September 9, 2015

Ending America’s “Architecture of Segregation” Requires a New Approach to Housing Policy


Over the weekend The New York Times ran an important editorial calling for an end to America’s “architecture of segregation,” a set of federal, state and local housing policies that encourage concentrated poverty and residential segregation. The piece points to a few specific examples: federally subsidized housing that is “disproportionately built in poor areas offering no work, underperforming schools and limited opportunity,” affluent suburbs with local zoning rules that “prevent poor, moderate-income and minority families from moving in,” and discriminatory lending and leasing practices that “exclude even higher income minority citizens from some communities.”

The editorial comes at the end of a landmark summer for the fair housing movement, which included a Supreme Court decision on the Fair Housing Act’s disparate impact doctrine, the release of HUD’s long-awaited rules on Affirmatively Furthering Fair Housing, and the airing of “Show Me a Hero,” HBO’s six-part miniseries about a notorious fight over a fair housing lawsuit in Yonkers, NY. It was also published just a few days after HUD’s 2015 National Fair Housing Conference, which attracted hundreds of freshly energized fair housing advocates from across the country.

The term “architecture of segregation” was coined by the Century Foundation’s Paul Jargowsky, who recently published a detailed report on racial and economic segregation in the U.S. According to his analysis, 13.8 million Americans live in high-poverty neighborhoods—meaning more than 40 percent of residents are poor—which is nearly double the population that lived in concentrated poverty in 2000. The number of neighborhoods identified as “high-poverty” increased by more than 75 percent over the same period.

This change has hit communities of color particularly hard. Jargowsky found that more than one in four poor black Americans and nearly one in six poor Latino Americans live in a high-poverty neighborhood, compared to just one in 13 poor white Americans.

Nearly half a century after the Fair Housing Act was signed into law, it’s clear that residential segregation is still a major—and growing—problem in our country. And thanks to groundbreaking new research from Harvard’s Raj Chetty and others, we now have a deeper understanding of segregation’s long-term negative consequences for families and communities. Chetty’s latest study, which was published in May, found that moving a child from a high-poverty neighborhood to a more integrated, lower-poverty neighborhood improves her chance of going to college, lowers her chance of being a single mother and increases her expected income as an adult by more than 30 percent.

So, what are we going to do about it? Everyone seems to agree that housing policy will play a key role in the solution, but beyond that the details are often frustratingly vague. (The Times editorial, for example, concludes with a call for “governments at all levels” to “do far more.”)

In the coming months, Enterprise will unveil a long-term policy agenda aimed at creating stronger, more inclusive and more integrated communities across the U.S. Below we identify a few policies that will be part of that platform. But before we get into the details, it’s important to understand the role of public policy in creating this problem in the first place.

Federal Housing Policy Contributed to the Creation of Segregated Communities

To be sure, there are a number of factors that contributed to the rise of racial and economic segregation over the years. Some are economic: 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. Others are social: deeply entrenched racial and socioeconomic tensions have led to strong “not in my backyard” objections to community integration efforts. We saw this recently during a racially-charged fight at a pool party in McKinney, TX, which allegedly began when a white resident told a black neighbor to “go back to your Section 8 home.”

Another important contributing factor: decades of federal housing policy.

During the opening day of HUD’s fair housing conference last week, the Economic Policy Institute’s Richard Rothstein gave a helpful seminar on the federal government’s long history of promoting residential segregation. Rothstein’s timeline started in the 1930s, when the federal government began building separate public housing for white and black households—often segregated by neighborhoods—to replace inner-city slums. These segregationist policies were expanded during World War II, when civilian workers moved in droves to inner-cities to take advantage of factory jobs, and again during the post-war boom when much of the country’s massive, high-density public housing projects were erected.

It wasn’t just public housing, though. Rothstein also described the massive federal investment in so-called “white suburbanization” beginning in the 1950s, including both the creation of the interstate highway system and government-backed loans to develop large white-only subdivisions outside of cities. At the same time, the Federal Housing Administration explicitly refused to insure mortgages to black borrowers or loans in predominantly black neighborhoods, making it much harder for households of color to build intergenerational wealth through homeownership. By the signing of the Fair Housing Act in 1968, much of the damage had already been done, with impoverished and mostly minority inner-cities encircled by affluent, mostly white suburbs. (For a more thorough account of this history, see Rothstein’s recent report entitled The Making of Ferguson: Public Policies at the Root of its Troubles.)

