The Effect of Income on Housing Instability and Living Arrangements: Evidence from the Earned Income Tax Credit

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Updated: May 2018

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

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As rents have risen and wages have not kept pace, housing affordability has declined over the last 15 years, increasing rates of housing instability (shared living arrangements/doubling up, moves, eviction/homelessness). Housing instability is especially common among low-income families and is linked with many negative outcomes for families and children. Yet surprisingly little is known about the causal impact of income on housing instability and living arrangements, the focus of this study. Using the Current Population Survey, we employ a parameterized difference-in-differences strategy to examine whether policy-induced expansions to the Earned Income Tax Credit (EITC), a key income transfer program in the US, affect the living arrangements and housing instability of single mothers. Results suggest that a $1,000 increase in the EITC reduces doubling up (living with additional, non-nuclear family adults) by 2 to 4 percentage points. Single mothers moving out of three-generation households explains much of the decline in shared living arrangements. An increase in the EITC increases the propensity to have moved in the last year, and to move for a welfare-improving reason. Results are concentrated among single mothers with children under the age of six, suggesting that the EITC has a significant effect on the housing stability and living arrangements of children during a critical developmental period. Findings imply that although the EITC is not an explicit housing policy, it does play a significant role in the living arrangements of single mothers and that income transfers more generally might help improve housing stability.