Investing in Gentrification: The Eligibility of Gentrifying Neighborhoods for Federal Place-Based Economic Investment in U.S. Cities

Abstract

Place-based policies commonly target disadvantaged neighborhoods for economic improvement, typically in the form of job opportunities, business development or affordable housing. To ensure that investment is channeled to truly distressed areas, place-based programs narrow the pool of eligible neighborhoods based on a set of socioeconomic criteria. The criteria, however, may not be targeting the places most in need. In this study, we examine the relationship between neighborhood gentrification status and 2018 eligibility for the New Markets Tax Credits, Opportunity Zones, Low Income Housing Tax Credits, and the Community Development Financial Institutions Program. We find that large percentages of gentrifying neighborhoods are eligible for each of the four programs, with many neighborhoods eligible for multiple programs. The Opportunity Zone program stands out, with the probability of eligibility nearly twice as high for gentrifying tracts than not-gentrifying tracts. We also found that the probability of eligibility increases with a greater percentage of adjacent neighborhoods experiencing gentrification.