A MetroTrends Map: How Racial Segregation Changed from 1970 to 2010

| Posted: April 17th, 2013

Recently, Sophie Litschwartz found that many of our larger metro areas with large black populations are only slightly more integrated than they were a few decades ago. Meanwhile, smaller metros with small black populations have been integrating at a much more rapid pace. Why this is occurring remains a mystery.

To evaluate metro segregation levels, Sophie calculated a commonly used measure called a dissimilarity index, which rates neighborhoods from 0 (complete integration) to 100 (complete segregation). To better illustrate what these scores mean, I’ve put together an interactive map that covers the 268 metros in our study (and rural areas as well).

View the full-screen map here

The map shows how black-white segregation levels have changed over time. What do New York’s stagnating scores of 75.0 in 1970 and 76.4 in 2010 look like? What does progress in a more integrated Washington, D.C., (80.3 in 1970 to 60.1 in 2010) look like? To find out, explore the map above.

This analysis is based on the neighborhood change database (NCDB). Note that the database does not contain data for all census tracts in 1970 because it does not provide data for “untracted” areas.

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Housing experts advise Congress to act now to help FHA protect taxpayers, saving big-picture debates for later

| Posted: April 11th, 2013

Amid the partisan rancor surrounding the release of President Obama’s 10-year budget this week, one issue stood out as a promising area of consensus from lawmakers across the aisle: the need to act now to enable the Federal Housing Administration to protect taxpayers from risk.

At Thursday’s House Financial Services Subcommittee on Housing and Insurance hearing on the future of the FHA, Democrat and Republican committee members heard from Urban Institute President Sarah Rosen Wartell and other expert witnesses. The message? Act swiftly on legislative proposals that would help FHA more nimbly and effectively mitigate losses from insured loans, and deal with complicated, more contentious questions about the agency’s mission when reform is more feasible.

By insuring mortgages, FHA provides access to credit for borrowers underserved by the private market. The agency experienced significant losses from loans that originated in the midst of the crisis. While its financial situation is improving, an actuarial review released in November showed that its fund was underwater by over $16 billion, raising concerns about its solvency.

The FHA Fund has experienced losses that resulted primarily from loans originated in the years immediately preceding the housing market crash. Default rates for loans originated after 2008 are significantly lower.

While some have suggested that FHA must revise its mission to be sustainable in the long term, the panel of witnesses at the hearing, including industry representatives and research experts, agreed that some steps can be taken immediately to improve the agency’s financial condition. However, some witnesses emphasized that the current attention on FHA presents an important opportunity to improve the housing finance system and national housing policy, and urged policymakers to assess changes to FHA within the broader context of GSE to whatever extent possible.

Wartell suggested increasing FHA’s authority and resources to assess and mitigate risk through expanded emergency powers and greater use of early warning indicators. She also stressed the need for pilot programs to test the costs and benefits of risksharing with private mortgage insurers. Risksharing could reduce FHA’s and the taxpayer’s exposure while allowing FHA to continue serving as a critical countercyclical force—a backstop for the housing market—in times of crisis.

Not only did these proposals enjoy support from the committee members and witnesses, but some of them have been voted on by Congress before with widespread support from both parties. The FHA Emergency Solvency Act of 2012, which passed the House 402–7 but died in the Senate, would have hastened FHA’s ability to stop irresponsible underwriting from lenders and restored the agency’s fiscal solvency. The hearing’s expert witnesses agreed that the legislation must be revisited.

Most important, Wartell insisted, lawmakers must not hold off needed improvements to FHA while waiting to resolve broader questions about where the agency fits in the bigger picture of U.S. housing finance policy.

Future reforms of Fannie Mae and Freddie Mac, which are both currently in conservatorship of the Federal Housing Finance Agency, will almost certainly affect the role and scope of FHA. And those reforms will offer an opportunity to streamline the U.S. housing finance system, currently a fractured collection of agencies and policies.

While these are indeed important questions to debate moving forward, Wartell told the committee not to hold off on improvements to FHA now.

“If you choose to delay these measures while Congress debates broader mission questions and the system as a whole, the FHA Fund will continue to absorb available losses,” she said. “There is no reason to wait to protect taxpayers from those preventable costs.”

Note: this post has been edited to account for nuances in the range of opinions presented at the panel discussion.

