The role of mixed income neighborhoods in lessening poverty
By Joe Cortright
Its a truism that the zip code that you are born in (or grow up in) has a lot to do with your life chances. If you’re born to a poor household, a neighborhood with safe streets, good schools, adequate parks and public services, and especially some healthy and successful peers and neighbors has a material impact on whether you rise out of poverty or are trapped in it. While this message often gets presented in fatalistic tones, there’s a growing body evidence that suggests how we build our cities, and specifically, how good a job we do of building mixed income neighborhoods that are open to everyone can play a key role in reducing poverty and promoting equity.
The big problem the US confronts is that poverty has grown increasingly concentrated over the past four decades. Our Lost in Place report showed the number of poor people living in urban census tracts with a poverty rate of 30 percent or higher has doubled since 1970; and today more of the urban poor live in neighborhoods where a high fraction of their neighbors are also poor. As difficult as it is to be poor, its harder growing up in a place where many or most of your neighbors also face these challenges.
New research shows that neighborhood effects—the impact of peers, the local environment, neighbors—contribute significantly to success later in life. Poor kids who grow up in more mixed income neighborhoods have better lifetime economic results. This signals that an important strategy for addressing poverty is building cities where mixed income neighborhoods are the norm, rather than the exception. And this strategy can be implemented in a number of ways—not just by relocating the poor to better neighborhoods, but by actively promoting greater income integration in the neighborhoods, mostly in cities, that have higher than average poverty rates.
In the New York Times, economist Justin Wolfers reported on groundbreaking work by Eric Chyn of the University of Michigan that found previous research may have understated the effect of neighborhoods on lifetime earnings and employment. The paper shows that moving low-income children in very poor neighborhoods to less poor neighborhoods can have a major positive effect on their life chances.
Most media outlets have covered this story as reinforcing the importance of “mobility programs”: that is, policies that encourage residents of very low-income neighborhoods to move to more economically integrated areas, usually with some form of direct housing assistance like vouchers. And the ability to move to neighborhoods with good amenities and access to jobs, without having to pay unsustainable amounts for housing or transportation, is a crucial part of creating more equitable, opportunity-rich cities.
But the coverage may be missing the other half of the policy equation: Chyn’s paper adds to the evidence about the value of mixed-income neighborhoods in general, not just mobility. That means it’s just as important that cities find a way to invest in low-income neighborhoods to bring opportunity to them, rather than simply trying to move everyone out.
Why this research is so important
The results of the voucher demonstration illustrate that there can be large benefits from even modest changes in economic integration. The average household moved about 2 miles from their previous public housing location, and still lived in a neighborhood that had a higher than average poverty rate. Chyn’s results show the effects of moving from neighborhoods dominated by public housing (where the poverty rate was 78% on average), to neighborhoods that had poverty rates initially 25 percentage points lower, on average. Most participants still lived in neighborhoods with far higher levels of poverty than the typical American neighborhood. But compared to their peers who remained in high poverty neighborhoods, they enjoyed better economic results later in life.
This chart shows that children who moved out of very low-income neighborhoods were about 5-10 percentage points more likely to be employed as adults.
In this chart, you can see the growing earnings benefit to children who left very low-income neighborhoods in their adult years.
This study—on the heels of a widely-cited study led by Harvard economist Raj Chetty released last year—adds even more heft to the growing body of evidence that helping people with lower incomes move to mixed-income neighborhoods can play a huge role in spreading economic opportunity.
The new research improves on older studies by getting rid of an important confounding factor that affected some earlier research by more closely replicating a true “natural experiment.”
The experiment was made possible by the decision to demolish large scale public housing in Chicago in the early 1990s. The families dislocated from the old style public housing—which were in neighborhoods of extremely concentrated poverty—had to find new housing. The Chicago Housing Authority (CHA) provided the families with vouchers to move to privately operated rental housing, typically in neighborhoods with far lower levels of poverty. The kids who moved to new lower-poverty neighborhoods saw a significant increase in their lifetime earnings compared to otherwise similar kids who remained in the public housing that wasn’t torn down.
This natural experiment has an important advantage over the “Moving to Opportunity” (MTO) housing experiment conducted by the federal government in the 1990s. In MTO, public housing households had to apply for a voucher lottery. This created the possibility that the people who had applied were particularly motivated and able to make the transition to a new neighborhood. That would mean that even those households that lost the lottery might have better-than-average outcomes, reducing the gap between those who moved and those who didn’t, and making the effect of moving appear smaller than it really was.
