The promise of economic mobility – that a child growing up in poverty can work her way up the income ladder – has always been an essential part of the American Dream. For millions of people in this country, however, that promise has not been fulfilled.
We have long known that where a person lives – the city, the neighborhood, even the block – determines her access to schools, jobs, food, health services, public transportation and other resources that are necessary to build skills, stay healthy and get ahead. It even impacts her life expectancy. But thanks to groundbreaking new research from Harvard’s Raj Chetty, we now have a deeper understanding of the direct link between where a child grows up and the opportunities she gets in life. For example, Chetty’s latest study found that each year a child spends in a high-poverty neighborhood – as opposed to a lower-poverty neighborhood with more opportunities – decreases her chances of going to college, increases her chances of becoming a single parent and decreases her expected earnings as an adult.
Moving a family from a high-poverty neighborhood to a low-poverty neighborhood can have a profound impact on a child’s life
Unfortunately, the number of Americans living in high-poverty neighborhoods – places that are often cut off from jobs, good schools and other opportunities – has increased significantly in recent years. According to the Century Foundation, today 13.8 million people in the United States live in high-poverty neighborhoods, meaning more than 40 percent of the neighborhood’s residents are poor, compared to just 7.2 million in 2000. In fact, the number of neighborhoods identified as “high-poverty” increased by more than 75 percent over the same period. These changes have hit communities of color particularly hard: more than one in four poor blacks and nearly one in six poor Latinos live in concentrated poverty, compared to just one in 13 poor whites.
Concentrated poverty has increased since 2000, with a disproportionate impact on households of color.
There are several factors that contributed to the increased concentration of poverty in recent years – some are economic, others are social. One crucial factor is the rising cost of living, which has left many lower-income households with no choice but to live in neighborhoods with poor-quality housing, rampant crime, bad schools and few jobs. Over the past decade, wages have stagnated for most low- and moderate-income workers while rents have steadily risen, especially in high-demand markets with the most job opportunities. As a result, a growing number of low-income renters are competing for an increasingly scarce supply of affordable rental homes, creating an unprecedented affordability crisis.
After adjusting for inflation, median rents have risen significantly since 2001, while the typical renter’s income has dropped.
When last measured in 2014, more than one in four families who rented their homes – 11.4 million renter households in total – were “housing insecure,” meaning they paid more than half of their monthly income on housing. Many housing insecure families have to make difficult tradeoffs simply to keep a roof over their heads, and many are just one unforeseen event – an illness, a job loss, even a drop in hours at work – from seeing an eviction notice on their front door. The number of housing insecure renters in the U.S. has increased by 30 percent over the past decade. Absent meaningful changes to public policy, we expect that number to steadily increase in the years to come. According to projections from Enterprise and the Joint Center for Housing Studies, even if rent growth matches income growth, the number of housing insecure renters is expected to increase by about 1.3 million households over the next decade – an increase of over 10 percent.
Barring significant policy action, housing insecurity among renters is expected to continue to grow over the next decade.
Misguided public policy is another key factor behind recent increases in concentrated poverty. The Century Foundation’s Paul Jargowsky recently published a report describing America’s “architecture of segregation,” a set of federal, state and local policies that have encouraged subsidized housing to be disproportionately located in poor inner-city neighborhoods, discouraged lower-income families from moving into more affluent suburbs and tacitly permitted landlords and mortgage lenders to discriminate against lower-income minority families. “Concentration of poverty,” Jargowsky wrote, “is the product of larger structural forces, political decisions and institutional arrangements that are too often taken for granted.”
Here’s the good news: America has tackled massive, seemingly intractable housing problems in the past, and we can do it again. Through policies enacted at the federal, state and local levels, we have ensured that long-term, affordable mortgage credit is available for most Americans throughout the business cycle. We have created an effective system for financing, building and maintaining quality rental housing that’s affordable to low-income households, driven by programs like the Low-Income Housing Tax Credit. Through innovations like Section 8 vouchers and supportive housing, we have ensured that many of the most vulnerable people in our communities – including those struggling with homelessness – have access to quality, affordable housing and the services they need to thrive. And through a variety of effective partnerships between the federal government, state and local governments and the private sector, we have drastically improved the physical conditions in which most low-income people live – a far cry from the blighted slums of decades ago.
