The Price of Inclusion: Evidence from Housing Developer Behavior

117 Pages Posted: 22 Sep 2020 Last revised: 2 Nov 2021

See all articles by Evan J. Soltas

Evan J. Soltas

Massachusetts Institute of Technology (MIT), Department of Economics

Date Written: October 30, 2021

Abstract

In many cities, incentives and regulations lead developers to integrate low-income housing into market-rate buildings. How cost-effective are these policies? I study take-up of a tax incentive in New York City using a model in which developers trade off between tax savings and pre-tax income. I estimate the model using policy variation and microdata on all development from 2003 to 2015. I estimate a citywide marginal fiscal cost of $1.6 million per low-income unit. Differences in neighborhoods, not developer incidence, explain the cost premium over other housing programs. Weighing costs against external estimates of neighborhood effects, I conclude middle-class neighborhoods offer "opportunity bargains."

Keywords: inclusionary housing, low-income housing, housing supply, affordable housing, property taxation

JEL Classification: H21, H22, H32, H71, R28, R31, R38

Suggested Citation

Soltas, Evan J., The Price of Inclusion: Evidence from Housing Developer Behavior (October 30, 2021). Available at SSRN: https://ssrn.com/abstract=3669304 or http://dx.doi.org/10.2139/ssrn.3669304

Evan J. Soltas (Contact Author)

Massachusetts Institute of Technology (MIT), Department of Economics ( email )

Cambridge, MA
United States

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