Desegregation Paradox? A Model and Simulation of LIHTC’s Effects on Economic Segregation
The Low Income Housing Tax Credit (LIHTC) subsidizes below-market rents for millions of low-income Americans, but research on the program’s effects on economic segregation is inconclusive. We simulate “LIHTC removal” to create a counterfactual where LIHTC residents are redistributed from their status quo tracts across their home counties. Our simulation suggests that the presence of LIHTC is associated with negligible changes in CBSA-level economic segregation between extremely low-income (ELI) and non-ELI residents. However, this null finding is sufficiently caused by the universally low prevalence of LIHTC. We offer a toy model of how LIHTC siting, the composition of LIHTC developments, and the composition of the general population can lead to counterintuitive effects on economic segregation in settings with sufficiently prevalent LIHTC. When examining the subsample of only tracts that contain LIHTC developments, our simulations find that LIHTC is associated with decreased economic segregation (across the subsamples) in most CBSAs, with a median decrease of 10%. Even though poorer neighborhoods tend to have more and poorer LIHTC developments, these relationships are not strong enough to cause an increase in economic segregation.
Recommended citation: Kirgis, Peter and Teddy Knox. (2025). "Desegregation Paradox? A Model and Simulation of LIHTC’s Effects on Economic Segregation." Preprint.