Difficult Developments Areas and the Supply of Low-Income Housing Tax Credit Units

Michael Eriksen

ERES from European Real Estate Society (ERES)

Abstract: The designation of a metropolitan area as a Difficult Development Area (DDA) by the US Government increases the per-unit generosity of the subsidy that private developers receive for supplying housing units under the Low-Income Housing Tax Credit (LIHTC) program. The top 20% of metropolitan areas ranked by the ratio of annual rent divided by household income receive the designation and a 30% increase in subsidy. Regression discontinuity (RD) methods are used to compare how DDA designation affects the quantity, composition, and location of LIHTC units based on the 20% threshold. I find increasing the generosity of the subsidy on a per-unit basis through DDA designation results in a 39% decrease in LIHTC units constructed in the metropolitan area. I also find that a DDA designation makes developers less likely to locate LIHTC units in low-income neighborhoods.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2016-01-01
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Persistent link: https://EconPapers.repec.org/RePEc:arz:wpaper:eres2016_271

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