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Difficult Development Areas and the supply of subsidized housing

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  • Eriksen, Michael D.

Abstract

The Low-Income Housing Tax Credit (LIHTC) provides a subsidy to developers who construct housing with maximum tenant incomes and contributions towards rent. The designation of a metropolitan area as a Difficult Development Area (DDA) by the U.S. Government increases the generosity of the subsidy that private developers receive under the program, but does not increase the aggregate dollar amount of tax credits available to be allocated. Regression discontinuity methods are used to compare how DDA designation affects the quantity, composition, and location of LIHTC units based on the restriction that no more than 20% of metropolitan areas can receive the designation annually. Results indicate a significant reduction in LIHTC subsidized construction occurs at the 20% population limit, although increases the share of subsidized units located in higher-income neighborhoods.

Suggested Citation

  • Eriksen, Michael D., 2017. "Difficult Development Areas and the supply of subsidized housing," Regional Science and Urban Economics, Elsevier, vol. 64(C), pages 68-80.
    • Handle: RePEc:eee:regeco:v:64:y:2017:i:c:p:68-80
    DOI: 10.1016/j.regsciurbeco.2017.02.004
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    Cited by:

    1. Christian A. L. Hilber & Olivier Schoni, 2022. "Housing policy and affordable housing," CEP Occasional Papers 56, Centre for Economic Performance, LSE.
    2. Eriksen, Michael D. & Lang, Bree J., 2020. "Overview and proposed reforms of the low-income housing tax credit program," Regional Science and Urban Economics, Elsevier, vol. 80(C).

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    More about this item

    Keywords

    Housing policy; Tax credits; LIHTC; Regression discontinuity;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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