Effects of Concentrated LIHTC Developments on Surrounding House Prices

Econsult Solutions Principal Richard Voith recently published a paper in the Journal of Housing Economics examining the property value impacts of affordable housing developments financed by Low-Income Housing Tax Credits (LIHTC). The LIHTC program is the U.S.’s largest funding source for affordable housing production, with an annual totaling of more than $8 billion. LIHTC developments are frequently clustered, prompting some to question whether this concentration of affordable housing might have adverse impacts on property values and neighborhoods.

This research is the first to focus on measuring the impacts of concentrated LIHTC developments on nearby property values. Using data spanning more than 20 years, over 600,000 housing sales, and 430 LIHTC developments, this investigation finds no evidence of negative impacts of LIHTC investments on neighborhood property values.

The analysis shows that stand-alone and clustered LIHTC properties have positive spillover effects on property prices in the surrounding communities. Moreover, neighborhoods with 3 or more LIHTC developments had even larger positive spillovers on neighboring property values. The largest impacts occurred within ¼ of a mile of the LIHTC development and diminished as distance from it increased, with property prices experiencing positive impacts up to ½ mile away from the LIHTC development. These positive spillovers were evident across a variety of neighborhoods including low-income neighborhoods and higher-income neighborhoods, including both neighborhoods with larger Black populations and in those with lower Black populations.

The estimation framework used in the analysis is a combination of interrupted time series (ITS) and a difference-in-difference (DID) methods. The framework enables the all-else-equal comparison of the price of homes in areas neighboring LIHTC properties against those that are not in close proximity to LIHTC developments, and the comparison of prices prior to the LIHTC development with prices in the neighborhood after project completion. To control for differences in neighborhoods that were difficult to observe, census tract fixed effects were included in the regression analysis, as well market-wide temporal fixed effects to capture market-wide fluctuations in prices over time.

Read more about, including the full report here, with an all-inclusive presentation of the in-depth modeling data, and a comprehensive look at the project findings: https://www.sciencedirect.com/science/article/pii/S1051137722000134

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