Who Wants Affordable Housing in their Backyard? An Equilibrium Analysis of Low Income Property Development
National Bureau of Economic Research
Download Document| Date Published | April 2016 |
| Version | |
| Primary Author | Rebecca Diamond |
| Other Authors | Timothy McQuade |
| Theme | Rental Housing |
| Country | United States |
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%, lowering crime rates, and attracting racially and income diverse populations. LIHTC development in higher income areas causes house price declines of 2.5% 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.