LIHTC Program Has Positive Effect on Neighborhoods, Says Study

June 28, 2010
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Affordable housing development fuels economic gains in distressed neighborhoods, concludes a recent study of New York low-income housing that was commissioned by Local Initiatives Support Corporation (LISC) and Enterprise Community Partners. Enterprise and LISC released this report based on data analysis done by the Furman Center for Real Estate and Urban Policy at New York University and independent consultants.

The LISC and Enterprise study considered the impact that new and rehabbed low-income housing has on residents and the communities in which it is built. The data indicate that supporting the construction and preservation of affordable housing—particularly housing financed by low-income housing tax credits (LIHTC)—has a broad, positive effect that generates a significant return on investment.

First, families in affordable housing more than double their discretionary income, allowing them to pay for healthcare, pay down debt, or save. Citing an example in the Bronx, researchers noted a 12 percent immediate annual return to residents living in a development that received a LIHTC investment, based on the additional disposable income available to residents.

Second, affordable housing boosts business for nearby merchants. By paying rent within their means, residents of a cluster of rental developments expanded estimated local purchasing power by more than one-third.

Third, LIHTC project investments increase adjacent property values and help generate additional property tax revenue. More specifically, they increased the value of surrounding properties by 6 percentage points right away, and resulted in consistent increases over time.

The positive impacts were felt in low-, moderate-, and high-income communities alike, with clusters of small projects having the most significant effect, the study found. Copies of the study are available at www.lisc.org or www.enterprisecommunity.org.