The Effect of the Earned Income Tax Credit on Housing and Living Arrangements

Abstract

As rents have risen and wages have not kept pace, housing affordability in the United States has declined over the last 15 years, impacting the housing and living arrangements of low-income families. Housing subsidies improve the housing situations of low-income families, but less than one in four eligible families receive a voucher. In this article, we analyze whether one of the largest anti-poverty programs in the United States—the Earned Income Tax Credit (EITC)—affects the housing (eviction, homelessness, and affordability) and living arrangements (doubling up, number of people in the household, and crowding) of low-income families. Using the Current Population Survey, the American Community Survey/decennial census, and the Fragile Families and Child Wellbeing Study, we employ a parameterized difference-in-differences strategy to examine whether policy-induced expansions to the EITC affect the housing and living arrangements of single mothers. Results suggest that a $1,000 increase in the EITC improves housing by reducing housing cost burdens, but it has no effect on eviction or homelessness. Increases in the EITC also reduce doubling up (living with additional, nonnuclear family adults)—in particular, doubling up in someone else’s home—and reduce three-generation/multigenerational coresidence, suggesting that mothers have a preference to live independently. We find weak evidence for a reduction in overall household size, yet the EITC does reduce household crowding. Although the EITC is not an explicit housing policy, expansions to the EITC are generally linked with improved housing outcomes for single mothers and their children.

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Fig. 1

Notes

  1. 1.

    One study modeled how the inclusion of the EITC in income reduces housing cost burdens (Stegman, Davis, and Quercia 2004).

  2. 2.

    We include women who receive housing vouchers because they do not face the same restrictions as women in public housing. We find no evidence that the EITC affects the likelihood of living in public housing or having a housing voucher (results available upon request).

  3. 3.

    We also run analyses in the Survey of Income and Program Participation (SIPP; see Table A7 in the online appendix) but do not include them here due to data limitations.

  4. 4.

    In a supplemental analysis, we restricted the CPS to the same years used in the ACS, and findings (available upon request) were similar to those presented here.

  5. 5.

    Additional details on the data and method, 15 sample states, sample restrictions, balance, and migration tests are available in the online appendix. The FFCWS has been used in previous research to examine the effect of EITC expansions on maltreatment (Berger et al. 2017).

  6. 6.

    Over the period studied, the CPS changed how it identified cohabiting partners. See the online appendix for details.

  7. 7.

    In the ACS and the CPS, we can identify only maternal grandparents. In the FFCWS, we can identify both maternal and paternal multigenerational households.

  8. 8.

    We conducted the same analyses using a sample of single mothers in the CPS, and results (available upon request) were virtually identical.

  9. 9.

    In the CPS, a $1,000 increase in the simulated benefit corresponds to a $794 increase in own EITC benefits among single mothers, which is consistent with previous research estimating about an 80 % take-up rate of the EITC (Currie 2004).

  10. 10.

    In the FFCWS, we include individual fixed effects rather than state or child fixed effects.

  11. 11.

    The state unemployment rate comes from the Bureau of Labor Statistics Local Area Unemployment Statistics: https://www.bls.gov/lau/. State GDP comes from the Bureau of Economic Analysis Regional Data: https://www.bea.gov/regional/index.htm. Information on welfare benefits comes from the Urban Institute’s Welfare Rules Database: http://wrd.urban.org/wrd/Query/query.cfm.

  12. 12.

    In the CPS, we evaluate six outcomes of interest, requiring point estimates to be significant at p < .008 rather than at p < .05. Similarly, in the ACS, we evaluate eight outcomes, requiring significance at p < .006; and in the FFCWS, we evaluate nine outcomes, requiring significance at p < .006.

  13. 13.

    This finding is no longer significant at p < .05 after Bonferroni correction for multiple hypothesis testing.

  14. 14.

    We present analyses controlling for the both state and federal EITC, but models run separately (not controlling for the other) yielded similar results.

  15. 15.

    We find no significant relationship between EITC generosity and the likelihood of single mothers owning their own homes, so we do not believe that these results are driven by compositional changes in the single mothers who own or rent their homes.

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Acknowledgments

The authors thank Poverty Solutions at the University of Michigan for funding for this project. This project was supported by Award No. R01HD036916 awarded by the Eunice Kennedy Shriver National Institute Of Child Health & Human Development. The content is solely the responsibility of the authors and does not necessarily represent the official views of the Eunice Kennedy Shriver National Institute of Child Health & Human Development or the National Institutes of Health.

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Correspondence to Natasha Pilkauskas.

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Pilkauskas, N., Michelmore, K. The Effect of the Earned Income Tax Credit on Housing and Living Arrangements. Demography 56, 1303–1326 (2019). https://doi.org/10.1007/s13524-019-00791-5

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Keywords

  • EITC
  • Housing
  • Living arrangements
  • Doubling up
  • Household instability