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The effects of low income housing tax credit developments on neighborhoods

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  • Baum-Snow, Nathaniel
  • Marion, Justin

Abstract

This paper evaluates the impacts of new housing developments funded with the Low Income Housing Tax Credit (LIHTC), the largest federal project based housing program in the U.S., on the neighborhoods in which they are built. A discontinuity in the formula determining the magnitude of tax credits as a function of neighborhood characteristics generates pseudo-random assignment in the number of low income housing units built in similar sets of census tracts. Tracts where projects are awarded 30% higher tax credits receive approximately six more low income housing units on a base of seven units per tract. These additional new low income developments cause homeowner turnover to rise, raise property values in declining areas and reduce incomes in gentrifying areas in neighborhoods near the 30th percentile of the income distribution. LIHTC units significantly crowd out nearby new rental construction in gentrifying areas but do not displace new construction in stable or declining areas.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 93 (2009)
Issue (Month): 5-6 (June)
Pages: 654-666

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Handle: RePEc:eee:pubeco:v:93:y:2009:i:5-6:p:654-666

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Web page: http://www.elsevier.com/locate/inca/505578

Related research

Keywords: Low income housing Tax credits Gentrification Housing crowd-out;

References

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  1. Kenneth Y. Chay & Michael Greenstone, 1998. "Does Air Quality Matter? Evidence from the Housing Market," NBER Working Papers 6826, National Bureau of Economic Research, Inc.
  2. Edgar O. Olsen, 2003. "Housing Programs for Low-Income Households," NBER Chapters, in: Means-Tested Transfer Programs in the United States, pages 365-442 National Bureau of Economic Research, Inc.
  3. Ekeland, Ivar & Heckman, James J. & Nesheim, Lars, 2004. "Identification and Estimation of Hedonic Models," Economics Papers from University Paris Dauphine 123456789/6486, Paris Dauphine University.
  4. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
  5. Jeffrey R. Kling & Jeffrey B. Liebman & Lawrence F. Katz, 2005. "Experimental Analysis of Neighborhood Effects," NBER Working Papers 11577, National Bureau of Economic Research, Inc.
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  7. Sinai, Todd & Waldfogel, Joel, 2005. "Do low-income housing subsidies increase the occupied housing stock?," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2137-2164, December.
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Citations

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Cited by:
  1. Severin Borenstein, 2010. "The Redistributional Impact of Non-linear Electricity Pricing," NBER Working Papers 15822, National Bureau of Economic Research, Inc.
  2. Di, Wenhua & Murdoch, James C., 2013. "The impact of the low income housing tax credit program on local schools," Journal of Housing Economics, Elsevier, vol. 22(4), pages 308-320.
  3. Freedman, Matthew & Owens, Emily G., 2011. "Low-income housing development and crime," Journal of Urban Economics, Elsevier, vol. 70(2-3), pages 115-131, September.
  4. Benoît Schmutz, 2012. "Public Housing Quotas and Segregation," AMSE Working Papers 1228, Aix-Marseille School of Economics, Marseille, France.
  5. David S. Lee & Thomas Lemieux, 2009. "Regression Discontinuity Designs in Economics," NBER Working Papers 14723, National Bureau of Economic Research, Inc.
  6. Matthew Klesta & Frank Manzo & Francisca G-C Richter & Mark S Sniderman, 2013. "Low-income-rental-housing programs in the Fourth District," Working Paper 1311, Federal Reserve Bank of Cleveland.
  7. Boomhower, Judson & Davis, Lucas W., 2014. "A credible approach for measuring inframarginal participation in energy efficiency programs," Journal of Public Economics, Elsevier, vol. 113(C), pages 67-79.
  8. Kelly D. Edmiston, 2012. "Nonprofit housing investment and local area home values," Economic Review, Federal Reserve Bank of Kansas City, issue Q I, pages 67-96.
  9. Kelly D. Edmiston, 2011. "Low-income housing tax credit developments and neighborhood property conditions," Research Working Paper RWP 11-10, Federal Reserve Bank of Kansas City.
  10. Lang, Bree J., 2012. "Location incentives in the low-income housing tax credit: Are qualified census tracts necessary?," Journal of Housing Economics, Elsevier, vol. 21(2), pages 142-150.
  11. Tuukka Saarimaa & Essi Eerola, 2013. "Is Social Housing Affordable?," ERSA conference papers ersa13p927, European Regional Science Association.
  12. Eriksen, Michael D. & Rosenthal, Stuart S., 2010. "Crowd out effects of place-based subsidized rental housing: New evidence from the LIHTC program," Journal of Public Economics, Elsevier, vol. 94(11-12), pages 953-966, December.
  13. Steve Gibbons & Max Nathan & Henry G. Overman, 2014. "Evaluating Spatial Policies," SERC Policy Papers 012, Spatial Economics Research Centre, LSE.

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