Labor Market Impacts of Exposure to Affordable Housing Supply : Evidence from the Low-Income Housing Tax Credit Program

Affordable housing programs as place-based programs in the United States have an impact on the neighborhoods, but little is known about the impact of affordable housing construction on individuals living in the neighborhoods hosting these projects. This paper investigates the effects of affordable housing construction under the Low-Income Housing Tax Credit (LIHTC) program on individuals’ labor market outcomes and welfare dependence. We exploit the timing of changes in the LIHTC program leading to spatial changes in the affordable housing supply to compare labor market outcomes of individuals exposed to varying levels of housing construction. We overcome the empirical challenges posed by the selective sorting of individuals into neighborhoods by matching the timing of the change in housing supply to an individuals’ neighborhood of residence. We find an average improvement in the labor market outcomes of individuals as a result of higher exposure to the supply of affordable housing in their neighborhood. In addition, we document significant heterogeneities by race and ethnicity and find evidence that these heterogeneities are likely explained by the program-induced and migration-induced changes in neighborhood quality