The Externality Of Public Housing Projects In Iran
Introduction
The study examines Externality Of Public Housing Projects using the case of Iran’s Mehr Housing Project, a massive public housing scheme initiated in 2007 with the aim of providing affordable housing (two million units) across many Iranian cities. The report investigates how these projects affect nearby property values and neighbourhood quality, especially in developing country contexts where institutional capacity, infrastructure provision, and socio-economic diversity differ from developed nations. acash.org.pk+1 Public housing projects are hotly debated especially for their impact on neighboring properties. On the one hand development of housing units could enhance available amenities and increase nearby house prices. On the other hand concentration of low-income households could create negative spillovers that reduce prices. For large projects, the expansion of the housing stock could reduce prices as well. A large body of literature provides estimates for the impact of public housing projects in developed countries. Yet, to the best of our knowledge, there is no rigorous empirical analysis of the impact of such projects in developing countries.
In this paper, we study a large public housing project known as the Mehr housing project in Iran to shed light on this question in a developing country. In 2007 the Iranian government revealed a plan to facilitate the construction of 2 million affordable apartments across almost all cities in the country. We use the exact delivery time of Mehr housing units and their postal regions to set up a difference-in-differences strategy for the estimation of the impact of Mehr units on existing nearby house prices.
Using the universe of house transactions for 19 large cities in Iran between 2010 and mid-2019, we compare house price changes in Mehr postal regions to non-Mehr postal regions around the time of Mehr housing units delivery. Our results show that after the delivery of Mehr units, house prices in Mehr postal regions decline by around 11 percent relative to prices in non-Mehr postal regions.
This effect is significant at the 5 percent level and is robust to several specification checks like the inclusion of city-by-time fixed effects, allowing for differential trends for suburban locations, and regions with higher initial property values. We also provide suggestive evidence on the role of disamenity effects by looking at the heterogeneity of results across different house areas, cities, and over time.
Mehr Housing Project: Overview & Intent
The Mehr Housing Project was introduced by the Iranian government to address severe housing shortages for low and lower-middle income households. Its goals included mass production of decent housing units, improving access to homeownership, and complementing urban expansion. But with Externality Of Public Housing Projects often underexplored in developing countries, the authors saw Mehr as an important case through which to understand the unintended consequences. acash.org.pk+1
Research Questions & Context
Key questions in studying the Externality Of Public Housing Projects include:
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Do such large-scale public housing projects affect house prices in surrounding areas?
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Are the effects positive (through amenities, infrastructure) or negative (through concentration of low income households, potential stigma, or disamenities)?
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How large are these effects, and what mitigates or exacerbates them (e.g. schools, services)?
This is particularly interesting in Iran because policies often deliver housing en masse, but complementary services or planning may lag behind. acash.org.pk+1
Methodology
To estimate Externality Of Public Housing Projects for Mehr, the study uses a difference-in-differences (DiD) approach comparing postal regions where Mehr housing units were delivered with those where they were not. Data comes from nearly two million housing transactions across 19 large Iranian cities between about 2010 to mid-2019. The analysis controls for time-city fixed effects, initial property values, suburban status, and also examines whether provision of schooling or amenities alters the external effects. IDEAS/RePEc+2acash.org.pk+2
Key Findings
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Decline in Nearby Property Values
After delivery of Mehr units, house prices in postal regions where Mehr projects were delivered drop by around 11% compared to non-Mehr regions. This points to a negative Externality Of Public Housing Projects in terms of property values in neighboring areas. acash.org.pk+2EconPapers+2 -
Variation Across Space and Income Levels
The negative effect is stronger in regions that already had lower initial property values and weaker in more affluent or better-serviced areas. These findings show that Externality Of Public Housing Projects is not uniform: wealth, amenities, schooling all matter in determining how severe or mild the effect is. acash.org.pk+1 -
Role of Public Goods & Amenities
One of the mitigating factors is availability of schools. Postal regions that saw proportional expansion of schools following Mehr project deliveries did not experience the same degree of price decline. Thus, the Externality Of Public Housing Projects can be reduced when public goods accompany housing supply. EconPapers+1 -
Robustness Checks
The study’s results are robust to different model specifications: including city-time fixed effects, allowing differential trends in suburban vs central areas, and analyzing high-value vs low-value neighborhoods. These lend confidence that observed decreases in property prices are attributable to Externality Of Public Housing Projects and not confounding trends. IDEAS/RePEc+1
Mechanisms of Externality
The study explores mechanisms through which Externality Of Public Housing Projects take effect:
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Disamenity Effects: Perceptions of lower neighborhood quality, fears of congestion, stigma, or overuse of shared infrastructure can reduce attractiveness.
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Supply Expansion: Adding many units increases supply in certain postal regions; this supply effect may pull down prices by increasing competition among homes.
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Infrastructure & Amenities Lagging: If the housing is built without proportional expansion of services (schools, roads, utilities), the external costs can outweigh perceived benefits.
Thus, Externality Of Public Housing Projects is influenced heavily by whether the project is well integrated with broader urban planning. acash.org.pk+2acash.org.pk+2
Comparison with Other Countries & Literature
In developed nations, studies of Externality Of Public Housing Projects sometimes find positive spillovers: improved infrastructure, amenity provision, and urban renewal can increase nearby property values. However, in the case of Mehr in Iran, the findings contrast. Here, lack of complementary infrastructure, high concentration of low-income households, and large scale without amenity support lead to negative externalities. This contrast underscores how context matters: the governance, planning, service delivery, and socio-economic composition determine whether public housing externalities are positive or negative. acash.org.pk+1
Policy Implications
Understanding Externality Of Public Housing Projects leads to several policy lessons:
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Integrated Urban Planning: Public housing needs to be paired with schools, roads, healthcare, and community services to prevent negative spillovers. For example, including schools reduces the downward pressure on property values. EconPapers+1
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Better Site Selection: Choosing locations that are not overly isolated or under-serviced can mitigate negative externalities. Proximity to amenities and good transport infrastructure reduces disamenity.
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Mixed Housing Strategies: Avoid large homogeneous housing blocks of low-income units; mixing incomes, housing types, and densities can diffuse potential stigma and disamenity.
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Phased Delivery & Monitoring: Building incrementally and monitoring externality effects over time allows adjustment; for example, providing infrastructure in early phases.
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Community Engagement & Perception Management: How residents perceive public housing developments matters; addressing concerns proactively (about traffic, environment, aesthetics) can reduce stigma or negative externalities.
Limitations & Further Research
The study acknowledges some limitations in exploring Externality Of Public Housing Projects:
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The observed negative price effects are based on housing transaction data; other impacts (like social cohesion, quality of life) are less directly measured.
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Regional heterogeneity: differences among cities (urban vs suburban, affluent vs poorer) matter; more granular studies could shed light on local variations in Externality Of Public Housing Projects.
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Temporal dimensions: immediate effects vs longer-run adjustments (e.g., property values may rebound as infrastructure improves) are important.
Conclusion
In sum, the study on Mehr reveals that Externality Of Public Housing Projects can produce unintended negative consequences on nearby property values if not properly planned. While the primary goal of public housing is social welfare and affordability, ignoring externalities may impose costs on adjacent communities and undermine the wider urban housing market. For public housing policy in developing countries (and more broadly), the findings underscore that housing delivery must come with complementary services, mixed development, community amenities, and careful location planning.
Also Read: Policies to Promote Affordable Housing in Pakistan Challenges and Lessons Learned