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The Intervention |
We are interested in understanding the impact of programs that target distressed communities in order to catalyze economic development and community change.
This project leverages open data from two large federal programs as the "treatment" in the study:
Low Income Housing Tax Credits
Low Income Housing Tax Credits (LIHTC) are one of the primary policy instruments used to incentivize the construction of new affordable housing units in the United States. Learn about LIHTC:
<iframe width="560" height="315" src="https://www.youtube.com/embed/DdUcOFRdyTQ" frameborder="0" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>New Market Tax Credits
New Market Tax Credits (NMTC) are mechanisms designed to catalyze economic development in distressed communities by attrating investments from private developers.
Watch case studies on the impact that New Market Tax Credits have achieved in three communities: NMTC Case Studies.
There are myriad possible mechanisms for catalyzing economic development such as New York City's
why are we using tax credits, and do they really work?
Even more weird, the money does not even go to the neighborhoods in need. The credits are claimed by intermediaries, whose job is then to convince others to invest in the neighborhoods.
One convincing argument is that if cities tried to directly invest in distressed neighborhoods they would likely run out of resources before achieving impact. Alternatively, if tax credits are structured correctly every one dollar the government spends can bring five or ten dollars of private investement to a community. That doesn’t guarantee the investments are going to the right projects or benefitting the people in need, but it is at least a provacative story proponents can tell.
The mystery is what makes this case study so interesting. Tax credits have potential to make a big impact, or the potential to waste a lot of money.
The biggest criticism against a lot of these programs is that you cannot determine which investors would have invested in the neighborhood without the tax credits, so even when we see a lot of private investment it is hard to tell how much was caused by the tax credit vs opportunistic developers using tax credits to make viable projects even more profitable. This is the primary selection problem that makes research challenging in this space.
But it’s not the only issue. Consider the Frontline news story on some recent fraud that was uncovered. It’s not surprising that when there are billions of dollars at stake the program invites corruption.
FRONTLINE and NPR investigate the billions spent on affordable housing, and why so few get the help they need.
Frontline Episode: Poverty, Politics and Profit
Chap 3 on Low Income Housing Tax Credits start at 19:00.
Reflection:
After reading a little about the programs, what are your views on the tax credit mechanisms?
Before we explore the data, what is your apriori hypothesis? Do you think we will find evidence that they worked as designed?
Neighborhood Revitalization Background Reading:
- Schill, Ellen, Schwartz, & Voicu (2002): Revitalizing inner‐city neighborhoods: New York City's ten‐year plan
- What Works Collaborative (2012): Building Successful Neighborhoods
- Lincoln Institute (2008): People or Place? Revisiting the Who Versus the Where of Urban Development
- Burnette (2017): Predicting Gentrification