The largest federal program designed to increase the rental housing supply for poor working families helps them find living space in decent neighborhoods with good schools. It also encounters frequent neighborhood opposition.
The low-income housing tax credit (LIHTC) program, created under the Tax Reform Act of 1986, subsidizes developers who construct market-quality, multifamily units or renovate older structures for rent to low-income tenants at below-market rates.
Homeowners in more-affluent areas often resist the housing in their neighborhoods, citing concerns that new residents will flood public schools and crowd classrooms, negatively influencing existing students and competing for limited educational resources. There are also worries that adding more low-income pupils to struggling schools in poor areas may overburden educators and facilities, ill-serving students even while helping reduce the financial burden on parents.
Adding LIHTC units appears to positively, not negatively, influence a school’s accountability rating in the year the projects open, our analysis found. However, that effect is temporary, largely disappearing after a year. Schools with nearby LIHTC units were classified by income and share of minorities in nearby census blocks. The estimates suggest that the positive influence is largely driven by the housing units constructed in higher-income census areas, while the negative, offsetting data come from LIHTC census block groups with greater minority or lower-income populations. The program’s influence on schools also depends on whether the project is new construction or rehabilitation. New buildings seem to contribute to improvement of academic performance at the nearest elementary schools.
Read remainder of the report from the Dallas Federal Reserve Board.