The external effects of public housing developments on informal housing: The case of Medellín, Colombia

Abstract

The provision of new subsidized housing projects presents an effective solution for alleviating the significant housing deficit in developing countries. However, limited knowledge exists regarding how these housing projects impact the quality of the surrounding environment, particularly when situated near informal settlements. By using highly detailed data from Medellin, Colombia, and employing an instrumental variables strategy, we estimate the external effects of social housing programs on the neighboring communities. Our results demonstrate that these projects contribute to a reduction in informal housing, poverty levels, and crime within the surrounding neighborhood. This external effect is significant and often overlooked when assessing the overall returns of social housing programs.