Economic Mobility & Housing

Transcription

1 Economic Mobility & Housing State of the Research There is an increasing amount of research examining the role housing, and particularly neighborhoods, have on economic mobility. Much of the existing literature examines the economic benefits that can accrue via housing voucher programs through which individuals and their families move from highpoverty areas to low-poverty areas. Additionally, there is a well-established, and evolving, literature examining the links between homeownership and economic mobility. Background Over the past fifty years intergenerational economic mobility has declined precipitously in the United States with substantially fewer adults earning incomes that meet or exceed those of their parents at similar ages. More troublingly, individuals and families who live in high-poverty areas, in sub-standard or insecure housing situations continue to face a well-documented uphill climb to achieving economic selfsufficiency, much less upward mobility. Much of the literature examining the relationship between housing and economic mobility is found in studies examining the benefits of homeownership or is situated within a broader literature that examines neighborhood effects on a range of economic, social, and health outcomes for individuals and families. of Research Findings Many studies have documented the reality that children from high-poverty areas do not achieve similar economic success as their peers from middle and upper-income communities. However, studies examining the economic benefits for individuals and families who move out of high-poverty areas have shown mixed results. Multiple factors play important roles in whether moving from a high-poverty neighborhood will lead to economic improvements for individuals and families, including: the quality of the new neighborhood; the reason families moved in the first place; the age of children when they move; and the amount of time they remain in the new situation. In addition, multiple studies have documented that homeowners tend to have more wealth and tend to be more economically secure than renters. In particular, for low- and middle-income individuals and families their homes continue to be their primary source of wealth. Even in the wake of the 2008/9 housing collapse as homeownership rates have declined throughout the country, the benefits of homeownership continue to be considerable for individuals and families across the income distribution. However, access to homeownership has become increasing restricted for low- and middle-income families in many markets, and the benefits that accrue to homeownership are not evenly distributed across different markets. Recent studies have found that: Place Matters Economic returns for adults and children moving from high-poverty areas to middle/upper-income areas vary depending on employment opportunities in the new areas, the age when students transfer to new settings, and the length of time they remain in the new setting. Local housing markets also inform the viability of homeownership for individuals in different parts of the country. Value Matters The ability of individuals and families to leverage homeownership into a substantial vehicle for economic mobility largely depends on the value of the homes they can afford, their ability to sustain or increase that value through regular maintenance and improvements, and their ability to access the capital accumulated in their home, or to pass it on to others.

2 Economic Mobility of Key Studies Chetty, R., Hendren, N., & Katz, L. F. (2016). The effects of exposure to better neighborhoods on children: New evidence from the Moving to Opportunity experiment. American Economic Review, 106(4), Longitudinal analysis of outcomes for youth in Chicago s Moving to Opportunity (MTO) Housing program. Methodology Regression analysis of tax records for MTO participants who moved from high-poverty to low-poverty neighborhood in the program compared to similar youth who did not move. Moving to a lower-poverty neighborhood significantly improves college attendance rates and earnings for children who were young (below age 13) when their families moved. These children also live in better neighborhoods themselves as adults and are less likely to become single parents. The same moves were observed to have negative long-term impacts on children who are more than 13 years old when their families move. The gains from moving are largely a function of the age when children move. Offering vouchers to move to lower-poverty neighborhoods to families with young children who are living in high-poverty housing projects may reduce the intergenerational persistence of poverty and ultimately generate positive returns for taxpayers. Sampson, R. (2016). Individual and Community Economic Mobility in the Great Recession Era: The Spatial Foundations of Persistent Inequality. Economic Mobility: Research and Ideas on Strengthening Families, Communities and the Economy, Longitudinal analysis of individual and neighborhood level economic mobility nationwide and with targeted analyses in Los Angeles and Chicago. Analysis of changes in individual income attainment and residence in economically diverse Methodology communities combined with analysis of changes in community level median incomes and economic diversity from 1990 through In both cities and for the nation, the findings suggest that neighborhood income status is surprisingly persistent in the highest and lowest income areas. For individuals, upward mobility in neighborhood economic status is relatively rare and informed by a persistent structure of racial stratification, making upward mobility highly unlikely for non-white individuals who come from neighborhoods with elevated poverty levels. The durability of neighborhood inequality calls into question policies that solely focus on individual mobility. While moving individuals and families out of poor neighborhoods can improve their chances for economic mobility, the strong place-based determinants of individual success observed in this study suggest that place-based interventions that seek to improve neighborhood conditions must also be part of a sustained broader effort to reduce poverty, income inequality and promote economic mobility. 2

