Washington - Despite the
lawsuits, media spotlight, and conventional wisdom, affordable housing
developments built in poor, heavily black communities can lead to greater
racial and income integration, according to new research by Stanford
economists.
Such housing, funded by
federal tax credits, also raises property values and lowers crime in
surrounding neighborhoods as higher-income white residents move in, the
researchers found.
"When a corporate
developer comes in and builds nicer, new housing, it makes the neighborhood
more desirable as a potential place to live," said Rebecca Diamond, a
professor at Stanford's Graduate School of Business who authored the study with
her colleague Tim McQuade.
The surprising findings, to
be published in the Journal of Political Economy, are being widely circulated
this week among academics following a New York Times story asserting that
federal tax credits for affordable housing promotes racial segregation despite
the program's intent.
While it's true that such
housing is disproportionately located in minority communities, the federal
program actually results in more racially desegregated neighborhoods over time,
said the researchers who analyzed a decade's worth of relevant data around more
than 7,000 developments built with federal tax credits in 15 states.
Building affordable housing
in low-income, high-minority neighborhoods lowers the share of black residents
in the surrounding community by about 3 percentage points, Diamond and McQuade
found. It also improves racial integration in wealthier, high-minority
communities. "That's a pretty big
effect just by developing one building," Diamond said.
Most of the impact occurs
within half a mile of the housing development. The most intense effect is felt
within less than a quarter mile, she said. In neighborhoods where median
incomes fell below $26,000 a year, the researchers saw home values appreciate
6.5 percent within a tenth of a mile of the housing development.
But the benefits disappear
when the affordable housing complexes are built in wealthier, white
neighborhoods, the researchers found.
In such neighborhoods with
median incomes above $54,000, property values dropped 2.5 percent within a
tenth of a mile of the housing development, or about two city blocks. The
affordable apartments also decrease diversity, but do not impact crime rates.
"People have a
preference of who their neighbors are, and perhaps higher income people just
don't want to live with lower-income residents," Diamond said.
Congress is trying to
address the issue of wealthier neighborhoods rejecting the construction of
affordable housing with bipartisan legislation that would prohibit states from
considering local opposition as a factor in funding developments.
The bill, sponsored by
Senator Maria Cantwell, D-Wash., and Senate Finance Committee Chairman Orrin
Hatch, R-Utah, would no longer require state agencies to notify local officials
when sitting a proposed housing development. The goal is to prevent "Not in
My Backyard" opposition from interfering with housing credit allocation.
That could encourage more
affordable housing in higher-income, whiter communities, says Daniel Hemel, who
teaches tax law at the University
of Chicago and who wrote
a blog post this week highlighting the role affordable housing tax credits play
in integrating neighborhoods.
Previous long-term research
has shown that giving families living in public-housing projects vouchers to
move into wealthier neighborhoods improves children's future earnings.
But the effect on individual
families does not outweigh the community benefits of locating affordable
housing developments in low-income neighborhoods, Diamond said.
"The neighborhood
spillover effect for low-income communities is quite large -- larger than the
benefits of moving the lucky few into a high-income neighborhoods,"
Diamond said. "A building is investing in a neighborhood whereas a voucher
is just a subsidy to one household."
Policy makers need to
consider the benefits of doing both, economists say"We should not have
affordable housing all going into low poverty neighborhoods or high poverty
neighborhoods. It can't be all or nothing," said Katherine O'Regan, a
public policy and planning professor at New York University's
Wagner Graduate School of Public Service who served as the assistant secretary
for policy development and research at the US Department of Housing and Urban
Development under President Barack Obama.
'Regan's research also
shows that the use of federal tax credits for affordable housing is linked to
declines in racial segregation in cities. Her work with Keren Horn was the
first paper to consider, at a national level, the changes in racial composition
in the neighborhood surrounding these developments.
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The federal government has a
documented history of perpetuating racist housing policies, leading to
segregated communities and the creation of white-only suburbs. But tax credits
for affordable housing is not one of them.
The tax credit program for
low-income housing, valued at more than $8 billion annually, began in 1987 and
has become the country's key source of federal support for the creation of
affordable rental housing. Developers apply to their states for the credits,
then use them to leverage private capital to build units for low-income people.
The future of the tax credit
program is in question given the uncertainty around President Trump's tax
reform plan, economists say. Trump has proposed $6.2 billion in cuts to
affordable housing programs at the Department for Housing and Urban
Development, but the tax credits program is administered by the Internal
Revenue Service.
"No one really knows
what the tax code is going to look like," said Mark Zandi, chief economist
of Moody's Analytics. "That means less construction until this uncertainty
is resolved because people are unsure about the value of these tax credits."