Is the Low Income Housing Tax Credit an Effective Policy for Increasing Neighborhood Income Diversity?

This paper provides novel evidence on the impact of an increase in the affordable housing stock. We provide evidence of the effect of the federal Low Income Housing Tax Credit on the dispersion of income in neighborhoods in Utah. Contrary to the stated goals of national and state housing authorities, we find that these credits decrease the amount of income diversity in a neighborhood. More surprisingly, we find that the decrease in income diversity associated with the construction of low income housing units is not caused by high-income households leaving but by crowding out the lowest income households in the neighborhood.