Photo by Flickr user, Cameron Rogers, used under a Creative Commons license. (CC BY-NC-SA 2.0)

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25 Years of Working with Chicago Public Housing: A History of Reform

| Posted: March 13th, 2013

Note: This is the third in a series of blog posts from Sue Popkin on her long history working with the Chicago Housing Authority (CHA) and the results of a ten-year study  on the experiences of CHA families as they were relocated and their buildings were demolished and replaced with new, mixed-income housing.

Chicago Housing Authority's Old Ida B. Wells Homes and new Oakwood Shores Mixed Income Development. Photo by Flicker user Zo187 used under Creative Common license (CC BY-NC-SA 2.0)

As noted in my previous posts, I first came to the Chicago Housing Authority in the mid-1980s as a graduate student working on my dissertation. I went in and out of CHA developments during that first spring, each time more convinced that these communities were so troubled that they were undermining the life chances of their residents.

Getting Away from the Shootings and Violence

When I finished my PhD, I had the opportunity to become the research director for several studies examining the Gautreaux housing desegregation program, which provided vouchers for current and former CHA residents to move to areas that were less than 30 percent African American. In practice, that meant most moved to the suburbs around Chicago, while a smaller number were allowed to use their vouchers in “revitalizing areas” of the city.

The study is famous for its findings that suburban movers ended up more likely to be employed and their children seemed to do better in school. But what struck me was the fact that the women we spoke to—some of whom had left CHA more than 10 years earlier—still talked about how glad they were to feel safe, to get away from the shootings and violence that had taken over CHA’s communities.

“The Sweeps”

In the late 1980s, the CHA began an intensive anti-crime effort. The most controversial component was what the agency called “the sweeps,” where CHA police and staff would literally shut down a building, go door to door checking for weapons, drugs, and illegal residents, install steel security doors and guard booths, and issue every resident an ID.

In 1992, I responded to a request from the CHA to evaluate their anti-drug initiative. That small project evolved into a seven-year study that tracked residents’ responses to the agency’s efforts to control crime and gang violence.

We watched as the CHA spent nearly $500 million on state-of-the art anti-crime initiatives that ultimately proved futile as the chaos and violence overwhelmed the combined efforts of police, security guards, and resident activists. By 1998, one of the most effective resident leaders we’d come to know told us that she was so distressed by the violence overtaking her development that she was chain smoking and had to take medication to “calm her nerves.”

Address Chronic Violence through Redevelopment

Toward the end of our research, the CHA began its first major demolition and revitalization efforts in the Henry Horner Homes—one of the three developments we’d been tracking. While residents were distressed about losing their community, for the first time, they saw real and sustained reductions in crime and disorder

We concluded that, sadly, the only way to address the chronic violence and chaos was to demolish the large developments and replace them with new housing. But we also wondered if the residents who had endured the worst days of CHA would really end up better off. It seemed unlikely they would meet the criteria for new, mixed-income housing, and there was a real possibility that this new effort would just be one more blow for these already-vulnerable families.

But the study we released this week shows that many of those fears were unfounded. Instead, residents are now far better off than they were.

Some of our findings:

• The majority of residents now live in decent housing in neighborhoods where they feel substantially safer.
• Those who live in the CHA’s remaining rehabilitated developments report better conditions than those who are renting private-market units with vouchers—a finding that speaks to the CHA’s investment and to the variability of its now very large (more than 36,000 unit) voucher program.
• Most exciting is that Demonstration participants’ mental and physical health has improved significantly and their employment gains have held.

But along with this good news are reasons for concern:

• Though their parents are doing better, children and youth continue to struggle.
• Voucher holders report trouble managing utility costs.

While residents’ new neighborhoods are better than the old CHA developments, most are still racially segregated and poor.

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Expanding Housing Choice for Voucher Holders? A New Toolkit Guides the Way

| Posted: March 13th, 2013

Photo by Flicker user City of Edmonton used under Creative Common license (CC BY-NC-SA 2.0)

Housing choice vouchers are intended to give low-income households more options in picking where they want to live, but research shows that significant shares of recipients still live in distressed, high poverty neighborhoods. Housing mobility programs can help voucher households access housing in better neighborhoods.

