Effects of Concentrated LIHTC Development on Surrounding House Prices
41 Pages Posted: 8 Feb 2021 Last revised: 28 Mar 2022
Date Written: March 27, 2022
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
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