You may have heard the term "food desert" on the news or read an article about the concept and thought, "what a shame." We often think of the United States as being a developed country, with the vast majority of our citizens having what they need to be comfortable. But surprisingly enough, over 12% of the United States population lives in a food desert where access to real food is limited.
Obviously it's a serious issue that needs to be addressed, but it probably never occurred to you that it can also affect property value, not just health. Research shows that it can actually negatively impact sales prices on real estate, making it an important consideration to investors who own or are looking to purchase properties in these areas.
What is a food desert?
The USDA defines a food desert as a neighborhood or area of a city whose urban residents live more than 0.5 to 1 mile away from the nearest fresh food grocery store or restaurant serving fresh food options. For more rural locations, it's defined as being more than 10 to 20 miles from fresh food. In these areas, there are no grocery stores with fresh goods. Instead, there are corner stores with limited selections and fast food restaurants selling processed foods.
The majority of these food desert areas are in low-income neighborhoods. To add complexity to this dilemma, people may have unreliable transportation or even none at all, which can be prohibitive when attempting to travel longer distances to buy food.
The thought of taking the bus for an hour just to purchase groceries is not something many of us have to think about. And it's not just the inconvenience or time factor that is the issue. Not having easy or reasonable access to fresh food is generally considered to lead to poor health for the residents that live there.
How does a food desert affect real estate?
People seek convenience when looking for homes, looking at factors such as: Is it close to the highway for commuting, does it have enough room for their family, can they run to the grocery store after picking up the kids from school? If they have to drive out of the way to access a grocery store, many homeowners are less willing to live there and therefore will offer less money for the home -- if they are willing to make an offer at all. Decreased demand drives the home prices down in these food desert areas, resulting in lower-income neighborhoods. This vicious cycle is self-perpetuating because grocery stores are then less willing to open stores in those areas due to residents with less money available for groceries and higher real or perceived crime rates.
Zillow found that real estate in nonrural food deserts sell for an average of 17.7% less than nearby real estate with access to fresh food options. ATTOM Data Solutions took it one step further and directly analyzed the effect of food deserts on the return on investment (ROI) for flips. They found that not only does the presence or absence of a store affect prices, but even the grocery store chain itself is a factor. An Aldi is more likely to generate better price appreciation over five years for an investor than a Trader Joes or Whole Foods by as much as an additional 11%.
The Millionacres bottom line
What is clear is that food deserts do impact real estate prices. It's a complex dynamic, because bringing grocery store chains into a food desert area can essentially gentrify it, boosting home values, which can ultimately push lower-income residents out of the area.
When looking for investment property, make sure to include the absence or presence of fresh food outlets into your due diligence, because it can impact the value of a property. For investors looking to purchase property in a food desert area, make sure to pull comps only for other properties in the same situation and adjust your offer price accordingly.