The following is an excerpt from the recently-released RPA report.


Key Facts:

  • Much of America’s poor live in low-rise neighborhoods in older urban areas and inner suburbs, where the finance rules discourage rehabilitation and otherwise work at cross-purposes with federal and local initiatives designed to break the cycle of disinvestment.
  • Increasing suburban poverty and worsening gentrification in some areas also argue for greater flexibility to encourage construction and renovation of mixed-income housing.
  • The 2015 decision by the Supreme Court upholding the government’s obligation to affirmatively further fair housing when policies result in disparate impacts underscores the need to remove these impediments. 

While the most common image of poverty is a high-rise public housing project, in fact many of America’s poor live in the very type of neighborhood where investment is impeded by current financing regulations. These are the neighborhoods with three and four story buildings, many with ground floor retail uses that predominate in many cities and in older, inner ring suburbs. The rapid growth in suburban poverty is hitting many of these former streetcar communities or older downtowns outside of the urban core. Limiting investment in these communities reinforces poverty in two ways. It reinforces a cycle of disinvestment that leads to deteriorating housing stock, fewer jobs, higher crime and worse schools. And by limiting supply and adding cost to what is built, it also puts greater pressure on housing prices in walkable communities with changing demographics.

Neighborhoods that are walkable are often not affordable.  Not developing more affordable housing within denser, urban communities that are in high demand will result in higher rents and further displacement of lower income individuals from increasingly desirable, mixed-use urban communities. Recent analysis shows that gentrification is accelerating, with 20 percent of low income, low property value census tracts gentrifying since 2000, while only 9 percent gentrified between 1990 and 2000.  Part of the answer is to increase supply in mixed-use walkable communities to put demand and supply in better balance. Less restrictive  financing can also make it possible to provide housing at a wider range of price points. There will still be a need for subsidies to preserve and upgrade existing low-income housing and protect tenants, but making it easier to accommodate market demand also provides more opportunity for cross-subsidizing below market rents. And the majority of poor households receive no subsidy at all. Of households living below the poverty line, 70 percent do not live in housing units that benefit from Section 8 or Low Income Housing Tax Credits .

America’s poor urban neighborhoods need investment

While the risk of displacing low-income residents through new investment is real, continued disinvestment is worse for these populations. Bringing new development, and therefore a mix of incomes to these struggling urban and suburban downtowns can, in theory, increase school performance, revitalize public space, and increase investment in shops, restaurants and other amenities and services.  Despite recent suggestions that cities are once again desirable and not as distressed as they were, there has been an increase in the number and geographic coverage of high-poverty neighborhoods since 2000. This can largely be attributed in part to the continuing expansion of suburban development, which has been pulling investment out of weak market cities.  Poverty is also increasing most rapidly in the suburbs, especially in older, inner ring suburbs. A large proportion of these high-poverty neighborhoods are located in low-rise, mixed use areas, yet current housing regulations largely prevent investment in these locations.  

Photo by Brett VA

Photo by Brett VA

These neighborhoods have the physical characteristics to attract new development. But sustainable urban form does not necessarily correlate with higher opportunity; many places with higher density, higher land use entropy, and access to transit have lower job access, lower school performance, and higher crime rates.  However, attracting market rate development can provide a mix of incomes, jobs, and services in these areas that could potentially improve access to opportunity. Mixed-use developments can expand the tax base within a municipality, increasing the resources available to increase the quality of education and other assets to improve opportunity and quality of life.

The 2015 Supreme Court ruling and HUD rules on fair housing reinforce the need to reform financing rules.  

The June 25, 2015 decision by the Supreme Court in Texas Department of Housing and Community Affairs v. Inclusive Communities Project upheld the government’s obligation  to affirmatively further fair housing when policies result in disparate impacts, even if there was no explicit discriminatory intent. Final HUD rules issued in July 2015 provide guidance and tools to states and localities for meeting these obligations. These highlight the need to both break the cycle of disinvestment in racially-concentrated areas of poverty and to expand the amount of affordable housing in areas with good schools and other opportunities. Reforming financing rules to make it easier to finance mixed-use development will remove an impediment to investment that can help achieve both of these goals. 

(Top photo by Ken Lund)


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