Effects of Concentrated LIHTC Development on Surrounding House Prices

41 Pages Posted: 8 Feb 2021 Last revised: 28 Mar 2022

See all articles by Richard Voith

Richard Voith

Econsult Solutions

Jing Liu

Econsult Solutions

Sean Zielenbach

SZ Consulting

Andrew Jakabovics

Enterprise Community Partners

Brian An

Georgia Institute of Technology

Seva Rodnyansky

Occidental College

Anthony W. Orlando

California State Polytechnic University, Pomona - Finance, Real Estate and Law Department

Raphael W. Bostic

Federal Reserve Bank of Atlanta

Date Written: March 27, 2022

Abstract

The Low-Income Housing Tax Credit (LIHTC) is the largest supply-side housing subsidy in the United States, with more than $8 billion worth of credits allocated per year. For a variety of reasons, LIHTC properties tend to be geographically concentrated in low-income urban communities. While numerous studies have examined the spillover effects of these properties on local property values, they have not accounted for the cumulative effects of clustering multiple LIHTC properties within an area. This paper examines the effects of introducing additional LIHTC developments in urban neighborhoods to determine whether the concentration of these affordable housing properties negatively affects local home values. We combine an interrupted time series model with a difference-in-difference approach to estimate the price effects in Chicago and surrounding Cook County, Illinois. We find some evidence that both stand-alone and clustered LIHTC developments generate positive price spillover effects on the surrounding neighborhoods; subsequent LIHTC projects do not affect prices negatively. The benefits are strongest within one quarter mile of the development, but smaller impacts prevail for up to a half mile from the LIHTC property. The positive impacts remain strong for at least 10 years after the initial development. The cumulative price effect is positive and significant in both lower and higher-income areas.

Keywords: LIHTC, affordable housing, housing prices, spatial persistence, neighborhood change

JEL Classification: R31, R38, R21, H23, H42, G12

Suggested Citation

Voith, Richard and Liu, Jing and Zielenbach, Sean and Jakabovics, Andrew and An, Brian and Rodnyansky, Seva and Orlando, Anthony W. and Bostic, Raphael W., Effects of Concentrated LIHTC Development on Surrounding House Prices (March 27, 2022). Journal of Housing Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3740758 or http://dx.doi.org/10.2139/ssrn.3740758

Richard Voith

Econsult Solutions ( email )

Jing Liu

Econsult Solutions ( email )

Sean Zielenbach

SZ Consulting ( email )

Andrew Jakabovics

Enterprise Community Partners ( email )

United States

Brian An

Georgia Institute of Technology ( email )

685 Cherry St
Atlanta, GA 30332
United States

HOME PAGE: http://www.brian-y-an.com

Seva Rodnyansky

Occidental College ( email )

1882 Campus Road
90041, CA
United States

HOME PAGE: http://https://www.oxy.edu/academics/faculty/seva-rodnyansky

Anthony W. Orlando (Contact Author)

California State Polytechnic University, Pomona - Finance, Real Estate and Law Department ( email )

United States

Raphael W. Bostic

Federal Reserve Bank of Atlanta

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

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