In many cities, incentives and regulations lead developers to integrate low-income housing into market-rate buildings. How cost-effective are these policies? I study take-up of a tax incentive in New York City using a model in which developers trade off between tax savings and pretax income. Estimating the model using policy variation and microdata on development from 2003 to 2015, I find a citywide marginal fiscal cost of $1.6 million per low-income unit. Differences in neighborhoods, not developer incidence, explain the cost premium over other housing programs. Weighing costs against estimates of neighborhood effects, I conclude middle-class neighborhoods offer “opportunity bargains.”

© 2022 The President and Fellows of Harvard College and the Massachusetts Institute of Technology
2022
The President and Fellows of Harvard College and the Massachusetts Institute of Technology

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