From research, we know that living in poor, segregated neighborhoods such as these has negative consequences for many outcomes, including health and safety. Improving these neighborhoods to make them more livable places is certainly important; however, those who want to move may need help fully realizing their housing choices. We can enable low-income households by providing them with quality information about neighborhood and housing options and equipping them with tools to help them overcome barriers to leasing an apartment in the private rental market. Housing mobility programs—offered by public housing agencies, community-based not-for-profit groups, fair housing advocacy and enforcement organizations, government agencies, private for-profit companies, and various combinations of these groups—help fulfill this critical role.

To help foster the development of housing mobility programs, the Urban Institute, with the Poverty & Race Research Action Council, Quadel Consulting, and the Center on Budget and Policy Priorities, has recently published Expanding Choice: Practical Strategies for Building a Successful Housing Mobility Program, a toolkit to guide local organizations through the process of designing and implementing a housing mobility program.

This toolkit grew out of an all-day knowledge-sharing session that started last year’s Fifth National Conference on Assisted Housing Mobility. Intended for a range of organizations, this toolkit draws on the best available research and model programs across the country to walk the reader through a series of considerations.

For example, the toolkit outlines how to adjust the local area’s current housing choice voucher program to better promote housing mobility, how to think about key design questions like defining target populations and identifying target neighborhoods, how the program will serve clients, and how the program will measure its success. Further, the toolkit takes into account the current fiscal climate by highlighting strategies that can be implemented at low cost to the organization and recommends potential ways to fund a housing mobility program.

By synthesizing these core elements into a single guide, this toolkit can serve as an instrumental resource for local organizations as they advance housing choice for families in their communities.

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25 Years of Working with Chicago Public Housing: Personal Stories

| Posted: March 12th, 2013

Note: This is the second in a series of blog posts from Sue Popkin on her long history working with the Chicago Housing Authority (CHA) and the results of a ten-year study on the experiences of CHA families as they were relocated and their buildings were demolished and replaced with new, mixed-income housing.

Photo by Megan Gallagher, Urban Institute

As noted in my last post, I first came to the Chicago Housing Authority in the mid-1980s as a graduate student working on my dissertation, and I’ve been deeply involved in studying the CHA’s policies, and their effects on its residents, ever since. Most recently, my colleagues and I finished a ten-year study on the authority’s ambitious Plan for Transformation.

We found that while the redevelopment projects had mixed results for residents, behind the research were stories of gains and challenges.

Families Making Their Way

We’ve followed one mother and daughter from their days of misery in the Ida Wells Homes—where the mother complained about drug users being so thick in the hallways that she couldn’t get to her own door—to their new home in one of the mixed-income developments.

The mother has been working more or less steadily since the move; the daughter, now 20, has a baby of her own and is working and going to college. Their apartment is safe and clean, and there are no drug dealers in the halls—all of which mean better odds for the baby as she grows.

Another mother we spoke to over the years moved to the private market with her two sons. She told me that although she’d always worked, moving out with a voucher made her take real responsibility; she now had to pay her share of the rent reliably and couldn’t “take a break” when she felt like it.

She was proud that she was now paying more than $600 a month in rent, and both of her boys were attending private school. The last time we saw them, her older son had dropped out and was struggling, but her younger son seemed on track to finish high school and go on to college

Finally, we got to know a grandfather who was raising several of his grandchildren in Wells (his daughter was a drug addict who was unable to care for them). When I first met his granddaughter, she was 16 and involved in a gang, though still managing to do well in school.

The family first moved into mixed-income housing, but when the grandfather lost his job, they moved again to a rehabbed CHA development. In 2011, the granddaughter, now 20, had a child of her own, but was going to college and seemed to be doing well.

A need for Intensive Support

We also got to know families with challenges so severe that it seems like they will need intensive support indefinitely:

• an older father with an addiction problem raising an autistic son;
• a mother with a violent history and severe depression, raising a son who is becoming lost to the streets and a daughter facing sexual pressures and her own depression; and
• a single woman who has lost custody of her child because of her addiction and faces such severe health problems that she cannot hold even a part-time job.

These stories tell us that although life for CHA residents has improved tremendously since my first visit, the residents who endured the worst days still need our help to overcome the trauma and damage of living in chronic violence.

