TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Wednesday, July 5, 2017

Hemel On The NY Times' Front Page Assault On The Low-Income Housing Tax Credit

Daniel Hemel (Chicago), Is the Low-Income Housing Tax Credit “Keeping Cities Segregated”?:

The front page of the New York Times this morning features a full-frontal assault on the low-income housing tax credit, the largest federal subsidy for the development of affordable housing. The charge against the credit is that the housing units it subsidizes are “disproportionately built in majority nonwhite communities,” which “means . . . that the federal government is essentially helping to maintain entrenched racial divides.” The first part of that claim is indisputably true: developments receiving low-income housing tax credits are, indeed, disproportionately located in communities with large nonwhite populations. But it does not therefore follow that the federal government, through the credit, is perpetuating residential segregation. ...

[O]ne might ask whether it’s a bad thing that the federal government is encouraging investment in communities that have experienced decades of disinvestment. But the Times article does not grapple with that question. Instead, it assumes (with qualifiers like “fair-housing advocates say”) that if the federal government is investing in affordable housing in majority nonwhite neighborhoods, then it’s “keeping cities segregated”  —  and that this scandal should be page one news.

The argument against federal financing for affordable housing in majority nonwhite neighborhoods —the argument that animates the Times article  —  goes something like the following: Housing desegregation will only happen if nonwhites move to majority white communities, which means (given the race-income correlation) that we need to build housing for low- and moderate-income families in neighborhoods with white majorities. Moreover, moving low-income families to higher-income (often whiter) neighborhoods will be good for kids. As the Times says, “Research suggests that when children from low-income households grow up in affluent communities, they tend to get a better education and earn more money as adults.”

Now, the research on the long-term effects of moving low-income families to more affluent neighborhoods is much more ambiguous than the Times article acknowledges. The best evidence comes from the much-studied “Moving to Opportunity” experiment in the 1990s, which randomly selected families for vouchers that enabled them to move to more affluent areas. A recent analysis by Raj Chetty, Nathaniel Hendren, and Lawrence Katz finds that moving to a more affluent area significantly improves educational and economic outcomes for children who are younger than 13 when their families relocate, but “the same moves have, if anything, negative long-term impacts on children who are more than 13 years old when their families move.” In other words, “moving to opportunity” is not an unalloyed good.

My own view, for what it’s worth (which is not much), is that federal housing policy should seek to facilitate the relocation of low-income households to more affluent communities, and that programs such as Moving to Opportunity should be scaled up. But at the same time, Moving to Opportunity is not infinitely scalable, and it cannot be our entire strategy for residential desegregation. No one (or at least, hopefully no one) thinks that housing policy should aim to empty out Chicago’s predominantly African-American, lower-income South Side and move everyone to Chicago’s predominantly white, higher-income North Side. We can’t just depopulate communities that have suffered from decades of disinvestment; we also need to invest there. And if we really want to achieve residential desegregation, we’ll have to encourage white families to move to majority nonwhite communities, as well as encouraging nonwhite families to move in the other direction. Residential desegregation is a two-way street. ...

A new paper by economists Rebecca Diamond and Tim McQuade, both at Stanford’s Graduate School of Business, finds that LIHTC-financed investments in low-income communities lead to increased property values and lower crime rates. Moreover, Diamond and McQuade find that LIHTC construction in high minority areas leads to a statistically significant increase in the share of non-black homebuyers moving into those areas. In the authors’ words, “it appears that building affordable housing in high minority areas may lead to lower racial segregation.” That’s exactly the opposite of what the Times headline claims. And yet the Diamond and McQuade study is only briefly mentioned in a single sentence at the end of paragraph 40 of the 51-paragraph story. ...

As the Trump administration proposes to cut federal housing funding in next year’s budget by $6 billion, it’s a surprising time for the Times to attack one of the few affordable housing programs that’s not on the chopping block. At the very least, we should acknowledge (in more than a deeply buried sentence) that on this extraordinarily complex issue, there is more than just one side.

http://taxprof.typepad.com/taxprof_blog/2017/07/hemel-criticizes-ny-times-front-page-assault-on-the-low-income-housing-tax-credit.html

Tax | Permalink

Comments

Why would you build low income housing on expensive land in a residential community that is in demand for one-earner households with a stay-at-home caregiver, instead of on inexpensive land that is within commuting distance of jobs?

Children from low income households may do better in middle class communities, but children from middle class communities do worse when low income children are brought in.

Posted by: why? | Jul 5, 2017 6:00:19 AM

Consideration also needs to be given to the prospective residents. Housing choice is important. Some people prefer to live near their church and transportation while others would prefer to not live in the central city. It is also important to note how lihtc projects have stabilized certain inner city neighborhoods and paved the way for upper income housing.

Posted by: ANGELA | Jul 6, 2017 5:58:30 AM