Association for Public Policy Analysis & Management

Stable housing is crucial to the physical, emotional, and economic wellbeing of individuals and families (e.g. Leventhal and Newman 2010). As housing affordability has declined, housing instability (e.g. frequent moves, moving in with others/doubling up, eviction, or homelessness) has increased, in particular among low-income households (Desmond 2016; JCHS 2017). By recent estimates, 70% of renters with incomes below $15,000 paid more than half their income on rent (JCHS 2017). Housing subsidies (such as section 8 vouchers) for low-income renters increase housing affordability and reduce housing instability, but only 24% of the 19 million eligible households receive assistance, and wait lists for housing assistance are frequently two to three years long (Leopold et al. 2015). Understanding how other public policies, such as the Earned Income Tax Credit (EITC), might reduce housing instability among low-income families with children is of vital importance.

Using data from the 1990-2017 Current Population Survey (CPS) we examine the following questions: 1) Do expansions to federal and state EITCs affect housing instability and living arrangements? And 2) are the effects stronger for mothers with young children, who are more likely to live with others, who may be more affected by the EITC and who experience more housing instability? Although the EITC is one of the largest cash transfer programs in the US, distributing benefits to 26 million households every year (CBPP 2016), to date, no study has examined whether EITC expansions reduces housing instability. By providing low-income households with cash (an average of over $3,000 for families with children; CBPP 2016), and encouraging families into employment (e.g. Eissa and Liebman 1996), the EITC likely reduces housing instability. By studying whether the effects are different for families with children under 6, we can better understand how this policy affect families during a critical developmental time period (e.g. Heckman 2006), when the impact of housing instability may be particularly detrimental (Mollborn et al 2018).

We use a parameterized difference-in-differences approach, exploiting federal and state variation in EITC generosity over the last three decades focusing on single mothers, the primary recipients of the EITC. We find that a $1,000 increase in the EITC reduces doubling up by (living with non-nuclear family adults) 2 to 3 percentage points (or about 20%). Single mothers moving out of three-generation households can explain much of the decline in shared living arrangements. We also find evidence that single mothers that receive the EITC are more likely to have moved in the last year for a welfare-improving reason (to a better neighborhood, to establish an independent home, for a new job). Our results are concentrated among single mothers with children under the age of six, suggesting that expansions to the EITC might be especially effective at reducing housing instability during this critical developmental period. By understanding whether the EITC reduces housing instability, its relationship to housing more generally, and links with children’s living arrangements, our results suggest expansions to the EITC might help low-income families find more stable housing.