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Data Draws a Line from Housing Policy to Economic Progress

Does investment in affordable housing support social and economic gains? The data certainly indicates that it does, says Chris Walker, LISC’s director of research. As part of our occasional series on community development research, Walker takes a closer look at studies that analyze the impact of the Low Income Housing Tax Credit. It's a compelling body of evidence that not only reflects decades of development work but informs current efforts to spur economic opportunity for low-income people across the country.

Community developers build. Policymakers debate and authorize. Researchers quantify.

I couldn’t help but think about the interconnections among these different roles as I read through a new research brief from the NYU Furman Center. It summarizes recent findings on the impact of the Low Income Housing Tax Credit (LIHTC), featuring studies that look at who lives in LIHTC properties and how those developments change their surrounding communities.

I find the most compelling takeaway to be the simplest: there is no longer any question about the value of LIHTC to communities. These developments offer quality affordable homes to people who need them, help raise nearby property values, activate moribund housing markets, reduce crime, and help chip away at neighborhood poverty rates

In fact, researchers have built an impressive body of quantitative evidence showing that what community developers build does advance the goals that policymakers have authorized.

The largest study of the LIHTC program to date was published by Stanford researchers Rebecca Diamond and Timothy James McQuade in 2015, drawing on information related to 7,100 development projects in 15 states.  In addition to confirming previous work showing that LIHTC projects shore up property values in distressed neighborhoods, the authors also found that LIHTC promotes economic diversity by attracting higher-income home buyers to disadvantaged areas. This is corroborated by other studies, including research by the Furman Center that documented how LIHTC helps reduce poverty rates.

Many researchers have suggested that these so-called spillover effects are due to renovation of blighted buildings or new construction on empty lots. But noting drops in crime near new developments, Diamond and McQuade surmise that improved safety in low-income areas also “appears to be one of the driving mechanisms through which LIHTC improves low-income neighborhoods.”

As community developers know, and researchers have confirmed, the degree of impact varies by location. For example, increased property values related to LIHTC, which range from 6.5 percent to as much as 15 percent according to several studies, seem to be more pronounced in low-income neighborhoods than in higher-income communities. (Several reports even note slight declines in the value of surrounding homes in some high-income neighborhoods.)

Are there other reports that contradict these findings on impact? Yes, a few, though I would argue some of that research uses less advanced methods than those cited here. The most sophisticated data and analyses seem to turn up the same encouraging outcomes.

That is certainly what we at LISC have seen in our data on incomes, employment, and crime. We’ve been able to quantify significant progress on quite a few measures—with affordable housing proving to be a key component of the work. It lays the foundation for future growth.

The implications for all of this right now are massive. We are in the midst of a national affordable housing crisis. The challenges are complex and, in many places, deeply entrenched. But, if we rely on what we have learned from 30 years of LIHTC investments, then we can see a clear line running from affordable housing investments to higher standards of living. Both our public policies and our work in communities should follow that lead.

For more information on affordable housing outcomes, check out some of the following research:



Chris Walker, Director of Research & Assessment
Chris is responsible for assembling, conducting, sponsoring and disseminating research on community development’s contributions to the well-being of individuals, families and communities. He also supports the research activities of our local programs throughout the United States. Prior to joining LISC in 2005, Chris directed a community and economic development research program at the Urban Institute, where he led studies of affordable housing, community lending, arts and culture and other community development issues.