The Poverty Concentration Implications of Housing Subsidies: A Cellular Automata Thought Experiment

Looking at data from HUD’s low income housing tax credit database from 1987 to 2001, we examine how the US tax credit program has concentrated poverty in neighborhoods by offering advantages to developing low income housing projects in low income census tracts. We then use a simple Cellular Automata model to explore how alternative programs structures could impact economic diversity and poverty concentration. This model suggests that many widely dispersed fixed location affordable housing projects increase local economic diversity over alternative housing allocation rules. If policymakers wish align the Low Income Housing Tax Credit program with the goal of promoting economic diversity in our neighborhoods, they should restructure the bonus to reward to projects in areas without a concentration of subsidized housing.