Early residents in Happy Valley settled on small platted lots near Fairhaven and larger "garden tracts" throughout the rest of the valley. A streetcar line connected Happy Valley to Fairhaven's waterfront along Harris Avenue. By the year 2000, just fewer than 6,000 people called the Happy Valley Neighborhood home, second only to Roosevelt Neighborhood.
With continued growth of Western Washington University (WWU), Happy Valley became a popular location for student housing. Since the late 1960's, increasing numbers of apartments directed toward student housing have been built, infilling amongst and replacing single family housing. The highest densities of apartments have been built in the north end of the neighborhood, closest to WWU. Much of the southern section of the neighborhood is zoned and developed with single family residences. Happy Valley Elementary and Sehome High School are located in the neighborhood.
Pockets of quiet, undeveloped areas remain. You can still find owls, deer, and great blue herons, see horses grazing or walk to a community garden. You can stroll through wetlands, forests, or meadows, enjoy vistas of the Chuckanut Mountains or Bellingham Bay, or look for fish in Padden Creek. The largest public natural area in Happy Valley is Connelly Creek Nature Area established to preserve Connelly Creek, its associated wetlands and the wildlife habitat they provide. The area is largely forested supplemented by wet meadow habitat. Happy Valley Park on Donovan Avenue provides a small, active neighborhood park with playground, picnic shelter and open field. The Connelly Creek Trail runs through the park and connects to Old Fairhaven Parkway south of Padden Creek.