But unlike MTO, the participants in the CHA relocation program were not self-selected. They represented a more or less random cross-section of public housing residents, and so the differences between the outcomes of treatment groups (those who got vouchers) and those who didn’t (control groups) could be treated as purely the result of the voucher program.
The policy implication: Mixed-income neighborhoods promote opportunity
But it’s important to put this finding in a broader context. Evidence about mobility programs, in turn, are part of a larger body of research that neighborhoods matter for economic opportunity. While the focus has been helping people leave neighborhoods with high concentrations of poverty, it’s also possible to bring investments and resources to these communities.
Of course, when that happens, it often happens in conjunction with—or even because of—a return of middle- and upper-income people to the neighborhood. In other words, gentrification.
For some, that’s enough to reject that policy avenue. But some research suggests we ought to give it another look. While news from neighborhoods in San Francisco and Brooklyn, where incredibly high levels of demand and tight supply have led to spiraling housing costs, makes it sound like gentrification inevitably and utterly displaces all a neighborhood’s residents, other research suggests that displacement is far less widespread than commonly thought. While housing costs can be an issue, a recent study from the Philadelphia Federal Reserve suggests that displacement is much less common than we might expect—and another study of New York public housing residents in gentrifying areas showed an increase in earnings and school test scores.
While the spatial response, as we’ve said, has focused on mobility, enabling the poor to move to higher income neighborhoods is challenging for a number of reasons. The raison d’etre of many suburbs is exclusion—using zoning requirements to make it essentially impossible for low income households to afford housing—and efforts by outside organizations or governments to reduce these barriers have been difficult. If we want to make the biggest difference in economic integration, we need to try to integrate low-income neighborhoods as well as high-income neighborhoods.
Neighborhoods for everyone
Taken together, the new Chyn results add to the growing body of literature on neighborhood effects and strongly suggest that we ought to be looking for all kinds of opportunities, large and small, to promote more mixed-income neighborhoods. Even the small steps—like lowering the poverty rate in a kid’s neighborhood from 75 percent to less than half—pays clear economic dividends.
But we also need to remember that integration isn’t just about moving around people with low incomes. We can reinvest in neighborhoods of concentrated poverty in ways that improve quality of life and enhance opportunity in place.
The role of mixed income neighborhoods in lessening poverty
Its a truism that the zip code that you are born in (or grow up in) has a lot to do with your life chances. If you’re born to a poor household, a neighborhood with safe streets, good schools, adequate parks and public services, and especially some healthy and successful peers and neighbors has a material impact on whether you rise out of poverty or are trapped in it. While this message often gets presented in fatalistic tones, there’s a growing body evidence that suggests how we build our cities, and specifically, how good a job we do of building mixed income neighborhoods that are open to everyone can play a key role in reducing poverty and promoting equity.
The big problem the US confronts is that poverty has grown increasingly concentrated over the past four decades. Our Lost in Place report showed the number of poor people living in urban census tracts with a poverty rate of 30 percent or higher has doubled since 1970; and today more of the urban poor live in neighborhoods where a high fraction of their neighbors are also poor. As difficult as it is to be poor, its harder growing up in a place where many or most of your neighbors also face these challenges.
New research shows that neighborhood effects—the impact of peers, the local environment, neighbors—contribute significantly to success later in life. Poor kids who grow up in more mixed income neighborhoods have better lifetime economic results. This signals that an important strategy for addressing poverty is building cities where mixed income neighborhoods are the norm, rather than the exception. And this strategy can be implemented in a number of ways—not just by relocating the poor to better neighborhoods, but by actively promoting greater income integration in the neighborhoods, mostly in cities, that have higher than average poverty rates.
In the New York Times, economist Justin Wolfers reported on groundbreaking work by Eric Chyn of the University of Michigan that found previous research may have understated the effect of neighborhoods on lifetime earnings and employment. The paper shows that moving low-income children in very poor neighborhoods to less poor neighborhoods can have a major positive effect on their life chances.
Most media outlets have covered this story as reinforcing the importance of “mobility programs”: that is, policies that encourage residents of very low-income neighborhoods to move to more economically integrated areas, usually with some form of direct housing assistance like vouchers. And the ability to move to neighborhoods with good amenities and access to jobs, without having to pay unsustainable amounts for housing or transportation, is a crucial part of creating more equitable, opportunity-rich cities.
But the coverage may be missing the other half of the policy equation: Chyn’s paper adds to the evidence about the value of mixed-income neighborhoods in general, not just mobility. That means it’s just as important that cities find a way to invest in low-income neighborhoods to bring opportunity to them, rather than simply trying to move everyone out.
