The Effect of the Low-Income Housing Tax Credit (LIHTC) on the Standard of Living in California

Abstract

In this paper, I estimate the effects of the Low Income Housing Tax Credits (LIHTC) on the standard of living in California by creating a difference-in-difference model to eliminate biasness due to non-random selection into the program. I measure the standard of living by looking at individual wealth and the cost of housing. I will compare the following: the median household income and per capita income to measure individual wealth, and the median house values and median gross rent to measure the cost of housing. I find that the LIHTC leads to a statistically significant increase in median household income by 4.23%, per capita income by 10.6%, median house value by 4.9%, and median gross rent by 8.47%. The LIHTC program is an investment in the social capital of neighborhoods as it attracts people who on average have a higher income.