We need to ensure that they and their children have the opportunity to live in safe places that are safe, provide decent housing, and offer a better life chance. And we need to make sure that the significant investment the CHA—and the federal government—has made in helping that happen is sustained.

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Protecting the Future of Affordable Housing by Strengthening the FHA

| Posted: March 1st, 2013

The Federal Housing Administration (FHA), which insures mortgages to help underserved borrowers, is still feeling the sting of the foreclosure crisis. The agency has lost money on troubled loans, particularly those that originated in 2008 and 2009 during the housing bust. Because of these losses, the FHA does not have enough in its insurance fund to cover all expected claims over the next 30 years, according to its November actuarial report. But the agency is still strong and still has a crucial mission to carry out. So, what should be done to get FHA’s finances back in order and prevent unnecessary losses in the future?

Enabling the agency to better manage, price, and mitigate risk would help, Urban Institute President Sarah Rosen Wartell advised Thursday in her testimony before the Senate Committee on Banking, Housing and Urban Affairs.

Wartell proposed innovative strategies to allow FHA to respond effectively to rapidly changing market conditions. She noted that, unlike private mortgage insurers, FHA’s ability to mitigate risk is constrained by complicated rulemaking and legislative processes. For example, for three years, the agency has been trying to strengthen the indemnification process, which requires congressional approval of two key authorities: to force lenders whose loans do not meet agency guidelines to reimburse taxpayers for the cost of those claims, and to immediately stop known irresponsible lenders from originating FHA-insured loans. Despite near consensus among experts about the need for these additional authorities, FHA has had to continue insuring excessively risky loans without collecting appropriate penalties as it awaits required input from Congress.

Wartell’s recommendations included granting the HUD secretary emergency powers, subject to congressional oversight, to suspend or modify FHA insurance programs in times of crisis to quickly avert these risks. Additionally, she called for directing the HUD secretary to develop and continuously improve early warning indicators of risk and allowing FHA to offer higher salaries to recruit talented staff that can develop and run analytical and risk management systems.

While Wartell’s testimony offered concrete proposals, policymakers are sure to encounter more questions as they consider how to address FHA’s challenges: What does FHA look like in the context of broader housing finance system reform? How will changes to FHA’s practices affect private insurers’ market share? And most important, how can FHA best improve its financial situation while continuing to provide underserved borrowers with access to credit and serving as a countercyclical force in times of crisis? The next few months will be critical for the future of American housing.

The Urban Institute is partnering with Next City, Bank of America, the Penn Institute for Urban Research, and the National Building Museum for a panel discussion on “The Future of the FHA and Affordable Housing in Cities.” Sarah Rosen Wartell and other key leaders in housing, lending, real estate, and government will discuss the future of housing policy by examining the FHA’s role.

To learn more about housing finance system reforms, see the Bipartisan Policy Center’s Housing Commission report, which outlines a possible blueprint for changes.

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Yes, Mayor Gray, It’s time for a Prosperity Dividend for the District

| Posted: February 14th, 2013

Homeless man sleeping in John Marshall Park, NW Washington, DC. Photo by: Flickr users rjs 1322 used under a Creative Commons License (cc-by-sa 2.0)

It is difficult to reconcile the recent reports of 600 children living in improvised shelters in abandoned DC General Hospital buildings with the District’s year-end surplus of $400 million.  As someone who has studied the lack of affordable housing in DC for more than a decade, I agree with Mayor Gray: it’s time to pay out a "prosperity dividend."

Living in a resilient, booming city has meant great things for middle- and upper-income DC residents: ramen on H Street, oysters at Union Market, ice-skating at Canal Park, and events at Living Social. New amenities like these have made the city more attractive. People want to live and play in DC, and they are buying houses in Bloomingdale, Hill East, Trinidad, and along H Street.

At the same time, the city’s prosperity has put pressure—in the form of rising rents—on its poorest families. Most are rent burdened, so even a minor fluctuation in salary or benefits puts their housing at risk. The result: homelessness among families in DC has steadily risen every year for the past five (increasing 72 percent during that time). Stimulus programs that helped slow the rise, like the Homelessness Prevention and Rapid Rehousing Program (HPRP), are long gone.

