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Effects of concentrated LIHTC development on surrounding house prices

Author

Listed:
  • Voith, Richard
  • Liu, Jing
  • Zielenbach, Sean
  • Jakabovics, Andrew
  • An, Brian
  • Rodnyansky, Seva
  • Orlando, Anthony W.
  • Bostic, Raphael W.

Abstract

The Low-Income Housing Tax Credit 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 in both lower and higher-income areas and more significant in lower-income areas.

Suggested Citation

  • Voith, Richard & Liu, Jing & Zielenbach, Sean & Jakabovics, Andrew & An, Brian & Rodnyansky, Seva & Orlando, Anthony W. & Bostic, Raphael W., 2022. "Effects of concentrated LIHTC development on surrounding house prices," Journal of Housing Economics, Elsevier, vol. 56(C).
    • Handle: RePEc:eee:jhouse:v:56:y:2022:i:c:s1051137722000134
    DOI: 10.1016/j.jhe.2022.101838
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    References listed on IDEAS

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    More about this item

    Keywords

    LIHTC; Affordable housing; Housing prices; Spatial persistence; Neighborhood change;
    All these keywords.

    JEL classification:

    • 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
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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