Exploring Spatial Clustering Over Time and Spillover Effects of the Low-Income Housing Tax Credit on Neighborhood-Level Income Segregation

Abstract

This study investigates the longitudinal and spatial patterns and spillover effects of Low-Income Housing Tax Credit (LIHTC) developments on neighborhood-level income segregation. Focusing on all MSAs in the U.S., the results show that LIHTC units have been spatially clustered in socioeconomically disadvantaged neighborhoods over time. This research also explores the spillover effects of LIHTC units on neighborhood economic status by utilizing propensity scores and weighted linear regression to address a self-selection bias of developers’ decisions regarding the location of LIHTC projects. The results suggest that LIHTC developments, in general, are expected to increase the concentration of households that have lower income than the average household income of the MSA. However, in high-poverty neighborhoods, LIHTC developments yield positive spillover effects on neighborhood economic status. Moreover, providing LIHTC units in high-poverty neighborhoods where LIHTC units were built previously in the focal or any adjacent neighborhood also improves neighborhood economic status.