Events

Dr. Cody Cook
Postdoctoral Associate in the Cowles Foundation
Yale University

Abstract

How does the location of affordable housing affect household welfare, the distribution of assistance, and broader societal objectives such as racial integration?  Using administrative data on affordable housing tenants, we first show that, despite fixed eligibility requirements, developments in higher-opportunity neighborhoods disproportionally house tenants who are higher income, more educated, less likely to have children, and less likely to be Black or Hispanic. To quantify the welfare implications, we build a model in which households choose from both market-rate and affordable housing options, where the latter are rationed by private developers. Building in higher-opportunity neighborhoods costs more, but increases household welfare and reduces racial and economic segregation. However, the welfare gains accrue to more moderate-need and white (non-Hispanic) households at the expense of other households.  Using the estimated model, we show that the shift in the distribution of assistance is primarily due to a “crowding out” effect: households that only apply for assistance in higher-opportunity neighborhoods crowd out those willing to apply regardless of location.  Relative to the initial choice of location, policy levers available post-construction—such as lowering the income limits used for means-testing—have only limited effects.