We nonparametrically estimate spillovers of properties Önanced by the Low Income Housing Tax Credit (LIHTC) onto neighborhood residents by developing a new di§erence-in-di§erences style estimator. LIHTC development revitalizes low-income neighborhoods, increasing house prices by 6.5%, lowering crime rates, and attracting racially and income diverse populations. LIHTC development in higher-income areas causes house price declines of 2.5% and attracts lower-income households. Linking these price e§ects to a hedonic model of preferences, LIHTC developments in low-income areas cause aggregate welfare benefts of $116 million. Affordable housing development acts like a place-based policy and can revitalize low-income communities.

In this paper, we provide an analysis of the costs and benefits of affordable housing construction to surrounding neighborhood residents and how they vary across demographically different neighborhoods. We study the neighborhood impacts of multifamily housing developments funded through the Low-Income Housing Tax Credit (LIHTC). Established in 1986, this program has become an integral component of federal housing policy, funding 21 percent of all multifamily developments over the period 1987-2008. Looking forward, with the construction of publicly run housing projects expected to continue to decline, the LIHTC program is likely to remain one of the main federal government initiatives designed to ensure access to affordable housing by low income households. We combine data on the location and funding dates for all LIHTC funded projects, housing transaction data from 129 counties, and home buyer race and income data to estimate the effects of LIHTC construction on the surrounding neighborhood. Our estimates show that the impact of affordable housing construction has dramatically different effects on surrounding property values based on whether the affordable housing was built in a relatively richer or poorer neighborhood and whether the neighborhood has a high share of minority residents.