Assessing the role of TIF and LIHTC in an equilibrium model of affordable housing development

Jaime Luque

Regional Science and Urban Economics, 2020, vol. 80, issue C

Abstract: The goal of this paper is to understand the impact of the Tax Incremental Financing (TIF) and the Low Income Housing Tax Credit (LIHTC) programs in an equilibrium model of affordable housing development. A TIF policy can implement an equilibrium where the construction of affordable housing becomes feasible (it passes the “but for ” test). TIF is also effective in ameliorating a housing affordability crisis resulting from supply frictions in the housing market (e.g., zoning constraints and NIMBYism). However, TIF has the pervasive effect of increasing the construction costs. TIF also has implications for global corporations that buy LIHTCs: it induces them to rebalance their portfolios of LIHTC equity away from municipalities that rely on TIF.

Keywords: Affordable housing development; Tax Incremental Financing (TIF); Low Income Housing Tax Credit (LIHTC); “But for” test; Equity; Debt (search for similar items in EconPapers)
JEL-codes: D52 D53 G12 G14 G15 G18 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:regeco:v:80:y:2020:i:c:s0166046217303277

DOI: 10.1016/j.regsciurbeco.2018.06.005

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