Urban Wire How housing matters for economic mobility
John McGinty, Pamela Blumenthal
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Increasing income inequality and stagnant rates of economic mobility have called into question the promise of equal opportunity and the plausibility of the American Dream. Forty-three percent of individuals born into the lowest 20 percent of the income distribution (the bottom quintile) remain there the rest of their lives, earning $11,490 per year on average. Seventy percent never reach the middle quintile. 

Black Americans have a particularly difficult time getting ahead; they are more likely to be born into the bottom income quintile (65 percent vs. 11 percent of whites) and less likely to escape the bottom rung (47 percent compared with 67 percent of whites).

As politicians, researchers, and others discuss inequality, equal opportunity, and upward mobility, we need to move the conversation beyond education and employment and consider the central role housing plays.

Why housing and neighborhoods matter

Not only is part of the American Dream to have a home of one’s own, but stable, affordable housing is central to individuals’ and families’ well-being. It plays a critical role in people’s lives—as a major consumption item, a source of safety and stability, the place where one pursues education or employment, and a nationally encouraged means for accumulating wealth.

And where families live can directly influence the educational, employment, and other resources to which they have access. The Great Recession was a reminder that housing not only supports upward mobility, but can cause downward mobility as well.

Effective housing policy can provide low-income people with ladders of opportunity to the middle class and the necessary safety nets to withstand financial shocks. The Urban Institute, with support from the John D. and Catherine T. MacArthur Foundation, hosted a roundtable in early April to discuss these topics in depth and explore how housing policy can promote economic mobility (check out our recent Urban.org policy debate to explore some of the ideas shared at the convening).

Unfortunately, many current federal, state, and local housing policies in the United States impede mobility. Exclusionary zoning, predatory mortgage lending practices, and numerous tax policies have restricted movement, limited choice, and sustained economic and racial segregation.

Pat Sharkey’s research shows low-income individuals, particularly minorities, are inheriting the disadvantaged neighborhoods in which their parents lived. These neighborhoods suffer from disinvestment, low-performing schools, violence, and reduced financial, social, and human capital.

Going a step further

Local variation in economic mobility extends beyond neighborhoods to cities and commuting zones. The odds of a child raised in the bottom income quintile rising to the top in San Jose, CA are 12.9 percent, but only 4.4 percent for a child in Charlotte, NC. These geographic differences are correlated with income segregation, income inequality, local school quality, social capital, and family structure, many of which tie back to the importance of place and stable, affordable housing.

Policymakers, researchers, and practitioners all need to explore more deeply how federal, state, and local actors can best work together to promote economic mobility. Current calls to restructure the federal mortgage interest deduction to better support low- and moderate-income homeowners and to use the additional federal resources to provide rental assistance present promising pathways.

Small area fair market rents, by which payment levels are established at the zip code rather than metropolitan level, can avoid over-subsidizing units in high-poverty neighborhoods and give families more ability to afford units in low-poverty neighborhoods. We have models from recent disaster recovery efforts and the Strong Cities Strong Communities initiative to inform more effective use of federal resources to improve communities. 

While we have much more to learn, efforts to promote economic mobility, particularly among low-income families and families of color, must recognize housing as a critical tool in the policy toolbox.

The Assisted Housing Initiative is a project of the Urban Institute, made possible by support from Housing Authority Insurance, Inc. (HAI, Inc.), to provide fact-based analysis about public and assisted housing. The Urban Institute is a non-profit, nonpartisan research organization and retains independent and exclusive control over substance and quality of any Assisted Housing Initiative products. The views expressed in this and other Assisted Housing Initiative commentaries are those of the authors and should not be attributed to the Urban Institute or HAI, Inc.


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Research Areas Neighborhoods, cities, and metros
Tags Inequality and mobility
Policy Centers Research to Action Lab