3 Goodman, Laurie S., and Christopher Mayer "Homeownership and the American Dream." Journal of Economic Perspectives, 32 (1): Methodology An updated review of homeownership in the US from an international perspective, a demographic perspective and a financial perspective to assess the ongoing benefits of homeownership in the post-recession era. Descriptive analyses of homeownership trends in the US and abroad, inferential analyses of the socio-demographic factors most associated with homeownership in the US, and a longitudinal analysis of the financial returns for homeownership compared to renting from 2002 to Homeownership continues to be a valuable institution. Overall, it allows families to build wealth and serves as a measure of financial security not afforded to renters. Homeownership rates in a variety of countries peak for households in their 60s, suggesting that owning a home helps reduce financial risk in retirement. With the absence of any widely available financial product for low to moderate income individuals to accumulate wealth, homeownership remains the primary vehicle for mass-market longterm savings. In addition, homeowners continue to benefit from a host of preferential tax structures not available to non-owners. However, there remain very substantial variations in the homeownership experience, depending on factors like purchase timing, holding period, and location. Homeownership remains very beneficial for most families, offering both financial gains and a chance to build wealth, especially for those who expect to own their homes for a long enough period of time. The public policy and housing development challenge is to address barriers that limit those who would benefit from homeownership from accessing it, while not pushing people to become homeowners for whom it doesn t make sense or providing subsidies where not appropriate. Rosenbaum, J. E., & DeLuca, S. (2008). What Kinds of Neighborhoods Change Lives-The Chicago Gautreaux Housing Program and Recent Mobility Programs. Ind. L. Rev., 41, 653. Methodology A retrospective review of studies examining the results of the Gautreaux Program that came out of the 1976 Supreme Court decision allowing low-income black Chicago residents to use Section 8 vouchers to move into mostly white neighborhoods in the city and suburbs. Systematic review of the existing literature examining the impacts of participation in the Gautreaux Program for children and their families. Women who moved to racially mixed or predominantly white neighborhoods with higher levels of socioeconomic resources did better (in terms of employment and income) than their counterparts in areas with low resources and high levels of black residents. Children of Gautreaux families who moved to the suburbs were more likely to graduate from high school, attend college and be employed than those who moved within the city. In addition, the neighborhoods where Gautreaux children resided in the late 1990s were substantially more integrated than their overwhelmingly minority origin neighborhoods. Delinquency for boys who moved to the suburbs improved substantially, although girls who moved to the suburbs tended to commit more criminal offenses than those who moved within the city. Housing policy is one lever to assist poor families by moving them into better neighborhoods with better schools and labor markets. The initial gains in neighborhood quality that many of the Gautreaux families achieved persisted for at least one to two decades. The Gautreaux findings suggest that it is possible for low-income black families to make permanent escapes from neighborhoods with concentrated racial segregation, crime, and poverty and that these moves are associated with large significant gains in education, employment, and racially integrated friendships, particularly for children. 3

4 Additional Recent Research Owens, A. (2017). How Do People-Based Housing Policies Affect People (and Place)? Housing Policy Debate, 17(2), Anderson, F., Haltiwanger, J.C., Kutzbach, M.J., Palloni, G.E., Pollakowski, H.O., Weinberg, D.H. (2016). Childhood Housing and Adult Earnings: A Between- Siblings Analysis of Housing Vouchers and Public Housing. National Bureau of Economic Research. Sharkey, P. (2016) Neighborhoods, Cities and Economic Mobility. The Russel Sage Foundation Journal of the Social Sciences. 2(2), Ewing, R., Hamidi, S., Grace, J.B., Wei, Y.D. (2016). Does urban sprawl hold down upward mobility? Landscape and Urban Planning 148(2016), Rothwell, J.T.; Massey, D.S. (2014). Geographic Effects on Intergenerational Income Mobility. Economic Geography 91(1), Massey, D. S., Albright, L., Casciano, R., Derickson, E., & Kinsey, D. N. (2013). Climbing Mount Laurel: The struggle for affordable housing and social mobility in an American suburb. Princeton University Press. Rohe, W., Linblad, M. (2013). Reexamining the Social Benefits of Homeownership after the Housing Crisis. Joint Center for Housing Studies. Herbert, C.E., McCue, D.T., Sanchez-Moyano, R. (2013) Is Homeownership Still and Effective Means of Building Wealth for Low-Income and Minority Households? (Was it Ever?) Joint Center for Housing Studies. Freeman, A., Ratcliffe, J. (2012) Setting the Record Straight on Affordable Homeownership. Center for Community Capital, UNC. Grinstein-Weiss, M., Key, C., Guo, S., Yeo, Y.H., Holub, K. (2011) Homeownership and Wealth Among Low and Moderate Income Households. Center for Community Capital, UNC. Mendenhall, R., DeLuca, S., & Duncan, G. (2006). Neighborhood resources, racial segregation, and economic mobility: Results from the Gautreaux program. Social Science Research, 35(4),

