Study Finds LIHTC Housing Promotes Racial and Income Diversity

Two Stanford economists recently conducted a study that looks into the ramifications of a bill Congress is preparing concerning affordable housing. The bill would no longer require state agencies to notify local officials when siting a proposed housing development, leaving the officials with no liberty to choose who they live with in terms of financial status. Stanford economists Rebecca Diamond and Tim McQuade wrote a study to be published in the Journal of Political Economy, arguing that affordable housing developments built in poor and heavily African-American neighborhoods can lead to greater racial and income integration.

The study analyzed 7,000 developments built over a span of 31 years in 15 states as part of the LIHTC program. Diamond and McQuade found that building affordable housing in low-income, high-minority neighborhoods lowers the share of African-American residents in the surrounding community by about 3 percentage points. It also improves racial integration in wealthier, high-minority communities. However, the benefits of affordable housing disappear when built in wealthier, white neighborhoods, the economists found.

Most of the impact occurs within half a mile of the housing development, Diamond calculates, with the most intense effect being felt within less than a quarter mile. In neighborhoods where median incomes fell below $26,000 a year, the researchers saw home values appreciate 6.5 percent within a tenth of a mile of the housing development. Meanwhile, in wealthier neighborhoods with median incomes above $54,000, property values depreciated 2.5 percent within a tenth of a mile of the housing development. The affordable apartments in such neighborhoods decrease diversity without changing crime rates.