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Location incentives in the low-income housing tax credit: Are qualified census tracts necessary?

Bree J. Lang

Journal of Housing Economics, 2012, vol. 21, issue 2, pages 142-150

Abstract: The low-income housing tax credit (LIHTC) is the largest project-based housing subsidy in the United States. Within the program, private developers receive a subsidy in exchange for constructing apartment units that rent for a predetermined affordable rate. Because the subsidy requires apartment buildings to charge a lower rental rate, the opportunity cost of developing subsidized housing in a location is the market rent that a developer could have charged if he had not received the subsidy. This study characterizes how profit incentives motivate location decisions within the LIHTC program by showing that opportunity cost causes more LIHTC development in locations with low market rent. This result implies that additional financial incentives, like the qualified census tract, may not be necessary to promote construction of subsidized housing in low-rent areas.

Keywords: Rental housing; Location choice; Subsidies (search for similar items in EconPapers)
JEL-codes: H2 L3 (search for similar items in EconPapers)
Date: 2012
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