Why this research is so important
The results of the voucher demonstration illustrate that there can be large benefits from even modest changes in economic integration. The average household moved about 2 miles from their previous public housing location, and still lived in a neighborhood that had a higher than average poverty rate. Chyn’s results show the effects of moving from neighborhoods dominated by public housing (where the poverty rate was 78% on average), to neighborhoods that had poverty rates initially 25 percentage points lower, on average. Most participants still lived in neighborhoods with far higher levels of poverty than the typical American neighborhood. But compared to their peers who remained in high poverty neighborhoods, they enjoyed better economic results later in life.
In this chart, you can see the growing earnings benefit to children who left very low-income neighborhoods in their adult years.
This study—on the heels of a widely-cited study led by Harvard economist Raj Chetty released last year—adds even more heft to the growing body of evidence that helping people with lower incomes move to mixed-income neighborhoods can play a huge role in spreading economic opportunity.
The new research improves on older studies by getting rid of an important confounding factor that affected some earlier research by more closely replicating a true “natural experiment.”
The experiment was made possible by the decision to demolish large scale public housing in Chicago in the early 1990s. The families dislocated from the old style public housing—which were in neighborhoods of extremely concentrated poverty—had to find new housing. The Chicago Housing Authority (CHA) provided the families with vouchers to move to privately operated rental housing, typically in neighborhoods with far lower levels of poverty. The kids who moved to new lower-poverty neighborhoods saw a significant increase in their lifetime earnings compared to otherwise similar kids who remained in the public housing that wasn’t torn down.
This natural experiment has an important advantage over the “Moving to Opportunity” (MTO) housing experiment conducted by the federal government in the 1990s. In MTO, public housing households had to apply for a voucher lottery. This created the possibility that the people who had applied were particularly motivated and able to make the transition to a new neighborhood. That would mean that even those households that lost the lottery might have better-than-average outcomes, reducing the gap between those who moved and those who didn’t, and making the effect of moving appear smaller than it really was.
But unlike MTO, the participants in the CHA relocation program were not self-selected. They represented a more or less random cross-section of public housing residents, and so the differences between the outcomes of treatment groups (those who got vouchers) and those who didn’t (control groups) could be treated as purely the result of the voucher program.
The policy implication: Mixed-income neighborhoods promote opportunity
But it’s important to put this finding in a broader context. Evidence about mobility programs, in turn, are part of a larger body of research that neighborhoods matter for economic opportunity. While the focus has been helping people leave neighborhoods with high concentrations of poverty, it’s also possible to bring investments and resources to these communities.
Of course, when that happens, it often happens in conjunction with—or even because of—a return of middle- and upper-income people to the neighborhood. In other words, gentrification.
For some, that’s enough to reject that policy avenue. But some research suggests we ought to give it another look. While news from neighborhoods in San Francisco and Brooklyn, where incredibly high levels of demand and tight supply have led to spiraling housing costs, makes it sound like gentrification inevitably and utterly displaces all a neighborhood’s residents, other research suggests that displacement is far less widespread than commonly thought. While housing costs can be an issue, a recent study from the Philadelphia Federal Reserve suggests that displacement is much less common than we might expect—and another study of New York public housing residents in gentrifying areas showed an increase in earnings and school test scores.
This research also occurs against a backdrop of widening inequality and economic segregation. And inequality has an important spatial dimension: low-income and high-income households are increasingly segregated from one another in separate neighborhoods.
While the spatial response, as we’ve said, has focused on mobility, enabling the poor to move to higher income neighborhoods is challenging for a number of reasons. The raison d’etre of many suburbs is exclusion—using zoning requirements to make it essentially impossible for low income households to afford housing—and efforts by outside organizations or governments to reduce these barriers have been difficult. If we want to make the biggest difference in economic integration, we need to try to integrate low-income neighborhoods as well as high-income neighborhoods.
Neighborhoods for everyone
Taken together, the new Chyn results add to the growing body of literature on neighborhood effects and strongly suggest that we ought to be looking for all kinds of opportunities, large and small, to promote more mixed-income neighborhoods. Even the small steps—like lowering the poverty rate in a kid’s neighborhood from 75 percent to less than half—pays clear economic dividends.
But we also need to remember that integration isn’t just about moving around people with low incomes. We can reinvest in neighborhoods of concentrated poverty in ways that improve quality of life and enhance opportunity in place.
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