LIHTC and Crowd Out: Does Subsidizing Rental Housing Deter Private Investment?

The United States government provides federal tax incentives to promote the construction of affordable housing through the federal Low-Income Housing Tax Credit (LIHTC) program. To date, LIHTC has subsidized the construction of over 2 million affordable housing units, making it the largest ongoing supply-side affordable housing program in the country. Prior research has suggested that LIHTC discourages private investment in new rental housing. Through their research, the Capstone team aimed to estimate the extent to which crowd-out occurs, using updated data describing housing markets and LIHTC-subsidized construction. The team employed an instrumental variable design to analyze LIHTC and census data from 2000 to 2010.