The Effect of Affordable Housing on the Surrounding Neighborhood

Although produced by NAHB’s Economists, Eye on Housing is intended for a fairly broad readership with an interest in housing, but not necessarily in the academic research published by technical journals.  Nevertheless, many EoH readers will want to know about a relatively recent technical paper published in Housing Policy Debate.  The paper is called The What, Where, and When of Place-Based Housing Policy’s Neighborhood Effects and was authored by three researchers from the Boston area, including an Assistant Professor of Economics at the University of Massachusetts Boston.

The paper is a review and synthesis of 16 previous studies that looked primarily, but not exclusively, at the neighborhood impacts of housing financed by the Low-Income Housing Tax Credit (LIHTC) program.  The LIHTC is currently the federal government’s primary vehicle for encouraging new affordable rental housing in the U.S.  According to HUD’s LIHTC Data Base, it has been responsible for creating over 1,400 projects with more than 100,000 housing units per year, on average, since 1995.

The 16 studies covered in the paper were all published since 2000 (the majority since 2010) and met the authors’ standards for academic rigor.  The paper looked separately at studies that analyzed the effects of LIHTC projects on distressed, high-opportunity and moderate-poverty neighborhoods.

In distressed neighborhoods, the basic findings were that building LIHTC housing increases surrounding property values and reduces crime rates.  In high-opportunity neighborhoods, LIHTC housing has no effect on crime rates, either positive or negative, but a small negative impact on property values—although only within one-tenth of a mile and if the high-opportunity neighborhood also lacks racial diversity.  In moderate-poverty neighborhoods, the research so far has been relatively sparse and not particularly conclusive.  Research also has also been relatively sparse and inconclusive on housing programs other than the LIHTC, and on neighborhood effects other than property values and crime.

After summarizing the previous studies in some detail, the authors of What, Where, and When of Place-Based Housing Policy’s Neighborhood Effects draw two important conclusions.  First, federal and local governments should continue to use the LIHTC program to build affordable housing in both distressed and low-poverty neighborhoods.  Second, developers and advocates should use the academic research to help overcome Not In My Back Yard (NIMBY) objections to affordable housing in high-opportunity neighborhoods.  As a recent study published jointly by NAHB and the National Multifamily Housing Council amply demonstrated, NIMBY opposition to any type of multifamily housing is extremely common.

Readers with a particularly strong interest in this topic can access The What, Where, and When of Place-Based Housing Policy’s Neighborhood Effects online, albeit at the prices that typically prevail in the academic literature.