Does the Earned Income Tax Credit Reduce Housing Instability?

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August 2017

Natasha Pilkauskas, The University of Michigan and Katherine Michelmore, Syracuse University

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Abstract

Housing instability (inability to pay rent, frequent moves, 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. In this study, we examine 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. Using longitudinal data from the Fragile Families and Child Wellbeing Study and the Survey of Income and Program Participation, we employ a simulated instruments strategy to examine whether policy-induced expansions in the EITC reduce housing instability. Results suggest that a $1,000 increase in the EITC reduces doubling up (living with other non-nuclear family adults) 3 to 5 percentage points. We find some suggestive evidence that the EITC decreases the average number of moves per year (0.05 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.