Who Wants Affordable Housing in their Backyard? An Equilibrium Analysis of Low Income Property Development

Rebecca Diamond, Timothy McQuade

NBER Working Paper No. 22204
Issued in April 2016
NBER Program(s):Labor Studies, Public Economics

We nonparametrically estimate spillovers of properties financed by the Low Income Housing Tax Credit (LIHTC) onto neighborhood residents by developing a new difference-in-differences style estimator. LIHTC development revitalizes low-income neighborhoods, increasing house prices 6.5%, lowering crime rates, and attracting racially and income diverse populations. LIHTC development in higher income areas causes house price declines of 2.5% and attracts lower income households. Linking these price effects to a hedonic model of preferences, LIHTC developments in low-income areas cause aggregate welfare benefits of $116 million. Affordable housing development acts like a place-based policy and can revitalize low-income communities.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w22204

Published: Rebecca Diamond & Tim McQuade, 2019. "Who Wants Affordable Housing in Their Backyard? An Equilibrium Analysis of Low-Income Property Development," Journal of Political Economy, vol 127(3), pages 1063-1117.