Subsidizing Gentrification: A Spatial Analysis of Place-Based Tax Incentives

Place-based tax incentives, such as the New Markets Tax Credit (NMTC) and Opportunity Zones are often used to promote investment in low-income neighborhoods. However, not all neighborhoods have an equal need for subsidies. Subsidies already gentrifying neighborhoods, example, may reflect inefficient inframarginal investment, they lead inequitable outcomes. Critics fear that when eligible will draw away from it most. few studies provided empirical analysis assess whether these concerns merit. Through a novel geospatial of location patterns tax-subsidized projects, this Article provides new evidence critics’ justified. This analyzes 15 years NMTC data explore projects 20 U.S. cities. It employs two spatial methods, quadrat density negative binomial regression analysis, describe their relationship variables known correlate with gentrification: high vacancy rates increasing rental rates. The reveals that, most cities, project is highest census tracts had rates, rents, or both. results confirmed many rent increases were statistically significant predictors investment. Together, provide other areas. They also suggest commonly proposed reform—to add statutory safeguards modeled after those NMTC—would fail prevent places gentrifying. The observed allocations, limit program’s ability equitable change, cast doubt about federal regulators can effectively shape program likely similarly Therefore, argues administrative reforms necessary reduce frequency at which incentives subsidize gentrifying. This study has profound implications $5 billion per year program, $3.5 state-level laws.