By Elizabeth Workman, NLIHC Research Intern
An article published in Housing Policy Debate, “The Effect of LIHTC Developments on Surrounding Rents and Home Prices in Florida,” examines the spillover effects of the Low-Income Housing Tax Credit (LIHTC) development on nearby rental and home costs in metropolitan regions in Florida. The authors find that new LIHTC-financed developments lead to more affordable rent prices in surrounding neighborhoods and increases in nearby home prices. These findings indicate that LIHTC developments benefit both existing renters and homeowners.
This study focuses on the five largest metropolitan areas in Florida: Jacksonville, Fort Lauderdale, Miami, Orlando, and Tampa - St. Petersburg. The authors utilized data from HUD to identify LIHTC properties in these regions. Then, two distance bands were defined around each LIHTC property: one at ¼ mile and the other at ½ mile from the property. The authors obtained rental unit price data from CoStar and home price data from the Florida Department of Revenue. Home price analysis is from 2009-2024 and rent price analysis is from 2000-2020.
The authors found that new LIHTC properties have led to slower rates of rent growth in the surrounding area. Within a quarter mile, monthly rents grew 1.1-1.3% ($12.70-$14.52) less than they would have without LIHTC investment. Between ¼ and ½ mile from new LIHTC properties, monthly rent grew 0.8% ($9.56) less than expected. The authors find that rent effects vary with unit size. Within the ¼ mile band, studio apartment rent grew 2.3% less and one- or two-bedroom apartment rent grew 1.1% less than rent increases in non-LIHTC areas. There is no significant rent change in three-bedroom apartments or the ½ mile band.
The authors find an opposite cost effect of LIHTC development on home prices only within the ¼‑mile band. There are no significant home price effects in the ½‑mile band. Home sale prices within a quarter mile from LIHTC properties increased to only 4.3% below those in non‑LIHTC areas compared to 15.1% below before LIHTC development. This increase (10.7%) significantly closes the gap between LIHTC and non-LIHTC communities, showing that new LIHTC development can improve home values despite the common misperception among incumbent homeowners that affordable housing will lower their home values.
The authors conclude that LIHTC development helps reduce upward pressure on nearby rent prices. At the same time, additional LIHTC rental units bring increased value to communities, resulting in increased home prices. This apparent contradiction stems from LITHC developments enhancing neighborhood desirability (which drives property values) while also increasing the supply of affordable apartments (and thus reducing pressure on rents).
The authors suggest further research in other parts of the country to investigate local and political factors that impact LIHTC spillover effects. The authors argue that policymakers could use such findings to maximize the positive spillover effects of LIHTC properties while minimizing rising development costs. As successful LIHTC properties raise nearby home prices, they also increase surrounding property values and development costs. Policymakers could reduce these costs by developing multiple LIHTC properties within the same period, capitalizing on the additive benefits before neighborhood price increases hinder further development.
Read the full report.