Study Finds Disparities Across LIHTC Neighborhoods

An article by Ingrid Gould Ellen, Keren Mertens Horn, and Yiwen Kuai in Housing Policy Debate, “Gateway to Opportunity? Disparities in Neighborhood Conditions Among Low-Income Housing Tax Credit (LIHTC) Residents,” finds that LIHTC renters are typically located in neighborhoods with better transit access, but higher poverty rates, weaker labor market engagement, and lower school proficiency than other renters. LIHTC renters with incomes below the poverty rate and those who are Hispanic or black have even less access to high opportunity neighborhoods than LIHTC renters with incomes above the poverty line or who are white. The authors recommend that policymakers adopt policies that encourage a balanced distribution of LIHTC developments across neighborhoods and ensure equal access to these developments.

LIHTC is the largest place-based housing subsidy in the U.S.  LIHTC-supported developments must set aside at least 20% of their rental units for households whose incomes are at or below 50% of the area median income (AMI) or 40% of their rental units for households whose incomes are at or below 60% of AMI (prior to the 2018 omnibus spending bill, which provided an income-averaging option that would enable LITHC projects to serve more lower income households).

The average LIHTC rental unit is in a neighborhood with a poverty rate six percentage points higher than the neighborhood of an average rental unit in general. Compared to the typical renter, the average LIHTC renter lives near a school with a nine-percentile-points lower performance and in a neighborhood with a thirteen-percentile-points lower labor-market engagement. The average LIHTC renter, however, lives in a neighborhood with a one-percentile-point lower transportation cost.

The average LIHTC tenant with income below the poverty line lives in a neighborhood with a poverty rate three percentage points higher than the average non-poverty LIHTC tenant. LIHTC tenants with below-poverty-level incomes are also more likely to be in neighborhoods of lower school proficiency (by three percentiles), worse environmental quality (by one percentile), and lower labor market engagement (by five percentiles) relative to LIHTC tenants with above-poverty incomes.

After controlling for poverty status, black and Hispanic LIHTC tenants live in neighborhoods with higher poverty rates than non-Hispanic white LIHTC tenants. Black and Hispanic LIHTC tenants also are more likely to live in neighborhoods that are more disadvantaged in terms of school proficiency, environmental quality, and labor market engagement, but that offer lower transportation costs. Racial disparities among LIHTC residents are even more pronounced in metropolitan areas with above-median levels of segregation.

The authors suggest that attention be paid not only to the geographic distribution of LIHTC developments, but also to the tenant selection process implemented at LIHTC properties. It should be asked, for example, whether LIHTC property managers in neighborhoods of higher opportunity require higher credit scores than necessary or whether they find ways to discourage potential renters with rental assistance. The authors also recommend that policymakers consider requiring developers to adopt more affirmative marketing plans that target and attract a more diverse range of households to LIHTC developments in higher opportunity neighborhoods.

“Gateway to Opportunity? Disparities in Neighborhood Conditions Among Low-Income Housing Tax Credit Residents” is available at: