Does the low-income housing tax credit increase the supply of housing?

The low-income housing tax credit (LIHTC) was originated in conjunction with the Tax Reform Act of 1986 (TRA 86) to provide incentives for private sector production of low-income housing. In this note we examine whether these units have added to the existing stock or merely substituted for unsubsidized units that otherwise would have been built. We explicitly control for effects of the number of other supply-side (e.g., public housing, Section 8 New Construction, Section 236 housing) and demand-side (vouchers and Section 8 Certificates) subsidies. From estimations of a simple cross-state model of the determinants of the stock of housing per 1000 population, we find no significant relationship between the number of LIHTC units (and other subsidized units) built in a given state and the size of the current housing stock, suggesting a high rate of substitution. However, our test is not sufficiently powerful to reject some alternative null hypotheses that suggest a lower rate of substitution, and we make some suggestions for future research.