5 Quick Facts from 2016 Census American Community Survey on the Relationship Between Economic Wellbeing and Housing 1 NOTE: The tables below present variation in homeownership rates, income and wealth accumulation across different age groups and housing tenure. The focus on wealth is based on the observed connection between homeownership and wealth accumulation. As the studies reviewed suggest there are positive gains to be had from moving into opportunity rich communities for renters in terms of educational attainment, employment and income. However, homeownership remains the primary wealth accumulation vehicle for the vast majority of Americans, as seen in the tables below. Year Homeownership Rate Age of Householder Less than % 35.5% 61.9% 71.7% 77.9% 81.1% 75.7% % 32.6% 58.6% 69.9% 76.5% 80.7% 76.3% % 32.0% 56.9% 68.4% 75.2% 79.7% 76.1% % 32.2% 56.4% 68.1% 74.7% 79.4% 75.9% % 33.6% 57.5% 68.5% 74.8% 79.7% 76.5% ( ) -2.3% -5.4% -7.1% -4.5% -3.9% -1.7% 1.1% Year Homeownership Rate Household Income as % of Level ($55,322 in 2016) Below 50% % % Over 150% % 42.2% 60.3% 72.5% 85.3% % 41.2% 59.2% 71.1% 83.5% % 40.9% 58.0% 69.3% 82.5% % 41.2% 56.5% 68.0% 81.3% ( ) -3.5% -2.4% -6.3% -6.2% -4.7% 1 Homeownership and Income data come American Community Survey and Reinvestment Fund computations of ACS 1-Year PUMS samples - Wealth data come from the Federal Reserve Survey of Consumer Finances - 5

6 Family Income (2016 Dollars, 1,000s) Net Worth (2016 Dollars, 1,000s) Year All Families Owners Renters All Families Owners Renters 2001 $54.10 $70.60 $33.40 $ $ $ $55.00 $70.20 $31.30 $ $ $ $54.80 $71.50 $32.20 $ $ $ $50.60 $65.80 $28.80 $85.40 $ $ $48.10 $65.30 $28.70 $83.70 $ $ $52.70 $71.20 $31.60 $97.30 $ $ % 0.8% -5.4% -17.1% -1.0% -23.1% 9.6% 9.0% 10.1% 16.2% 14.8% -9.1% % of Families Having Stock Ownership, Direct or Indirect Ratio of Debt Payments to Family Income Year All Families Owners Renters All Families Owners Renters % 63.2% 31.5% % 61.0% 26.5% % 64.6% 28.1% % 61.3% 26.3% % 60.0% 28.0% % 64.6% 29.6% Percent Change -2.1% 2.2% -6.0% -16.3% -15.8% -9.5% Percent Change 6.4% 7.7% 5.7% -10.0% -10.7% 1.5% 6

7 Family Income by Age of Head of Household (2016 Dollars, 1,000s) Year Less than $45.30 $69.70 $73.90 $61.30 $37.60 $ $41.80 $63.60 $77.70 $69.20 $42.40 $ $43.30 $65.50 $74.30 $63.20 $45.10 $ $38.80 $59.50 $67.40 $60.90 $47.20 $ $36.40 $62.80 $62.80 $56.80 $47.40 $ $40.50 $65.80 $69.50 $61.00 $50.10 $ % -5.6% -6.0% -0.5% 33.2% 32.0% 11.3% 4.8% 10.7% 7.4% 5.7% 36.1% Net Worth by Percentile of Income (2016 Dollars, 1,000s) Year Less than 35% 35 44% 45 54% 55 64% 65 74% 75% or more 2001 $15.90 $ $ $ $ $ $18.00 $88.30 $ $ $ $ $13.70 $ $ $ $ $ $10.30 $46.60 $ $ $ $ $10.70 $48.20 $ $ $ $ $11.00 $59.80 $ $ $ $ % -43.1% -31.9% -25.4% -7.3% 25.9% 2.8% 24.1% 14.4% 9.5% -6.6% 31.9% 7