Do Increases in Subsidized Housing Reduce the Incidence of Homelessness?

NCPA October 14, 2015

A recent study examined the impact of subsidized housing on homelessness using the Low-Income Housing Tax Credit (LIHTC), the largest place-based housing program in the United States.

LIHTC is a tax incentive that benefits affordable rental housing developments targeted at low-income households. The credits are distributed in each state to private developers through a competitive process. To qualify for the credit, a project must meet certain criteria for tenant incomes for a subset of units.

The study found that:

• LIHTC program increases the local stock of low-income rental units but there is no evidence that these increases reduce local area homelessness in poor neighborhoods.
• Increases in low-income housing may attract homeless individuals to areas with greater LIHTC activity because the homeless population is very mobile.
• Once mobility across neighborhoods is taken into account via county-level estimation, evidence suggests that LIHTC development does reduce area homelessness.
• Local housing demand of the homeless may be fairly price sensitive, likely due in part to high mobility across neighborhoods.

Therefore, the effects on homelessness and possibly other outcomes of local expansions of LIHTC developments may cross local boundaries. Additionally, the method of allocating low-income units is a particularly important channel for affecting homelessness.

The findings are consistent with proposed policies to encourage income mixing and to target LIHTC housing to those at risk of becoming homeless or those who already are homeless. Further examination of the LIHTC program, including more extensive effects on the already-housed, would be very useful.

Source: Osborne Jackson and Laura Kawano, "Do Increases in Subsidized Housing Reduce the Incidence of Homelessness?" Federal Reserve Bank of Boston, May 2015.