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The Long-Run Effects of Low-Income Housing on Neighborhood Composition

Author

Listed:
  • Morris Davis

    (Rutgers Business School, Rutgers Univers)

  • Daniel Hartley

    (Federal Reserve Bank of Chicago)

  • Jesse Gregory

    (University of Wisconsin)

Abstract

We develop a new model of the demand for neighborhoods and use the model to forecast the long-run impact of new low-income housing units on neighborhood demographic composition and housing rents. We estimate the utility that each of a large number of observable “types” of households derive from neighborhoods (Census tracts) in MSAs throughout the U.S. using detailed panel data on the location choices of 5% of the U.S. population. We then estimate each type's preferences over neighborhood demographics, exploiting a new instrumental variables approach that combines the implications of our model with two discontinuities in the formula used by the department of Housing and Urban Development (HUD) for determining eligibility for federal low-income housing development credits. With knowledge of each type's preferences for neighborhoods and demographics, we simulate the long-run impacts of various low-income housing development policies. If a relatively large amount of low-income housing is placed in only one tract, the share of low-income and African-American residents increases, but the results vary by tract and the range of possible outcomes is quite large. If a small number of low-income units are simultaneously placed in a targeted tract and many adjacent tracts, only small changes to tract demographic composition occur.

Suggested Citation

  • Morris Davis & Daniel Hartley & Jesse Gregory, 2019. "The Long-Run Effects of Low-Income Housing on Neighborhood Composition," 2019 Meeting Papers 70, Society for Economic Dynamics.
    • Handle: RePEc:red:sed019:70
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    Cited by:

    1. Eric Chyn & Lawrence F. Katz, 2021. "Neighborhoods Matter: Assessing the Evidence for Place Effects," Journal of Economic Perspectives, American Economic Association, vol. 35(4), pages 197-222, Fall.
    2. Aliprantis, Dionissi & Martin, Hal & Tauber, Kristen, 2024. "What determines the success of housing mobility programs?," Journal of Housing Economics, Elsevier, vol. 65(C).
    3. Jipeng Zhang & Lue Zhan & Chong Lu, 2020. "The long-run effects of poverty alleviation resettlement on child development: Evidence from a quasi-experiment in China," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 43(10), pages 245-284.

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