Working Paper: NBER ID: w22204
Authors: Rebecca Diamond; Timothy McQuade
Abstract: We nonparametrically estimate spillovers of properties financed by the Low Income Housing Tax Credit (LIHTC) onto neighborhood residents by developing a new difference-in-differences style estimator. LIHTC development revitalizes low-income neighborhoods, increasing house prices 6.5%, lowering crime rates, and attracting racially and income diverse populations. LIHTC development in higher income areas causes house price declines of 2.5% and attracts lower income households. Linking these price effects to a hedonic model of preferences, LIHTC developments in low-income areas cause aggregate welfare benefits of $116 million. Affordable housing development acts like a place-based policy and can revitalize low-income communities.
Keywords: Affordable Housing; Housing Policy; Low Income Housing Tax Credit; Neighborhood Effects
JEL Codes: H23; R13; R38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| LIHTC development (R38) | increase in house prices within 0.1 miles of the development site (R31) |
| LIHTC development (R38) | lower crime rates (K14) |
| LIHTC development (R38) | attract a more racially and income-diverse population (R23) |
| LIHTC development in higher-income areas (R38) | decline in house prices (R31) |
| LIHTC development in low-income areas (R38) | aggregate welfare benefits (E10) |
| Proximity to LIHTC sites (R38) | willingness to pay (D11) |
| Proximity to LIHTC sites in higher-income areas (R38) | willingness to pay to avoid (D11) |