Differences in poverty rate in the neighborhood where kids grow up make a bigger difference to their economic future than differences in parents income.* Children who grow up in neighborhoods of concentrated poverty face lifelong health challenges, increased odds of incarceration and reduced lifetime earnings.* By contrast when lower-income families live in economically mixed communities, their children have essentially the same health and economic outcomes as children from higher income families.*
Lower-income families are not the only ones who suffer under economic segregation—everyone loses when economic diversity deteriorates. Unequal access to housing drives sprawling development patterns, worsens traffic congestion, pollutes air quality, increases taxpayer dollars spent on basic infrastructure, and decreases racial, cultural, and economic diversity.
While we have understood the negative consequences of economic segregation for decades, recent research has shown just how hard it is to achieve economic integration through traditional affordable housing strategies. A 2012 study found that the vast majority of subsidized affordable housing has been located in neighborhoods with poor performing schools.*
| Housing Program | Median quality of nearest school |
|---|---|
| Public Housing | 19th Percentile |
| Low Income Housing tax Credits | 30th Percentile |
| Housing Choice Vouchers | 26th Percentile |
| Inclusionary Housing | 40th to 60th Percentile |
By contrast, the results of another 2012 study suggest that inclusionary housing programs have been more successful in achieving this goal. The typical inclusionary home was in a neighborhood where only 7 percent of the population lived in poverty (half the national average for all neighborhoods). Children in these inclusionary units were assigned to schools with state test score ranks in the 40th to 60th percentile and with lower than average numbers of students eligible for free lunches.*
Yes: Since the mid-1980s, a broad consensus among scholars and urban planners has emerged in support of the idea that housing policy should encourage the creation of more mixed-income communities. In one example, the Pew Charitable Trust’s Economic Mobility Project followed 5,000 families to determine whether children moved up or down the income ladder relative to their parents. Surprisingly, the study found that differences in the poverty rate in the neighborhood where children grew up strongly predicted their economic mobility as adults, even more strongly than differences in their parent’s education level, occupation, or other family characteristics.*
It is easy to see that children who live in distressed communities face tougher odds, but what we haven’t been able to prove before is whether families whose kids would face significant obstacles in any event, choose to live in distressed neighborhoods or whether it is something about the places themselves that negatively affects the kids.
A 2015 study from Harvard University* has added very strong new evidence to support the conclusion that the places themselves matter. Economists studied children who moved from “worse” to “better” neighborhoods and found that kids who grew up in better neighborhoods earned more as adults when compared to kids who didn’t move or who moved to a worse neighborhood. And the effect grew over time. The younger kids were when they moved, the greater the gains. This research suggests that housing policies encouraging greater economic integration will lead to better economic outcomes for lower-income children.
Yes: HUD’s Affirmatively Furthering Fair Housing (AFFH) rule requires jurisdictions that receive federal housing funds to proactively plan for overcoming racial segregation. Decades of experience with fair housing enforcement has shown that removing discrimination in the leasing and sale of homes is generally not enough to overcome racial segregation. Inclusionary housing has been one of the most successful strategies that communities have used to ensure economic and racial integration of higher opportunity neighborhoods.
Not necessarily: Many policymakers pursued mixed-income housing policies in the hope that social interactions between lower-income and higher-income residents would lead to better access to jobs or other resources for lower-income residents. The research clearly suggests that these hopes are not realistic. The Urban Institute reviewed dozens of studies of housing programs that promoted mixed-income communities and found little evidence of any meaningful social interaction between lower-income and higher-income neighbors in mixed-income developments. It also found no evidence that lower-income residents reliably benefitted from the employment connections or other “social capital” of their higher-income neighbors.* Even among members of the same income and racial groups, this kind of social interaction among neighbors appears to be rarer than is often imagined.
Yes: In historically disinvested communities and communities of color, new market-rate housing can help trigger gentrification and ultimately displacement of long time lower-income populations. Inclusionary projects, particularly those with a sizable share of permanently affordable housing units, can help ensure that new development helps to stabilize rather than displace the existing community. Researchers at UC Berkeley found that development of new affordable housing was significantly associated with lower levels of displacement in gentrifying neighborhoods.*
A few communities actively encourage developers to utilize other housing subsidies to help offset the cost of building required affordable units. This position seems to be more common in communities with a surplus of affordable housing funds. Many communities, however, face an acute need for affordable housing and high demand for scarce affordable housing subsidy funds. These cities will generally prohibit developers from ‘double counting’ units (i.e. using other affordable housing programs to subsidize units that are required by the inclusionary housing program) because these affordable housing funds are limited. To the extent that inclusionary developers are using public affordable housing funds to offset their costs, the program is not producing additional affordable housing beyond what would have been provided in any event.
Many cities adopt policies somewhere in the middle, allowing some affordable housing funds to be utilized but prohibiting others. In general, cities are more cautious about using funds that are highly limited. For example, many cities will allow developers to utilize tax abatements but prohibit the same projects from applying for housing grant funds. A second general guideline is that access to external funding should be balanced against the burdens required or requested of the developer. If cities wish to maintain their inclusionary policies, yet the inclusionary rules make development extremely difficult, they will often err on the side of allowing more external subsidies to be used.
Use of the Federal Low Income Housing Tax Credit (LIHTC) program can be more complicated in part because there are two different types of LIHTC. The so-called 9 percent credits provide a large share of the cost of eligible projects and as a result they are in very high demand and limited supply. The 4 percent credits provide relatively less subsidy and require relatively more investment from local sources and private debt, and as a result they are in less demand. An inclusionary project that accessed 9 percent credits might be ‘taking them away’ from another local affordable housing project while the same project could use the four percent credits without affecting other eligible local projects. For this reason there has been a trend for inclusionary housing programs to allow developers to use 4 percent but not 9 percent credits either in on-site or off-site projects.
San Francisco, California uses its tax credits to achieve deeper affordability. Generally, the city does not allow developments to use any subsidies (local, state or federal). However subsidies can be used, with written permission, to deepen the affordability of a unit beyond the level required by the program. Additionally, if 20 percent of their units are affordable to people making 50 percent of AMI, the four percent tax credit can be used. The percentage increases to 25 percent for off-site production.
Inclusionary housing is just one of several strategies described on the National Housing Conference’s Inclusive Communities Toolkit. The site provides an overview of the full range of strategies that communities employ to promote and protect economic diversity. Visit Website
This report examines 11 inclusionary programs across the United States to determine the extent to which the policies serve lower-income families and provide inclusionary residents with access to low-poverty neighborhoods. They also evaluate whether inclusionary programs offer lower-income children opportunities to access high-performing schools. View Report
