How the Biden Administration Is Using My Research to Address Housing Affordability
The President's economic advisors endorse our take on LIHTC
This morning, President Biden’s Council of Economic Advisors released the 2024 Economic Report of the President, in which they propose a series of policies to “reduce housing supply constraints.”
This is a good and urgent goal. Last week, the National Low-Income Housing Coalition announced its latest estimate that we have “a shortage of 7.3 million rental homes affordable and available to renters with extremely low incomes” — and it doesn’t end there. Millions upon millions more homes are needed for Americans with incomes that aren’t “extremely low.”
Among the policies that the Biden administration considers is the Low-Income Housing Tax Credit, known in the housing world as “LIHTC.” It’s been around since 1986, and it has subsidized some three million affordable housing units and counting.
But Americans often worry when LIHTC comes to their neighborhood. What will it look like? Who will move in? What will happen to my property value?
I’ve been studying these questions for almost a decade now, and the President’s report turns to my work — with Richard Voith and others — for some of the answers:
LIHTC-funded developments make an impact on both families and neighborhoods, according to multiple studies of the program’s benefits (Baum-Snow and Marion 2009; Eriksen and Rosenthal 2010). Evidence from Chicago demonstrates that LIHTC-assisted developments have positive spillover effects on local property values (Voith et al. 2022). Home price appreciation contributes to wealth accumulation for neighborhood residents and increases funding for public services, but it can also make localities inaccessible for financially disadvantaged families. At the same time, LIHTC-assisted developments are associated with reductions in violent crime through neighborhood revitalization (Freedman and Owens 2011). One study estimates that the program’s aggregate welfare benefits in low-income areas are $116 million via property value appreciation, declines in crime, and the inflow of racially diverse individuals (Diamond and McQuade 2019). Further, access to affordable housing via LIHTC units gives families and their children the stability required for regular health care access and is associated with decreased rates of child abuse and neglect (Gensheimer et al. 2022; Shanahan et al. 2022).
All of this is true. LIHTC is a great way to build affordable units with affordable rents for low-income residents — without harming the surrounding community and its property values.
And that makes it a smart policy for the President to promote.