Study Looks at LIHTC Program's Impact on Nearby Property Values

A 2015 study published in Urban Studies by researchers at Texas A&M University, titled “Unpacking the impacts of the Low-Income Housing Tax Credit program on nearby property values,” questions the perception of affordable, subsidized housing driving down housing prices in surrounding buildings. It looks at changes in housing prices before and after the introduction of LIHTC-subsidized housing. Researchers examined data from Cleveland, Ohio, and Charlotte, N.C., from 1996 to 2007, classifying properties based on the proximity to LIHTC developments. The study’s findings include:

• In general, LIHTC housing developments had negative impacts on housing prices in Charlotte but had positive impacts on nearby housing prices in Cleveland.
• Charlotte housing prices were already 5.4 percent lower in areas where LIHTC housing developments were constructed, as compared to the prices in control areas. This gap widened by 1.2 percent to 6.6 percent after LIHTC units were developed.
• Cleveland housing prices were 8.1 percent lower in areas before LIHTC housing were built. After LIHTC units were constructed, however, nearby housing prices were 7.3 percent higher than in control areas.

In addition, the authors also looked at how impacts of LIHTC developments vary across submarkets in low-, middle-, and high-income neighborhoods in each of the two cities. The findings for this part of the study include:

• In low-income neighborhoods in Charlotte, a one-unit increase in the number of LIHTC housing was associated with a 0.03 percent decrease in housing price. The corresponding price increase in Cleveland was 0.01 percent.
• In middle-income neighborhoods in Charlotte, installation of the first unit dramatically reduced housing prices, but housing prices increased as additional units were built. LIHTC housing had no statistically significant impacts in similar Cleveland neighborhoods.
• A one-unit increase in LIHTC housing increased housing prices in Charlotte’s high-income neighborhoods by 0.05 percent.

The authors observed from their findings that the common perceptions of the impact of low-income housing on housing markets needs to be examined in a more nuanced way. For example, they attribute the variations in LIHTC impacts on housing prices in Charlotte and Cleveland partially to differences in the cities’ preexisting markets and the neighborhood needs in each city. In Charlotte, LIHTC developments brought down nearby housing prices. Cleveland, on the other hand, used LIHTC-subsidized housing as a tool with which to stimulate its stagnant housing market and to revitalize distressed communities where “disamenities,” such as dilapidated or vacant buildings, reduced property values and neighborhood safety.