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The cost‐effectiveness of the low‐income housing tax credit relative to vouchers: Evidence from six metropolitan areas

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  • Lan Deng

Abstract

How expensive is the Low‐Income Housing Tax Credit (LIHTC) program relative to vouchers? Are there any market conditions under which the supply‐based LIHTC could be more cost‐effective than demand‐based vouchers? This article examines these questions in six metropolitan areas—Boston, New York, San Jose (CA), Atlanta, Cleveland, and Miami. Controlling for family income and unit size, I compare the development subsidies of new‐construction LIHTC projects with the alternative 20‐year voucher cost in each area. In general, the LIHTC is found to be more expensive than vouchers. The premium, however, varies significantly by voucher payment standard and local housing market. Assuming a payment standard of 100 percent of fair market rent, the LIHTC is only 2 percent more expensive than vouchers in San Jose, but more than twice as expensive as vouchers in Atlanta. Many factors account for these regional variations. This study emphasizes two: local market conditions and program administration.

Suggested Citation

  • Lan Deng, 2005. "The cost‐effectiveness of the low‐income housing tax credit relative to vouchers: Evidence from six metropolitan areas," Housing Policy Debate, Taylor & Francis Journals, vol. 16(3-4), pages 469-511.
    • Handle: RePEc:taf:houspd:v:16:y:2005:i:3-4:p:469-511
    DOI: 10.1080/10511482.2005.9521553
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    Cited by:

    1. Lang, Bree J., 2015. "Input distortions in the Low-Income Housing Tax Credit: Evidence from building size," Regional Science and Urban Economics, Elsevier, vol. 52(C), pages 119-128.
    2. Matthew Klesta & Frank Manzo & Francisca Richter & Mark S. Sniderman, 2013. "Low-income-rental-housing programs in the Fourth District," Working Papers (Old Series) 1311, Federal Reserve Bank of Cleveland.

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