The Washington Post’s picture of two adorable babies sharing a stroller to keep warm is likely to pull on some heartstrings—and it should. However, budget-minded policymakers should also know that the temporary option isn’t necessarily the cheapest option.  Shelters can cost significantly more than subsidizing rent. (See this HUD study.) Some homeless families languish in shelter and transitional housing for months, or even years, a very costly response. So the lack of action is not only morally repugnant; it is bad policy.

In his state of the city address, Mayor Gray announced a $100 million commitment to affordable housing. It is unclear what he plans to do with those funds, since his office has yet to share any formal strategy. If the mayor wants to help the 600 children and their families living in DC General, along with other homeless families throughout the city, here is where he should put the money:

• $10 million for a new Homelessness Prevention and Rapid Rehousing Program (HPRP). During the recession, HPRP provided DC $7.5 million from the federal government to fund housing and supportive services. The program ended in September 2012, leaving an enormous gap to fill. This model is critical for helping families pay the rent and avoid long, costly stays in the shelter system.
• $40 million for the Local Rent Supplement Program. This established program, which operates similarly to the housing voucher program, is ready to provide subsidies to families so they can rent housing in the private market. All it needs is more money. For the past several years, funding for local rent supplements has hovered between $12 and $19 million and has served only a fraction of the need.

• $50 million for the Housing Production Trust Fund. In recent years, the Housing Trust Fund has been an unstable source for affordable housing preservation and production. It is time to shore up resources, set preservation and production goals, and build capacity among nonprofit housing developers, especially ones that develop permanent supportive housing for poor, disabled families and veterans.

A surplus of this size leaves no excuse. It is time to act.

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No Such Thing as "Low-Income Housing"

| Posted: February 1st, 2013

Bad terminology can create bad policy. Nowhere is this more evident than in housing policy. The best example is the use of the term “low-income housing.” Though widely used, there is no such thing as low-income housing in the sense that a physical place is inextricably linked only to residents with low incomes. Of course, some housing is commonly rented or bought by low-income families. But just because low-income families commonly purchase certain cars and buy meals at certain restaurants, we do not call those things “low-income cars” or “low-income restaurants.” Rather, it is the low price of housing, cars, and other goods that attracts low-income families.

So what, you might ask? Low price, low income, what’s the difference? Importantly, this semantic error affects the thinking and actions of policy advocates and government officials. Instead of providing low-income families with more purchasing power to obtain housing, too often policymakers attempt to subsidize and wall off certain houses and apartments for the poor and near poor. Public housing is one example. The government provides subsidies for building and maintaining specific places limited to people with low incomes. Other programs also subsidize particular homes and apartments and restrict them for use only by low-income or lower-middle-income households.

This approach is problematic. First, subsidies tied to specific “low-income” homes substantially restrict where recipients can live, and what’s available may be a poor choice for their families. Second, the cost of subsidizing construction programs is higher than the cost of boosting people’s purchasing power to rent or buy their own dwellings, even assuming the construction units last at least 30 years. For both reasons, the government’s cost is often far higher than the recipient’s benefit.

Even the much-vaunted low-income housing tax credit, endorsed strongly by the New York Times editorial board, is costly and does little to expand housing supply. The tax credit aims to encourage developers to invest in affordable housing. They sell the credits to investors, lowering the amount they need to borrow to build or fix up property. But developers generally sell their tax credits at a discount, leaving them with only about 70-75 percent of the government subsidy. To advocates of these programs, the subsidies add to the stock of “affordable” housing. But, as research has shown, the added housing financed by government is largely or completely offset by less private-financed housing.

Further, the families benefiting from the low-income housing tax credit often have incomes well above the poverty line, while many families with far lower incomes receive no subsidy. It is not even clear that significant rent savings accrue because the rents charged for reserved “low-income” housing are often well in the range of market rents.

In unusual situations, stimulating production of low-cost housing may be worthwhile because it benefits the neighborhood or gets around regulations that restrict low-priced units. But pushing for more subsidized “low-income housing” on grounds of too few affordable places can be inefficient, particularly when home prices have fallen dramatically and large numbers of existing homes are vacant. Instead, raising the purchasing power of low-income families offers a better deal for them and for the government than encouraging new construction through tax credits.

The issue is hardly academic—today, 30 percent or fewer households eligible for housing subsidies actually receive one. So any savings can be critical in extending benefits to more low-income families.

