Neighborhood Quality and Racial Segregation

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

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Most voucher households in the Chicago region live in mid- to high-poverty, racially segregated neighborhoods. Whether households choose to live in high-poverty racially segregated neighborhoods or are constrained to living in these neighborhoods is unclear and difficult to examine. For example, voucher holders may choose to live in higher-poverty neighborhoods because of job proximity or social ties. Conversely, voucher holders may be constrained to certain neighborhoods because of racial discrimination in the housing market and policies inherent to the voucher program that make residential mobility difficult.

One hypothesis is that voucher participants tend to lease units in higher-poverty, racially segregated neighborhoods because the units in these neighborhoods meet program rent level requirements and landlords are willing to rent to voucher holders (Turner, Popkin, and Cunningham 2000). To lease a unit under the Housing Choice Voucher Program, eligible households must find a unit at or below the local payment standard.¹ Payment standards are set by local housing authorities and can range between 90 and 110 percent of HUD's Fair Market Rent (FMR), which is based on rent levels in the local housing market.² Finding a unit at or below the local payment standard can be difficult in tight markets where landlords can lease their apartments for rents above the FMR. Further, finding a unit at or below the FMR only means the unit meets the program guidelines; it does not mean the unit will be rented to the voucher household. That depends on the willingness of the landlord to accept the voucher and the tenant.

The level of difficulty in finding a unit with a voucher varies by city and region. Voucher success rates depend on several factors, including efficient program management and how tight the rental market is. The tighter the rental market, the more difficult it is for a voucher household to find a unit and a landlord willing to accept the voucher.

In Chicago, the housing market was tight in the late 1990s, with vacancy rates below 4 percent in 1999 (Great Cities Institute 1999). The market has loosened somewhat over the past few years, with recent vacancy rates at 6 percent citywide (Red Capitol Group 2005). It should therefore, be less difficult for voucher households to find a unit today than it was five years ago. Lease-up success rates, which were higher in 2001 than they were in 1999 (around 90 percent versus 70 percent) suggest this is true.³ However, a looser rental market does not necessary mean voucher holders are ending up in better neighborhoods; it may simply mean it is easier for them to find units in the same poor communities where most voucher holders live.

In three papers commissioned by the Chicago Area Fair Housing Alliance, Paul Fischer (2001, 2003, 2004) completed an extensive geographical analysis of the locations of voucher households and below-FMR units. He consistently found that voucher households are located in predominantly black, mid- to high-poverty neighborhoods. Our own analysis of data from CHAC, Inc., which administers Chicago's Housing Choice Voucher Program, shows that about 55 percent of voucher holders live in mid- to high-poverty neighborhoods and the remaining live in neighborhoods that are less than 23.49 percent poor, which is the standard for an "opportunity neighborhood." Further, voucher households generally live in racially segregated neighborhoods, with 63 percent living in neighborhoods that are more than 90 percent black.

However, these data provide only a limited picture of what these neighborhoods and conditions are like for residents. For example, while we know poverty rates and racial makeup, we know little about other dimensions of neighborhood quality, such as school quality, crime rates, and the characteristics of neighborhood residents. In this brief, we expand on Fischer's and our earlier work by examining additional measures of neighborhood quality where voucher households currently reside and looking at the quality of neighborhoods affordable to voucher households under program guidelines.

Notes from this section of the report

1. Provisions in the Quality Housing and Work Responsibility Act of 1999 allow households to rent above the payment standard as long as the total rent burden does not exceed 40 percent.

2. Housing authorities are required to conduct market surveys to determine reasonable rents for voucher units. These surveys determine rent reasonableness by comparing the "rents being charged for comparable unassisted units; and not more than rents currently being charged by the same owner for comparable units."

3. According to CHAC, Inc., the contractor that administers the Housing Choice Voucher Program in Chicago, lease-up success rates in 1999 for voucher participants coming off the waiting list averaged 70 percent. In 2001 rates increased significantly to an average of 95 percent.

Note: This report is available in its entirety in the Portable Document Format (PDF). (File Size: 9 MB)

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