Cited by 264Housing Market and EconomicsUrban, Neighborhood, and Segregation StudiesUrban Planning and Governance

The DOI matches its Crossref record; 17 of the 17 references it cites were found in a registry or an index; none of the 5 sources its claims cite is checked for support yet.

The effects of low income housing tax credit developments on neighborhoods

Open access
Baum-Snow, Nathaniel, Marion, Justin·2009·Journal of Public Economics

Abstract

This paper evaluates the impacts of new housing developments funded with the Low Income Housing Tax Credit (LIHTC), the largest federal project based housing program in the U.S., on the neighborhoods in which they are built. A discontinuity in the formula determining the magnitude of tax credits as a function of neighborhood characteristics generates pseudo-random assignment in the number of low income housing units built in similar sets of census tracts. Tracts where projects are awarded 30 percent higher tax credits receive approximately six more low income housing units on a base of seven units per tract. These additional new low income developments cause homeowner turnover to rise, raise property values in declining areas and reduce incomes in gentrifying areas in neighborhoods near the 30th percentile of the income distribution. LIHTC units significantly crowd out nearby new rental construction in gentrifying areas but do not displace new construction in stable or declining areas.

Overview

AI snapshot

Written from the paper’s full text.

TL;DR

This paper uses a regression discontinuity at the Qualified Census Tract threshold to estimate effects of Low Income Housing Tax Credit developments on neighborhoods. It finds higher owner turnover, lower median incomes especially in gentrifying areas, higher home values in declining/stable areas, and modest crowd-out of nearby rental construction.

Key findings

  • Tracts just above the QCT threshold receive about 6 additional LIHTC units on a base of 7 units per tract between 1994 and 1999, driven by the 30 percent higher tax credits.
  • Each additional 100 LIHTC units causes a 5.9 percentage point increase in the fraction of owners moving into a block group between 1995 and 2000, and reduces median household income by 9.3 percent overall and by 21.5 percent in gentrifying areas.
  • Each additional 100 LIHTC units raises median home values by 14.9 percent overall, with effects of 10.6 percent in stable areas and 5.6 percent in gentrifying areas.
  • Each LIHTC unit increases newly built rental units within 1 km by 0.80, with no effect on owner-occupied units; in gentrifying areas each LIHTC unit increases new rental construction by only 0.37 units, implying substantial crowd-out.

Methods

  • Regression discontinuity design exploiting the 50 percent eligible-household cutoff for Qualified Census Tract status, which gives projects 30 percent higher tax credits and generates pseudo-random variation in LIHTC units.
  • Data include HUD LIHTC projects placed in service 1987–2005, focusing on 1994–1999 metropolitan projects, merged with 1980, 1990, and 2000 census tract and block group data; applications data cover California, Texas, and New Jersey in 2004–2005.
  • Analysis uses tract-level and 1 km ring-level first-stage and reduced-form/IV estimates, instrumenting LIHTC units with QCT status or the number of blocks in qualified tracts, controlling for cubic control functions, county fixed effects, and demographic/housing characteristics.

Limitations

  • The paper states that the RD design supports causal statements only for areas that are fairly poor but not extremely poor near the QCT threshold, and that treatment effects may differ by neighborhood composition and developer incentives.
  • The paper states missing data concerns: project location is missing for 9.5 percent of projects and unit counts for 4.9 percent; only placed-in-service projects are observed, and applications data are limited to California, Texas, and New Jersey in 2004–2005.
  • The paper states crowd-out estimates may overstate effects because about 70 percent of exogenous LIHTC units are new construction while the rest are rehabilitations, and may understate crowd-out because units built 1994–1999 are compared with outcomes for 1995–1999; separate declining-area estimates are not reported due to a marginally significant first stage.

Model-written summary. Check it against the paper before relying on it.

Integrity signals

Registry

Crossref · 10.1016/j.jpubeco.2009.01.001

Cites

17 of 17 references verified0 citation errors · 0 not checkable

Statistics

Nothing to recompute.

Verification

Claims the paper makes

77 Own result · 24 Own method · 24 Own interpretation · 20 No basis given · 3 Sources not found · 3 Not checked yet · 1 No full text of the sources

  • It may state two separate claims as one. 41
  • Probably not a substantial claim. 30
64 of 64
  • The paper relies on this without support.

    LIHTC subsidized units are almost entirely populated by households below the 30th percentile of the income distribution.

    “Since LIHTC subsidized units are almost entirely populated by households below the 30th percentile of the income distribution, new developments may generate a decline in local amenities because they lead to an influx of lower than average income residents in most neighborhoods.”
  • The paper relies on this without support.

    Developers’ incentives to build low income versus market rate housing may differ markedly by local economic conditions.

    “Developers’ incentives to build low income versus market rate housing may differ markedly by local economic conditions.”
  • The paper relies on this without support.

