Distributive Politics and the Low-Income Housing Tax Credit


In this paper, I explore the possibility and extent of partisan targeting in the administration of the Low-Income Housing Tax Credit (LIHTC) program. State agencies have discretion over the distribution of LIHTC’s, and state governors have varying degrees of influence over the allocating agencies. If agencies are partisan or deferent to the governor, LIHTC’s may be allocated to match the governor’s political interests if the credits are politically salient. I assemble a county-year panel dataset from HUD’s LIHTC database, Census demographic data, and CQ election returns data and test the extent to which LIHTC’s are allocated to counties based on local partisanship and state governing party using difference-in-differences and regression discontinuity designs. I find that governors of both major parties do not allocate significantly more or less LIHTC’s or LIHTC funds to counties that vote with their party relative to those that don’t, and I find no significant evidence of differential allocation to “swingier” counties.