DLS – Justin Steil

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Abstract:

This presentation analyzes the effect of disasters on affordable housing construction.  Exploiting the exogenous timing of flooding disasters and 25 years of housing data, we derive causal estimates of the effect of disasters on county-level Low-Income Housing Tax Credit (LIHTC) allocations nationwide.  We find that states respond to flooding disasters by increasing the number of LIHTC units allocated to a disaster-struck county in the year after the disaster, compared to other years.  We suggest that this increased allocation of LIHTC units is indicative of a process of institutional or policy conversion, in which states are repurposing the three-decade old housing tax credit program to meet disaster assistance and recovery needs.  These additional LIHTC units can meet the pressing needs of disaster survivors for affordable rental housing, but, given that the program was not designed with disasters in mind, do the new units ameliorate or exacerbate renters’ exposure to disaster risk?  To answer this question, we analyze whether these post-disaster LIHTC allocations are more or less likely to be located in the floodplain than pre-disaster LIHTC allocations in that county.  Results indicate that, after a disaster, more units are allocated both inside and outside of the floodplain relative to prior years and that on an absolute level, the average number of units allocated outside of the 500-year floodplain in a disaster-struck county increases more than the average number inside the floodplain.  The relative increase in units after a disaster, however, is larger in the floodplain than outside of the floodplain, relative to other years.  The findings highlight the tension between supporting the recovery of disaster-struck low-income residents in their existing communities and encouraging rebuilding outside of floodplains.