In many ways, the modern community development industry began as a direct response to these decades of divestment from lower-income minority communities. Public policy played a key role in growing the industry—the creation of Community Development Corporations in the late 1960s, the Community Reinvestment Act and the Community Development Block Grant program in the 1970s, the Low-Income Housing Tax Credit program in the 1980s and the Community Development Financial Institution Fund and HOME Investment Partnership program in the 1990s all aimed to increase public and private investments into poor, inner-city and mostly minority neighborhoods.

Fair Housing Requires a Balanced Approach to Community Development

While HUD’s conference last week covered a wide range of issues related to fair housing, the central focus was neighborhood access. Several speakers and panelists spoke passionately about the need to integrate long-segregated communities by ensuring that poor families have access to affluent neighborhoods with good schools, safe streets, reliable transit and ample job opportunities.

Promoting broad access to high-opportunity areas has always been a central tenant of the Fair Housing Act. And as Raj Chetty—arguably the preeminent academic on issues of neighborhood choice and economic mobility—has noted, a balanced approach is necessary to achieve this goal.

In a recent presentation at the Brookings Institution, Chetty said:

“At the end of the day, while moving people can be one useful policy tool, there are limits to the scalability of such a policy. You can't move everybody from Harlem to the Bronx, and expect to get the same types of outcomes.  So you also ultimately need to think about policies that can improve existing neighborhoods.”

Enterprise calls this the “both/and” approach to fair housing. We need to both ensure broad access to high-opportunity communities and allocate the resources necessary to transform distressed neighborhoods into vibrant, diverse communities of opportunity—neighborhoods that people live in by choice, not by necessity. These two strategies, of course, are not mutually exclusive; they must be pursued in tandem.Both the recent Supreme Court decision and HUD’s new Affirmatively Furthering Fair Housing rule support both mobility and community revitalization as equally important and valid tools for furthering fair housing.  Justice Anthony Kennedy, author of the Court’s majority opinion, wrote:“It would be paradoxical to construe the (Fair Housing Act) to impose onerous costs on actors who encourage revitalizing dilapidated housing in the Nation’s cities merely because some other priority might seem preferable…this Court does not impugn local housing authorities’ race-neutral efforts to encourage revitalization of communities that have long suffered the harsh consequences of segregated housing patterns.”

Similarly, the preamble to HUD‘s final rule states:

“HUD’s rule recognizes the role of place-based strategies, including economic development to improve conditions in high poverty neighborhoods, as well as preservation of the existing affordable housing stock, including HUD-assisted housing, to help respond to the overwhelming need for affordable housing.”

Toward A More Balanced and Equitable Approach to Housing Policy

The Supreme Court’s decision and HUD’s new rules are meaningful steps in the right direction. However, if we are truly committed to a balanced approach to fair housing, we need to pursue a much broader set of reforms at all levels of government.

In the coming months, Enterprise will publish a long-term policy agenda that lays out the federal, state and local policy changes necessary to meet this ambitious goal.

The platform will include:

  1. Policies that ensure broad access to high-opportunity neighborhoods, including recommendations to:

  1. Policies that promote comprehensive investments into distressed neighborhoods, including recommendations to:

  • Expand HUD’s Rental Assistance Demonstration and provide the federal resources necessary to preserve all at-risk public housing.
  • Expand the Obama administration’s Promise Zones initiative to promote cross-sector investments in the country's most economically distressed communities.
  • Make permanent and significantly expand the New Markets Tax Credit
  • Create a new federal tax credit for investments into debt products offered by Community Development Financial Institutions and other individual and corporate investments into low-income communities.
  • Establish federal regulations that encourage so-called “impact investments” into low-income communities by tax-exempt foundations, pension funds and government-insured depository institutions.

In addition, the platform will include a set of proposals to rebalance federal housing priorities and target scarce subsidy dollars where they’re needed most. After a series of federal budget cuts in recent years, today only 23 percent of households who are eligible for federal rental assistance actually receive it, leading to decade-long waiting lists and lotteries for rare openings. At the same time, developers requested more than twice amount of Low-Income Housing Tax Credits than were available in 2013, meaning hundreds of viable developments that would serve low-income families in need are turned down because of scarcity of tax credits, not because of applicants’ qualifications or community needs. Meanwhile, we’re spending billions of dollars each year to subsidize the mortgages of high-income families who don’t need government support to remain stably housed.

The platform will also look beyond housing policy to a set of recommendations to that improve the overall financial wellbeing of low-income families—from boosting take-home pay to encouraging emergency savings and long-term investments.

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.

Some of these policy changes will carry significant costs, and many of the proposals are unlikely to be enacted in today’s fiscal and political environment. But over the next several years—perhaps even decades—these are the types of investments that will be necessary to dismantle America’s “architecture of segregation.”

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