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Evaluating Federal Programs

CPP 528 Final Project Spring 2020
Results and Conclusion

Results and Conclusion

Results

We began our study by creating metrics to examine 72,693 census tracts and identify 19,885 tracts as candidates for gentrification. Out of that, we found that 414 tracts (or 2.08%) had transitioned into advanced stages of gentrification.

Due to the uniqueness of each city in terms of its history, culture, people, vibe, political stability, economics, geography, and climate, we determined that further examination of the tracts on a metro-level was necessary and implemented a fixed-effects model to account for differences in various metropolitans. For example, we found that home values responded differently to changes in household income, professional population and unemployed population. Specifically, for each percentage change in unemployed population, home value changes from 2000 to 2010 decreased by 6.98% in the fixed effects model versus the 9.50% decrease we found without accounting for metro-level effects.

Finally, we evaluated the Low-Income Housing Tax Credit (LIHTC) Program and New Market Tax Credit (NMTC) Program as solutions to mitigate the impacts of gentrification on lower income populations and found that the NMTC program was most effective at encouraging growth in distressed communities. However, we also noted that the census tracts in the LIHTC program may not be in need of as much growth since the goal of the program is primarily to provide lower-income residents with affordable housing in higher income areas.

Conclusion

In conclusion, we discovered that gentrification is a notable problem in the United States with 27.3% of census tracts qualifying as experiencing gentrification from 2000 to 2010 and 2.08% of census tracts reaching advanced stage gentrification. Therefore, it is critical for policymakers to examine and devise ways to mitigate these effects for lower income and disadvantaged populations.

According to our regression model, the NMTC program serves as an effective way to encourage home value growth in disadvantaged communities where values can improve on average by 10%. However, since up to 25% of the areas enrolled in this program are not necessarily disadvantaged, it is worth examining how improvements differ between these areas and whether 10% growth is equitable across markets. Thus, it would serve policymakers well to further examine this program in the context of numerous controls to predict how the program impacts individual cities and metro areas with various characteristics.

In addition, further research is needed on the LIHTC program to understand its impact on lower income residents who live in areas with higher median home values. It is unclear in this study whether these individuals benefit from living in lower-income housing constructions in areas that may have better community resources or if it simply creates lower income sections within higher income areas

Overall, the diversity of cities and metro areas within the United States creates an interesting and complex dilemma for policymakers interested in community change and gentrification. Controls for socioeconomic and physical characteristics are critical to provide context to programs aimed at reducing inequalities and displacement for disadvantaged populations. Current federal programs have both pros and cons that are in need of further research, but this study finds the predicted benefits of the New Market Tax Credit Program to be encouraging.

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