Association for Public Policy Analysis & Management

Subsidized housing development in low-income neighborhoods has the potential to improve housing options for low-income populations, but research is divided on the effects of these developments on neighborhood segregation and residential mobility.  In particular, it remains unclear as to whether subsidized housing creates opportunities for low-income individuals to move into more affluent neighborhoods or whether it simply reinforces neighborhood segregation by encouraging poor households to move to relatively poor areas.

This study sheds light on these questions by examining the effects of the Low Income Housing Tax Credit (LIHTC) on neighborhood mobility.  LIHTC provides subsidies for the development or renovation of low-income housing, and is responsible for providing funding to roughly one third of new multifamily construction built in the US over the past thirty years (Khadduri et al. 2012).  Given the scale of the program, understanding whether LIHTC induces households to move to more affluent neighborhoods is extremely important for both the research and policy communities. 

Our study is unique in that it uses a large nationally representative panel data set derived from the 2000 and 2010 decennial censuses of the US population.  We construct this data set using probabilistic matching techniques to link the 2000 long form of the decennial census to the 2010 decennial census, forming a panel data set that captures roughly 1 in 7 individuals living in the US in year 2000.  The size of this data set allows us to construct a variety of measures of neighborhood quality and examine the effects of low-income housing on neighborhood mobility across a diverse range of geographic areas.

Using this data, we examine whether an increase in low-income housing units due to LIHTC generates increased movement of low-income individuals into poorer neighborhoods.  Our analysis follows previous work such as Baum-Snow and Marion (2009) and Freedman and McGavock (2015) in exploiting discontinuities in eligibility rules that designate whether a census tract is a “Qualified Census Tract” (QCT) that receives additional subsidies for low-income housing development.  Specifically, we make use of two separate criteria that provide exogenous variation in low-income housing availability across geographic areas.  First, to be designated as a QCT a tract must either have a poverty rate above 50 percent or have at least 50 percent of the households be eligible to rent an LIHTC unit. In addition, no more than twenty percent of the population of a given metropolitan area is allowed to live in a QCT.  Taken together, these rules provide exogenous variation for an instrumental variables strategy that assesses the effect of low-income housing on residential mobility.

These results are relevant to the current policy debate around low-income housing in the United States. A longstanding criticism of subsidized housing in low-income communities is that the subsidized construction merely serves to “concentrate poverty.”  While a large literature has examined these issues, we are the first to examine the origins of individuals moving into low-income housing on such a large scale.