Blogs| How LIHTC Investments Build Long-Term Community Impact
Written by
Sajan Sharma
Published
Jul 7, 2025
Topics
LIHTC
The Low-Income Housing Tax Credit (LIHTC) program is the United States’ most significant source of funding for the development of affordable rental housing. Since 1986, it has financed over three million units by incentivizing private developers to set aside units for low-income tenants. While typically evaluated in terms of unit output or cost efficiency, LIHTC’s true potential lies in its capacity to shape long-term community well-being.
Recent findings from academic and legal sources provide a more holistic view of how LIHTC investments can influence neighborhoods economically, socially, racially, and structurally. When planned equitably, distributed thoughtfully, and backed by policy safeguards, LIHTC developments can serve as catalysts for community transformation.
This article outlines six core dimensions of LIHTC’s long-term impact, supported exclusively by peer-reviewed research and field analysis.
A stable home is one of the most critical foundations for individual and community health. According to a comprehensive review published in the American Journal of Public Health, housing influences health through four key pathways: residential stability, housing quality and safety, housing affordability, and the neighborhood environment. These factors affect stress levels, exposure to hazards, access to care, and long-term developmental outcomes.
LIHTC developments help ensure long-term housing stability for residents vulnerable to displacement by guaranteeing affordability for at least 15 to 30 years. This stability reduces high-stress mobility, which is linked to adverse physical and mental health outcomes. The same study noted that when families remain housed, children are more likely to stay in school, individuals are more likely to maintain employment, and households are better positioned to manage chronic illness.
Additionally, LIHTC can indirectly support access to health-promoting neighborhood resources—transit, grocery stores, and healthcare facilities—when units are not clustered in areas of concentrated poverty.
While the LIHTC program does not mandate health-specific outcomes, its structural stability contributes significantly to public health resilience.
One of LIHTC’s most distinctive features is that it mobilizes private capital to serve a public need. As emphasized by Community Legal Aid, LIHTC does not rely on constructing traditional public housing. Instead, it uses tax credits to attract private developers to build or preserve affordable rental units. This model reduces direct federal expenditure while stimulating economic activity in underinvested areas.
These investments improve housing stock, generate construction-related employment, and attract additional services to low-income neighborhoods. In contexts where public housing has declined, and market-rate development bypasses low-income areas, LIHTC remains one of the few viable instruments for reinvestment.
A 2022 study published in the Journal of Housing Economics examined over a decade of housing data from Dallas County. It found that clusters of LIHTC developments did not depress property values in Black-majority neighborhoods—and in some cases, local home prices held steady or modestly increased. This suggests that in these neighborhoods, LIHTC housing helped fill a gap in supply, contributing to localized stabilization.
However, the same study found that in White-majority neighborhoods, a high concentration of LIHTC units within short distances (0.1–0.5 miles) was associated with declines in property values over time.
This uneven market response indicates that while LIHTC can support economic revitalization, its impact depends heavily on community context and density thresholds.
Beyond housing production, LIHTC developments offer legal and structural safeguards that promote long-term tenancy and reduce housing insecurity. According to Community Legal Aid, these include:
Some LIHTC properties also provide tenants the right of first refusal to purchase their units, laying the groundwork for eventual homeownership. These measures contribute to social cohesion, reduce turnover, and empower residents to engage with local institutions and community networks over the long term.
How LIHTC is distributed spatially matters. The Dallas study revealed a stark contrast: while LIHTC development had neutral or positive effects on home values in Black-majority neighborhoods, the same developments, when heavily concentrated, led to market pushback in White-majority neighborhoods.
This pattern suggests that certain communities may perceive affordable housing as a threat to property values or neighborhood identity. As a result, developers and state housing agencies must be mindful of over-concentration and avoid reinforcing patterns of segregation or NIMBYism.
LIHTC has the potential to support integration and equity, but only if it is used strategically across diverse geographies rather than isolated in low-income, racially marginalized areas. The findings from Dallas highlight that racial composition and community perception significantly shape the externalities of LIHTC development, calling for a deliberate approach to siting and density.
While LIHTC is primarily a rental program, some developments incorporate homeownership pathways, allowing long-term tenants to purchase their homes after the initial compliance period. Community Legal Aid notes that this provision enables low-income households to transition from renters to owners, build equity, and reduce long-term housing cost burdens.
Although this feature is not universal, where implemented, it can help address generational wealth gaps—particularly in communities historically excluded from homeownership opportunities. Combined with stable rent and legal protections, this pathway reinforces LIHTC’s role not just in affordability but also in economic mobility.
LIHTC’s effects do not occur in a vacuum but change over time. The Dallas study revealed that neighborhood impact varies both spatially and temporally. LIHTC-induced property value changes in some areas became more pronounced over several years.
For example, negative price effects intensified with time in white-majority neighborhoods, particularly where LIHTC developments were highly concentrated. In contrast, effects in Black-majority neighborhoods were stable or improved in the short-to-medium term.
These findings suggest that LIHTC’s long-term effectiveness hinges on ongoing monitoring, contextual planning, and balanced integration with other community development strategies. Concentrated development in resistant markets may generate unintended consequences, while inclusive planning can produce lasting benefits.
LIHTC is not just a housing finance program—it is a multidimensional policy instrument capable of influencing health, economic development, social stability, and spatial justice. Its long-term community impact depends on the quantity of units produced and factors like where they are built, who they serve, and how they are protected.
By anchoring families, attracting private capital, protecting tenants, and sometimes enabling ownership, LIHTC can contribute to stronger, healthier, and more equitable communities. However, to reach this potential, it must be implemented with precision, equity, and a long-term vision.
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