    The probability a project is proposed in a particular tract, and whether this proposal is ultimately accepted, is likely to be related to some unobserved tract characteristics that also influence the change in the outcome.

    “The probability a project is proposed in a particular tract, and whether this proposal is ultimately accepted, is likely to be related to some unobserved tract characteristics that also influence the change in the outcome Δyi.”
  • The paper relies on this without support.

    The error term εi does not change discontinuously across the threshold ei = 0.5.

    “The estimated coefficient β^1 is consistent provided the error term εi does not change discontinuously across the threshold ei = 0.5.”
  • The authors state this as an assumption.

    There are no unobservables that influence an outcome of interest and are correlated with QCT status, conditional on controls including the interacted polynomial f(e).

    “The basic identifying assumption is that there are no unobservables that influence an outcome of interest and are correlated with QCT status, conditional on controls including the interacted polynomial f(e).”
  • The paper relies on this without support.

    Sorting on unobservables is likely to remain within groups of tracts on either side of the QCT threshold.

    “It is important to recognize that sorting on unobservables is likely to remain within groups of tracts on either side of the QCT threshold.”
  • The paper relies on this without support.

    Whether locating in a qualified tract or not, developers will still find it to their advantage to locate in gentrifying areas.

    “In particular, whether locating in a qualified tract or not, developers will still find it to their advantage to locate in gentrifying areas.”
  • The authors state this as an assumption.

    Sorting on unobservables happens using exactly the same process on each side of the QCT threshold.

    “For econometric identification, we need that such sorting on unobservables happens using exactly the same process on each side of the threshold.”
  • The authors state this as an assumption.

    The empirical model in (2) captures the data generating process for x at the census block level.

    “Assuming the empirical model in (2) captures the data generating process for x at the census block level, inclusion of the aggregated polynomial control function terms ensures that the instrument is orthogonal to the error term ε~g.”
  • The authors state this as an assumption.

    Missing information on location does not differ across the 50 percent eligibility cutoff.

    “Assuming that missing information on location does not differ across the 50 percent eligibility cutoff, missing data does not adversely affect our identification strategy, though it does add noise to the error term.”
  • The authors state this as an assumption.

    Unobserved tract characteristics that influence outcomes of interest do not vary discontinuously across the QCT eligibility threshold.

    “In order for the regression discontinuity strategy to yield consistent parameter estimates, unobserved tract characteristics that influence outcomes of interest must not vary discontinuously across the policy threshold.”
  • The paper relies on this without support.

    In 2003 the QCT criterion was expanded to allow tracts with a poverty rate exceeding 25 percent to qualify as QCTs.

    “In 2003 the QCT criterion was expanded also to allow tracts with a poverty rate exceeding 25 percent to qualify as QCTs.”
  • The authors state this as an assumption.

    If all profitable projects are proposed, then the response of proposed units to QCT designation yields the supply response of LIHTC units to higher anticipated tax credits.

    “If all profitable projects are proposed, then the response of proposed units to the QCT designation yields the supply response of LIHTC units to higher anticipated tax credits.”
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Self-check

Percentages, sums and reported differences re-computed from the paper’s own numbers.

Each contradiction between two passages listed here was confirmed by an independent check.

2 of 2

Citations

Cites

Show all 17 references

Research works printed but not linked: 1

  1. Schwartz, 2006, The external effects of subsidized housing investment, Regional Science and Urban Economics, 36, 697

Cited by

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Metadata

Authors
Baum-Snow, N., & Marion, J.
Affiliations
  • Brown University (US)
  • University of California, Santa Cruz (US)
Corresponding author
Baum-Snow, Nathaniel
Venue
Journal of Public Economics
Publisher
Elsevier BV
Published
2009-06
Volume
93
Issue
5-6
Pages
654-666
ISSN
0047-2727 (ISSN-L)
OpenAlex
W2048157984
Cited by
264
References
17
Citations by year
2026: 20 · 2025: 25 · 2024: 14 · 2023: 11 · 2022: 19 · 2021: 13 · 2020: 30 · 2019: 16 · 2018: 16 · 2017: 10 · 2016: 9 · 2015: 28 · 2014: 13 · 2013: 10 · 2012: 11
FWCI
19.27
Type
journal article
Language
en
Open access
Locations
  • Journal of Public Economics (publishedVersion)
  • PubMed (publishedVersion)
  • Europe PMC (PubMed Central) (acceptedVersion)
  • PubMed Central (acceptedVersion)
  • RePEc: Research Papers in Economics (submittedVersion)
Funders
Eunice Kennedy Shriver National Institute of Child Health and Human Development (R24HD041020)
Topics
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Housing Market and Economics
  • Social Sciences › Sociology and Political Science › Urban, Neighborhood, and Segregation Studies
  • Social Sciences › Urban Studies › Urban Planning and Governance
Keywords
Low-Income Housing Tax Credit, neighborhood effects, gentrification, property values, income distribution, displacement, housing policy, tax credits, census tracts

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