Siting Affordable Housing: Location and Neighborhood Trends of Low Income Housing Tax Credit Developments in the 1990s

Lance Freeman
Lance Freeman
Lance Freeman Former Brookings Expert, Professor, Urban Planning Program - Columbia University

April 1, 2004

An analysis of the location and neighborhood characteristics of housing developments funded by the federal Low Income Housing Tax Credit (LIHTC) in the 1990s finds that:

  • Approximately 42 percent of all LIHTC units are located in the suburbs, compared to only 24 percent of other project-based federally assisted housing units. Still, a majority of LIHTC units (58 percent) lie in central cities although a minority (38 percent) of all metropolitan residents reside there. Northeastern states have the highest proportion of their LIHTC units in central cities.
  • LIHTC neighborhoods contain disproportionate shares of black residents. Blacks represent about one in four residents of LIHTC neighborhoods, compared to about one in seven residents across all metropolitan neighborhoods. LIHTC neighborhoods did become more racially and ethnically diverse during the 1990s, thanks largely to a significant increase in their Hispanic and foreign-born populations.
  • Compared to other neighborhoods, LIHTC neighborhoods experienced larger declines in poverty and similar increases in home values during the 1990s. Despite their progress, however, LIHTC neighborhoods still have considerably higher poverty rates, lower median incomes, and lower median home values than typical metropolitan neighborhoods.
  • Suburban LIHTC neighborhoods are predominantly white and boast higher median incomes, lower levels of poverty, and higher home values and homeownership rates than LIHTC neighborhoods in central cities. The large socioeconomic gaps that separate central city and suburban LIHTC neighborhoods did narrow during the 1990s, however. For instance, although median household income in central-city LIHTC neighborhoods trails that in suburban LIHTC neighborhoods by $13,000, incomes grew more than twice as fast in city as suburban LIHTC neighborhoods over the decade.

In sum, substantial room exists for the LIHTC program to expand housing choice for lower-income families beyond the central-city neighborhoods (although neighborhoods with LIHTC developments improve on those containing traditional project-based affordable housing). Lawmakers should therefore review targeting incentives within the LIHTC statute to ensure that they promote family access to economically stable, racially integrated neighborhoods. In addition, collecting and analyzing more data on the age and racial/ethnic characteristics of LIHTC development residents would enhance understanding of program performance.