In order to make a meaningful dent in systemic problems like concentrated poverty and housing insecurity, we will need bold, systemic solutions from the private and public sectors – and that often starts with changes to public policy. But first we must reconsider our current priorities in housing policy at all levels of government.
Each year, nearly three-quarters of federal housing subsidies go to homeowners.
The federal budget shows just how skewed our country’s housing priorities have become. The federal government spends about $200 billion each year to help Americans buy and rent their homes, delivered through a patchwork of direct spending programs, tax incentives, loan guarantees and other programs. However, the bulk of those subsidies go to higher-income households who would likely be stably housed without the government’s support, in part because a disproportional percentage of federal housing resources support homeowners, whose incomes are typically twice those of renters.
When the Center on Budget and Policy Priorities analyzed the programs for which reliable income data are available, they found that 60 percent of federal housing subsidies benefit households with incomes above $100,000. In fact, each year more federal housing subsidies go to the richest 7 million households – those making more than $200,000 per year – than go to the poorest 55 million households combined.
More than half of federal housing subsidies go to higher-income households
One fact is clear: in order to establish America as a true land of opportunity, in which every person has a fair shot at success, we need a new approach to housing policy. In the following chapters, we lay out a bold new vision for federal, state and local housing policy, with a focus on creating strong, affordable and inclusive communities of opportunity across the country.
Our proposals follow four broad strategies for reform:
Many of the proposals in this platform already have broad bipartisan support – in fact, many were also offered by the Bipartisan Policy Center’s Housing Commission in 2013. In addition, the majority of the policies can be implemented with little or no long-term cost to taxpayers. To be sure, some of the policies will carry significant costs, but the size and scale of the problem requires bold action. All told, once fully phased we estimate that the policies in this platform would require an additional $60 billion – $70 billion in annual investment from the federal government. While certainly a big price tag, Congress could cover most or all of the annual investment through smart reforms to the mortgage interest and property tax deductions – two remarkably inefficient subsidies that cost taxpayers roughly $100 billion each year – all while expanding support to the homeowners who need it most. We discuss how this could work in a later chapter of the platform.
As we weigh the costs and benefits of each proposal, we must also consider the high cost of inaction – the price of allowing millions of Americans to remain stuck in communities without access to good schools, jobs and other opportunities. For example, according to a recent study of high-cost cities like New York, San Francisco and San Jose, the dearth of affordable housing options costs the U.S. economy an estimated $1.6 trillion each year in lost wages and productivity alone. In other words, this is not just a matter of fulfilling the promise of equal opportunity for all Americans – it’s also a matter of keeping our economy competitive by unleashing the full potential of the American workforce.
Over the next several years – perhaps even decades – these are the types of investments that will be necessary to tackle America’s growing rental housing crisis and create communities of opportunity throughout the country. The problems we face are not intractable – indeed, we already have many of the tools needed to solve them. The key question is whether we have the political will to strengthen those tools and make the investments necessary to address the problem at the scale at which it exists.
In many ways, 2015 was a pivotal year for fair housing. In June, the Supreme Court upheld “disparate impact” as a legal tool for fair housing complaints, reinforcing that housing discrimination does not have to be intentional to be illegal. A few weeks later, the Obama administration released its long-awaited final rule on Affirmatively Furthering Fair Housing, clarifying the obligations of state and municipal governments under the federal Fair Housing Act.
Enterprise believes that fair housing is essential to creating inclusive communities of opportunity. We strongly support distributing federal resources in a way that allows low-income people to make housing choices that are best for themselves and their families. This means preserving affordable housing where it exists today, revitalizing distressed communities, building affordable homes in neighborhoods of opportunity and creating and promoting options for mobility. And for communities that are in transition, including gentrifying neighborhoods where housing costs are rapidly rising, we must preserve affordable housing options so that current residents are not displaced. These strategies, of course, are not mutually exclusive; they must be pursued in tandem. As Supreme Court Justice Anthony Kennedy noted in the majority opinion in June:
“Much progress remains to be made in our Nation’s continuing struggle against racial isolation … The (Fair Housing Act) must play an important part in avoiding the … grim prophecy that ‘our Nation is moving toward two societies, one black, one white—separate and unequal.’ … The Court acknowledges the Fair Housing Act’s continuing role in moving the Nation toward a more integrated society.”