Why Smaller Homes Next Door Will Raise Our Property Values

This is one of those "sounds wrong but is absolutely true" types of things: when smaller homes go into a neighborhood, the value of the older, larger homes goes up.

For neighborhoods like ours, the literature is unambiguous. I want to show you how it works, and why I'm taking a strong stand in support of the higher-density Phase III of Terre Vista Glen.

A note on affiliation: I am in no way affiliated with the developer. I have a family member who works for the City, but not in any departmt connected to development, planning, or redevelopment. I am writing this because I own a home in Terre Vista Glen and fundamentally believe this is the best thing that could happen to my net worth. If my writing this increases the likelihood of the development by just 5%, I am estimating that translates to roughly $5,000 in expected value on my home. I'm telling you exactly what I get out of this so you can decide whether it explains my whole position.

Different products, not different prices

If you remember econ class, the standard rule is: when supply of a good goes up, the price falls. The strongest version of the opposition's economic argument would be some version of this.

The catch is that homes in the $100K–$300K range are not the same product as homes in the $400K+ range. The buyer for a $200K starter home isn't a buyer for a $500K executive home with a smaller wallet — they're a fundamentally different household at a different life stage. If you take the cheaper option off the market, they don't trade up. They leave town, or they don't form a household here at all.

This matters because the petition's framing — "build executive housing instead" — assumes the demand pools are interchangeable. They aren't. Building 60 mid-tier homes doesn't compete with the upper tier. It serves a completely different segment of the market that Terre Haute is currently underserving.

How more starter homes raise upper-tier values

Here's where it gets counterintuitive. More mid-tier housing doesn't just leave the upper tier alone, it actively pulls it up.

The mechanism is what economists call a local multiplier effect, and it's complementary, not competitive. More households in the area means more demand for local services: contractors, dentists, restaurants, daycare, retail. More service businesses means more business owners, managers, and skilled tradespeople — people whose incomes put them in the market for the kind of larger, established homes that already exist in Terre Vista Glen. They want to live near where they work and where their kids go to school. That demand has to land somewhere, and the homes it lands on are ours.

Enrico Moretti's research on local labor markets quantifies this: every tradeable-sector job (e.g. those jobs going in for the battery plant) supports roughly 1.6 local service jobs, and those service workers need housing in the same corridor. Phase III plus the existing stock is how that demand gets absorbed. The mid-tier and upper-tier markets aren't competing for the same buyers, they're feeding each other.

And this neighborhood specifically wins

The benefits from new development don't spread evenly across a city. They concentrate. The closer your home is to the new development, the larger the effect on your value, and the effect drops off sharply with distance.

Today, my lot is on the smaller end of a uniform subdivision. After Phase III, my lot sits at the upper end of the local product mix. Scarcity within a defined market raises relative price, that's not a paradox, that's just how markets work.

Finished beats half-finished

Right now, our neighborhood has 17 acres of undeveloped land at the back. That uncertainty is a discount on every home in Phase I and Phase II. Nobody buys a home with full confidence about what's going to be next to them in five years when there's a vacant parcel attached.

A completed subdivision, even one with smaller lots than ours, removes that discount. A finished neighborhood is worth more than a half-finished one. Buyers pay a premium for resolved uncertainty, and we capture that premium when Phase III is built.

The civic case is separate, and it also matters

Everything above is about our financial self-interest. There's a separate argument worth making on its own terms.

Raj Chetty's work at Opportunity Insights has shown that kids who grow up in mixed-income neighborhoods, specifically, lower-income kids growing up around higher-income neighbors, have measurably better long-term outcomes than kids in segregated ones. Better schools, better adult earnings, more upward mobility.

Building a neighborhood where middle-class families can climb the same ladder we climbed, next to ours, is the kind of thing that makes a town worth living in. The financial case for Phase III stands on its own. The civic case stands on its own.

Evan Mast's 2023 research traces the same logic from a different angle: every new home built sets off a chain of moves that ripples down-market, freeing up older housing for households that couldn't otherwise afford to live here. Sixty new mid-tier homes is sixty units of slack across the entire local distribution. That helps people who will never live in Phase III at all.

The east-side context makes this urgent

This isn't happening in a vacuum. VCSC is proposing a $222M new high school on the east side. The east side of Terre Haute is where the next decade of growth is going to happen, and the housing stock has to absorb it or it might stall out.

If we don't build for that growth here, the families coming for those jobs settle somewhere else, and they take the schools, the retail, the road improvements, and the political weight with them. That political weight could bring the growth elsewhere. The high school siting decision has not been made yet. More rooftops in this corridor is the single best argument for putting it nearby.

I'm a first-generation homeowner

I am a first-generation homeowner. I am proud of that, and it was hard. I'm well-paid, and it still took me until I was 30 to be able to afford a house.

The people who will buy these $100K–$300K homes in Phase III are middle-class families climbing a similar ladder to what I climbed. They are not a threat to this neighborhood. They are the next generation of it. Their kids, raised next to ours, in a mixed-income neighborhood, are statistically more likely to do better than their parents did. That matters.

So neighbors: the financial case and the civic case point the same direction. Approve Phase III.