Does the low-income housing tax credit segregate? An analysis of the effects of privately-provided low-income housing on neighborhood composition.

Abstract

This paper explores the income and demographic impacts of the low-income housing tax credit (LIHTC) on the neighborhoods where rent-restricted units are placed in service. I employ a quasi-experimental regression kink design to estimate the treatment effect of LIHTC units on census tract-level characteristics. I find that the subsidized developments contribute significantly to an incline in both the White population and the White share of a tract’s population, while producing a simultaneous decline in Hispanic population and Hispanic share. Effects on tract poverty rates are ambiguous. Notably, I find that the observed demographic impacts of the program vary significantly based on preexisting tract characteristics. Specifically, tracts with high growth over time in housing prices, a proxy measure of gentrification, experience larger inclines in White relative and total population. Tracts with low or negative house price growth see no such effect. Ultimately, I demonstrate that the LIHTC does not concentrate poverty nor minority residents and instead spurs an influx of White households to a tract.