The New York Times recently reported that the Federal Low Income Housing Tax Credit Program (LIHTC) has promoted rather than reduced the racial and economic segregation of housing. (https://www.nytimes.com/2017/07/02/us/federal-housing-assistance-urban-racial-divides.html.) This should not come as a surprise to anyone familiar with the program’s requirements. There are programs and incentives that increase diversity– but the LIHTC does the opposite by design! It subsidizes only housing for very low-income people, and incentivizes the construction of housing in low-income areas. The LIHTC program by its structure produces economic and racial segregation.
The idea behind the program is to spur housing production for the most economically distressed by requiring that the income requirements for residents be set at a very low cap on family income. In order to provide a preference to low-income people, it also gives increased benefits for housing built in neighborhoods that already house low-income families. This produces the effect of segregating those with the lowest incomes both by building and by neighborhood. Continue reading