittsford. A retired couple selling their large house and purchasing a smaller home in the same community is reinvesting in Pittsford while freeing another home for a family that needs it. Each is a small act of private investment that adds another layer to the community.

This is especially relevant to the Rochester housing problem identified by ReImagine ROC. The report describes a market in which seniors often remain in larger houses because appropriate downsizing options are unavailable. It argues that additional smaller housing can restore movement within the existing housing market rather than relying entirely on large-scale new construction. 

The objective, then, is not simply to make Pittsford cheaper. It is to allow more people, at more stages of life, to invest in Pittsford and contribute to the wealth of the community.

Wealth Is Built in Small Steps

There is one final distinction that matters. When communities recognize that they need more housing, their instinct is often to search for a large project: find a developer, assemble a large parcel, approve hundreds of units, negotiate incentives and make the giant leap. ReImagine ROC proposes something much more interesting.

Its Pattern Book includes ADUs, cottages, duplexes, triplexes and small multifamily buildings. Its Incremental Developer strategy envisions local people becoming developers themselves, building small projects in neighborhoods they already know. This is not merely a different way to produce housing. It is a different way to think about how a community creates wealth.

Traditional communities became valuable through countless small investments over generations. One building became two. A house gained an addition. A vacant lot received a home. A large house became a duplex. A commercial building gained apartments upstairs. Another generation came along and made the next investment. No single project transformed the community. Thousands of small decisions accumulated into something enormously valuable.

That distinction matters because Pittsford does not have to choose between preserving what people value about their community and responding to the region’s housing shortage. There is another approach: allow the community to thicken incrementally. Allow the next increment of development. Permit a few more people to live on land already served by streets, pipes and public services. Create homes at different price points and for different stages of life. Give local property owners opportunities to make the next small investment.

Then measure what happens. How much new private investment occurred? How much additional tax base was created? What was the value produced per acre? How much new infrastructure did the community have to assume? What happened to surrounding property values? The property-value question still belongs in the analysis, but it should not be the only measure of whether the community benefited.

Because the long-term prosperity of a place cannot rest solely on maximizing the scarcity value of the homes that already exist. A prosperous community also needs to create opportunities for the next generation of residents to make small investments that add to the wealth, productivity and resilience of the community over time.