The Price of Inclusion: Evidence from Housing Developer Behavior

Evan J. Soltas
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Evan J. Soltas: MIT Economics

The Review of Economics and Statistics, 2024, vol. 106, issue 6, 1588-1606

Abstract: In many cities, incentives and regulations lead developers to integrate low-income housing into market-rate buildings. How cost-effective are these policies? I study take-up of a tax incentive in New York City using a model in which developers trade off between tax savings and pretax income. Estimating the model using policy variation and microdata on development from 2003 to 2015, I find a citywide marginal fiscal cost of $1.6 million per low-income unit. Differences in neighborhoods, not developer incidence, explain the cost premium over other housing programs. Weighing costs against estimates of neighborhood effects, I conclude middle-class neighborhoods offer “opportunity bargains.”

Date: 2024
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