Does the Earned Income Tax Credit Reduce Housing Instability?

Does the Earned Income Tax Credit Reduce Housing Instability?

Housing instability (inability to pay rent, frequent moves, moving in with others/doubling up, eviction, or homelessness) is common among low-income households and is linked with a host of negative outcomes for families and children. As rents have risen and wages have not kept pace, housing affordability has declined over the last 15 years, increasing rates of housing instability. Yet, to date, no research has examined whether the Earned Income Tax Credit (EITC), a key US social welfare policy and one of the largest cash transfer programs in the US, reduces housing instability. To address this gap in the literature this study examines whether the EITC is linked with housing instability. Using longitudinal data from the Fragile Families and Child Wellbeing Study (FFCWS) and the Survey of Income and Program Participation (SIPP), we employ a simulated instruments strategy to examine whether policy-induced expansions in the EITC (exploiting federal and state policy variation over time by family size) reduces housing instability. We find that a one thousand dollar increase in the EITC is associated with a 3 to 5 percentage point decline in doubling up (living with at least one adult who is not a nuclear family member). We find some suggestive evidence that the EITC decreases the average number of moves per year (0.5 moves). While our results suggest that the EITC does decrease certain, less severe forms of housing instability, we find no evidence that the EITC decreases more extreme (and rarer) forms of housing instability: eviction or homelessness. Consistent with earlier research, we also find some evidence that the effect of the EITC on doubling up is strongest among families between 50 and 200% of poverty and among mothers with a high school education or some college.

PUBLICATION DATE: 2017