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

64 Pages Posted: 2 May 2016 Last revised: 4 Mar 2022

See all articles by Rebecca Diamond

Rebecca Diamond

Stanford Graduate School of Business

Timothy McQuade

Stanford University

Date Written: April 2016

Abstract

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.

Suggested Citation

Diamond, Rebecca and McQuade, Timothy, Who Wants Affordable Housing in Their Backyard? An Equilibrium Analysis of Low Income Property Development (April 2016). NBER Working Paper No. w22204, Available at SSRN: https://ssrn.com/abstract=2773434

Rebecca Diamond (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Timothy McQuade

Stanford University ( email )

Stanford, CA 94305
United States

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