Producing affordable housing in higher-opportunity neighborhoods: Incentives in California’s LIHTC program

Abstract

ABSTRACT Housing policy shapes where low-income families live and whether they can access neighborhoods that promote children’s well-being. Since 2018, California’s Low-Income Housing Tax Credit (LIHTC) program has incentivized the development of family affordable housing in higher-resource areas. We examine how the location of proposed and funded LIHTC developments changed in response to these incentives. We find that the probability that large family projects—those eligible for incentives—were proposed in higher-resource areas increased from 0.19 to 0.29, comparing 2014-2017 and 2018–2021. The probability that funded large family projects were located in higher-resource areas doubled, from 0.15 to 0.30. The probability of location in higher-resource areas declined for developments ineligible for incentives. Interviews with affordable housing developers illuminate the role of mission and resources in shaping their responses to program incentives. We conclude with a broader discussion of the LIHTC program as a tool for reducing neighborhood inequality.