The Low-Income Housing Tax Credit (LIHTC) is the largest federal program for the production and rehabilitation of affordable housing, and it supported 20,441 rental housing units in the District of Columbia in 2018. In a recently published paper (see here and here), two Stanford University economists found that new affordable housing developments throughout the nation, funded by the LIHTC, tended to increase nearby home prices and incomes in their immediate areas.
Our current study assesses some of the local effects of affordable housing units on respective neighborhoods using District of Columbia income and property tax data. Specifically, the affordable housing units under analysis are financed in varying degrees by the District of Columbia’s Housing Production Trust Fund (HPTF). The HPTF is the city’s largest affordable housing policy tool that provides financing to help build and preserve affordable residential projects, and it financed over 9,000 affordable housing units in the city since 2001. Like the national study, this study also finds new affordable housing developments tend to increase neighborhood home prices and incomes. The study also finds that tax filers residing in HPTF housing units are more likely to claim the federal Child Tax Credit and claim higher amounts of the credit compared to comparable tenants in similar but non-HPTF rental units.
We identified 740 HPTF-funded residential rental buildings across the city (Figure 1). And while there are HPTF-funded buildings in every ward, the vast majority of HPTF buildings are in the eastern half of the city. Notably, however, Ward 3 had only one HPTF building in 2019.
Figure 1. Location of HPTF Buildings by Ward
When examining the locations of HPTF buildings at the census tract level, we find there are HPTF buildings in 77 (43 percent) of the city’s 179 census tracts (see Figure 2).
In order to identify the effects of HPTF-funded housing units on neighborhood home values and wage income, we identified individual income tax filers that lived in HPTF buildings in 2016. We aggregated all income tax information at the census tract level. We used the city’s property tax data to obtain each census tract’s median property value for single-family homes. In the study, the median property value in 2016 for all single-family homes and condos in the census tracts with HPTF buildings was $403,445. And, the median annual wage income in 2016 for the same census tracts was $30,529.
Figure 3. Median Values for Census Tracts with HPTF Units in 2016
Source: Author’s Calculation derived from DC Office of Tax and Revenue data.
A statistical analysis at the census tract level identified the marginal effect of additional HPTF rental units and HPTF residents on different neighborhood outcomes for 2016. The model results indicate that an additional HPTF residential rental unit in a census tract is correlated with an average increase of $425.64 (0.11 percent) in the median home value, and an additional tax filer living in HPTF units is correlated with a $537.27 (0.13 percent) increase in the median home value (Figure 4). We also find an additional HPTF residential rental unit is correlated with an average increase of $7.71 (0.03 percent) in a census tract’s annual median wage income.
Figure 4. Average Marginal Effects on Median Home Values in Census Tracts
Source: Calculations derived from regression analysis.
The study also attempted to identify whether there was a statistical difference in the value of various federal and District credits, deductions, and exemptions for tax filers that resided in HPTF buildings and those in similar but non-HPTF rental units. The only statistically significant difference identified involved the federal Child Care Tax Credit. This study finds tax filers that reside in HPTF buildings are 2.2 percent more likely to claim the Child Care Tax Credit than income tax filers that live in similar but unsubsidized rental buildings after controlling for the number of children per tax filer, age, filing status and location of these tax filers. We also found that these tax filers receive a Child Care Tax credit that is on average $20 dollars higher (44 percent more) than those in the comparison group. (These credit amounts do not include the automatic District of Columbia Child Care Tax Credit that equals 32 percent of the federal credit for respective tax filers.) Though the actual credit amounts in this study are small on a per tax filer basis, the main takeaway is that these tax filers tend to spend more on child care services. Other research suggests that increased access to more or better-quality childcare can enhance children’s educational and social achievements and cause parents to miss less days from work in the short term. And in the longer term, it means longer-term financial well-being and earnings trajectory for both parents and children. This finding suggests that a possible side benefit of the city’s primary affordable housing program is improved prospects for children living in households benefiting from this program.
This study finds the benefits of the city’s HPTF program extend beyond merely providing affordable housing to low-and moderate-income households. In terms of neighborhood effects, we find that an additional HPTF residential rental unit in a neighborhood is correlated with a 0.11 percent ($425.64) increase in the median home value, and an additional HPTF tax filer is correlated with a 0.13 percent ($537.27) increase in the median home value. We also find an additional HPTF residential rental unit is correlated with an average increase of $7.71 (0.03 percent) in a neighborhood’s annual median income.
HPTF buildings tend to be in neighborhoods with relatively higher poverty rates and lower employment rates. And since new affordable housing tenants are working adults that meet specified income requirements, it might be that new or newly renovated HPTF buildings help to increase the share of working adults (tenants) in respective neighborhoods, which in turn might mitigate some poverty-related characteristics of the neighborhood. Also, the new or newly renovated HPTF buildings represent an upgrading/modernizing of a neighborhood’s housing stock in that HPTF projects replace or help outnumber much older or even blighted residential buildings in respective neighborhoods. To some, this may be considered neighborhood revitalization, which in turn attracts higher-income residents to the broader low-income neighborhood. In essence, the current drive of using the HPTF to help build and renovate affordable housing developments in low-income areas appears to be running parallel to the gentrification trends also taking place in many of the same neighborhoods. This too may be one explanation for the positive effects on neighborhood income.
This study also finds tax filers that reside in HPTF buildings have a higher probability of taking the federal Child Care Tax Credit, and that these tax filers receive a federal Child Care Tax credit that is 44 percent more than those in the control group. This finding suggests that these tax filers could be using their savings from lower housing expenditures to purchase more or better-quality child care for their school age children. Or, the finding might indicate that tax filers who tend to spend more on child care may be more likely to choose HPTF housing (i.e. maximizing public benefits). Nevertheless, this study has identified several important positive side benefits (externalities) of the District’s largest affordable housing program.