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Who Wants Affordable Housing in their Backyard? An Equilibrium Analysis of Low Income Property Development

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  • 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.

Suggested Citation

  • Rebecca Diamond & Timothy McQuade, 2016. "Who Wants Affordable Housing in their Backyard? An Equilibrium Analysis of Low Income Property Development," NBER Working Papers 22204, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:22204
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    More about this item

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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