By shifting from construction incentives to rent vouchers, the government can save 20 percent or more on its current housing outlays, meaning it could offer vouchers to many more low-income families at the same costs. Moreover, as shown elsewhere, if the new vouchers emphasized homeownership instead of renting, the government’s costs would be even lower—which could mean even more available vouchers and more families covered by subsidized housing. That’s quite a benefit from thinking more clearly about the housing of low-income families!

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Location and Inequality: Are the Income Gaps Real?

| Posted: December 6th, 2012

Debates about income inequality and the shrinking middle class have largely focused on globalization, the declining share of middle-wage jobs, the eroding role of unions, technological change that benefits more educated workers, tax policies, and the share of income going to the top 1 percent. Often ignored is the question of whether we’re really measuring inequality accurately.  Do standard measures of money income really capture inequalities in living standards?  Not really.  Because of differences in living costs across communities, higher incomes don’t necessarily translate into higher living standards.  Housing costs reduce purchasing power in some communities more than in others.  At the same time, income gaps can become more pronounced when low-wage workers are discouraged from moving to areas with high housing costs.  Where people live, it turns out, matters a lot in measuring and accounting for the inequality of living standards.

Analysts of poverty trends have long recognized that cash income does not tell the whole story, since it ignores the importance of noncash public benefits, such as food stamps, housing assistance, and health coverage. Indeed, the Census Bureau is now taking into account noncash benefits and differences in housing costs when measuring poverty. Recently, researchers have begun analyzing geographic differences to explain trends in income inequality.

Several mechanisms are potentially at work, as Enrico Moretti of the University of California, Berkeley points out. Living costs may increase faster in areas where high-income, highly educated people are concentrated. The rise in living costs may come from more rapid growth in housing prices and in the prices of other goods and services linked to rising land values. High-income people may have moved to metropolitan areas where housing costs are especially high. By contrast, low-wage, less-educated workers have been less likely to move to areas where they would earn higher wages but not higher living standards. Moretti finds all of these factors at work, showing that the rising inequality in money income didn’t completely translate into rising inequality in purchasing power. According to Moretti, more than 20 percent of the rising money advantage of college graduates over high school graduates between 1980 and 2000 did not represent an advantage in living standards.

Locational differences can make income inequality appear worse than the actual inequality of living standards.  Economists have long viewed local zoning requirements as harmful to low-income families by limiting their access to attractive suburban neighborhoods. By requiring large lot sizes, towns have priced low-income families out of their housing markets. Now, as highlighted by the New York Times Economix blog, Peter Ganong and Daniel Shoag of Harvard University have demonstrated that differential housing regulations are a major culprit in slowing the convergence of regional income gaps, thereby lessening the migration into high cash income, high cost areas communities and adding to the inequality in money incomes. High-wage areas used to attract all types of workers.  As the supply of workers, including low-skill workers, went up in high-wage metro areas and fell in low-wage metros, wage differences between metro areas declined.  In recent years, because high housing costs have increasingly offset higher wages, fewer workers have chosen to migrate within the United States. Thus, low-income families lose in two ways from restrictive regulations—those in highly regulated areas face higher prices because of limitations on supplies and those in other locations lose access to better paying jobs because they cannot afford the high-priced housing.  Housing subsidies can shield some low-income families from increased housing costs in high-priced areas, but most low- and middle-income families receive no housing benefits at all.

To see how money income fails to capture purchasing power differences, compare the ability of low- and middle-skill workers and of median-income families to buy homes in four high-priced and four low-priced metropolitan areas. To simplify, let’s look only at the burden of a 30-year mortgage at a 4 percent interest rate. As the table shows, workers at moderate education levels face enormous mortgage burdens trying to buy homes in the four high-priced metro areas. But, homes in low-priced areas are quite affordable even among workers without a college degree. The gaps in affordability are far less in the case of family income. Still, a median-income family would have to spend more than double their share of income on the median-priced home in the Los Angeles or San Francisco metro areas than in the four low-priced metro areas. As a result, family income inequality across cities looks far higher when we don’t account for differences in housing costs. Median family incomes are 40 percent higher in San Francisco than in Oklahoma City, but the gap in income after mortgage payments falls to 9 percent. Since other living costs are higher in San Francisco, the differences in purchasing power are even smaller. The figures illustrate how inequality in purchasing power is often lower than inequality in money incomes.

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