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

Rebecca Diamond and Tim McQuade

Journal of Political Economy, 2019, vol. 127, issue 3, 1063 - 1117

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 percent, lowering crime rates, and attracting racially and income diverse populations. LIHTC development in higher-income areas causes house price declines of 2.5 percent 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.

Date: 2019
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Related works:
Working Paper: Who Wants Affordable Housing in their Backyard? An Equilibrium Analysis of Low Income Property Development (2016)
Working Paper: Who Wants Affordable Housing in Their Backyard? An Equilibrium Analysis of Low Income Property Development (2015)
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