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Crowd out effects of place-based subsidized rental housing: New evidence from the LIHTC program

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  • Eriksen, Michael D.
  • Rosenthal, Stuart S.

Abstract

Since its inception in 1987, the Low Income Housing Tax Credit (LIHTC) program has ballooned into the largest ever source of subsidized construction of low-income housing in the United States, accounting for one-third of all recent multi-family rental construction. This paper examines the crowd out effects of this increasingly important source of low-moderate income housing. To do so, we analyze the impact of LIHTC construction at three different levels of geography, MSA, county, and 10-mile radius circles. This allows us to employ increasingly extensive geographic fixed effects that help to difference away unobserved factors. Political variables are also used as instruments to further facilitate identification. In all of our models, IV estimates yield substantially greater crowd out than OLS, confirming the endogenous attraction of LIHTC development to areas ripe for new construction. Our most robust IV estimates indicate that nearly 100% of LIHTC development is offset by a reduction in the number of newly built unsubsidized rental units, although the confidence band around this point estimate allows for less dramatic assessments. Additional estimates suggest that LIHTC development has a much more moderate impact on construction of owner-occupied housing, but these estimates are imprecise. Overall, while LIHTC development may well affect the location of low-moderate income rental housing opportunities, our estimates suggest that the impact of the program on the number of newly developed rental housing units appears to be small.

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Bibliographic Info

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

Volume (Year): 94 (2010)
Issue (Month): 11-12 (December)
Pages: 953-966

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Handle: RePEc:eee:pubeco:v:94:y:2010:i:11-12:p:953-966

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

Related research

Keywords: Crowd out Subsidized housing LIHTC;

References

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Citations

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Cited by:
  1. David Neumark & Helen Simpson, 2014. "Place-Based Policies," NBER Working Papers 20049, National Bureau of Economic Research, Inc.
  2. Benoît Schmutz, 2012. "Public Housing Quotas and Segregation," Working Papers halshs-00793467, HAL.
  3. Freedman, Matthew & Owens, Emily G., 2011. "Low-income housing development and crime," Journal of Urban Economics, Elsevier, vol. 70(2), pages 115-131.
  4. Mihir Desai & Dhammika Dharmapala & Monica Singhal, 2010. "Tax Incentives for Affordable Housing: The Low Income Housing Tax Credit," NBER Chapters, in: Tax Policy and the Economy, Volume 24, pages 181-205 National Bureau of Economic Research, Inc.
  5. Daphna Bassok & Maria Fitzpatrick & Susanna Loeb, 2012. "Does State Preschool Crowd-Out Private Provision? The Impact of Universal Preschool on the Childcare Sector in Oklahoma and Georgia," NBER Working Papers 18605, National Bureau of Economic Research, Inc.
  6. Robert Haveman & Barbara Wolfe, 2012. "Long-Term Effects of Public Low-Income Housing Vouchers: Work, Neighborhood, Family Composition and Childcare Usage," CEPR Discussion Papers 667, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  7. Tuukka Saarimaa & Essi Eerola, 2013. "Is Social Housing Affordable?," ERSA conference papers ersa13p927, European Regional Science Association.
  8. 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.
  9. Fredrik Andersson & John C. Haltiwanger & Mark J. Kutzbach & Giordano Palloni & Henry O. Pollakowski & Daniel H. Weinberg, 2013. "Childhood Housing And Adult Earnings: A Between-Siblings Analysis Of Housing Vouchers And Public Housing," Working Papers 13-48, Center for Economic Studies, U.S. Census Bureau.
  10. Marion Steele & Francois Des Rosiers, 2009. "Building Affordable Rental Housing in Unaffordable Cities: A Canadian Low-Income Housing Tax Credit," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 289, May.
  11. Eriksen, Michael D., 2009. "The market price of Low-Income Housing Tax Credits," Journal of Urban Economics, Elsevier, vol. 66(2), pages 141-149, September.
  12. Freedman, Matthew, 2012. "Teaching new markets old tricks: The effects of subsidized investment on low-income neighborhoods," Journal of Public Economics, Elsevier, vol. 96(11), pages 1000-1014.
  13. 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.
  14. Carlson, Deven & Haveman, Robert & Kaplan, Tom & Wolfe, Barbara, 2012. "Long-term earnings and employment effects of housing voucher receipt," Journal of Urban Economics, Elsevier, vol. 71(1), pages 128-150.

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