Why HUD Matters: Desegregating Cities

Why HUD Matters: Desegregating Cities

Imagine that as a child, you’re in an ice cream store with siblings. Your parents offer to pay for half of your sister’s ice cream, but you have to buy your own with allowance. Unfortunately, your allowance alone was not enough to cover the ice cream; and even if it was, the store says it refuses to take coins– it will only accept dollar bills. As a result, your sibling ended up better off, and you may be upset for the rest of the day. Now, imagine instead of an ice cream, your parents just bought your sister a house. That is probably going to adversely affect not just your life outcome, but possibly those of your children as well.

Unfortunately, the US Government employed a similar approach to those parents in the first half of the 20th century, while landlords acted much like the store. To encourage suburbanization, the government began to offer fully insured loans, to the effect of substantially subsidizing this movement into what became middle and upper-middle-class suburbs. There was one slight problem: by 1949, when ⅓ of home building was government assisted, 98% of insured loans had gone to white families, leaving black families in densely populated urban areas. This race-based housing segregation continued for two more decades until the Fair Housing Act.

The Fair Housing Act (Title 8) of 1968 was meant to end race-based housing segregation. However, as Richard Rothstein, the author of The Color of Law explains, this ban was difficult to implement, and results were hard to come by. Rothstein explains that if you abolish bus segregation, blacks can sit in the front of the bus the next day. However, it is difficult to evict tenants and move families overnight. Not to mention, by the 1970’s, these suburbs had become too expensive for most blacks: a greater amount of government assistance would be required for the move due to increase in home prices.  

It is important to understand the serious consequences of city segregation. Racial segregation in cities can correlate with negative economic and life outcomes for residents, especially people of color. However, desegregating metropolitan areas has been demonstrated to greatly improve life outcomes for people of color, while not negatively affecting white population outcomes. In general, lower poverty areas tend to be more racially reflective of US racial demographics, with a larger proportion of white residents. A 2015 paper by Raj Chetty, published by the National Bureau of Economic Research, studied the impact of the Moving to Opportunity (MTO) experiment. The study found “children whose families take up an experimental voucher to move to a lower-poverty area when they are less than 13 years old have an annual income that is $3,477 (31%) higher on average relative to a mean of $11,270 in the control group in their mid-twenties”.This is due to, among other reasons, these young people going on to receive a better education and pursue higher degrees. And further, according to Jenny Schultz of the Brookings Institute, “differences in income alone cannot explain the degree of racial sorting in housing markets”. Unfortunately, segregation levels are still exceptionally high in US cities, as can be seen in the chart below. And further, vouchers which force movement to low-income areas, such as those from MTO, are expensive and rarely created.

Screen Shot 2018-05-15 at 12.05.34 AM

In fact, the predominant housing voucher (Section 8) offered to low income, minority groups are very difficult to be applied to low-poverty suburbs. So, despite the governments’ offering of vouchers to 2.2 million families yearly, the fact that landlords can refuse them combined with their relatively low worth as compared to wealthier areas, has rendered them unable to accomplish the task of desegregation. Normally, people who use them simply move within the densely populated, high-poverty city areas.

However, hope exists to find a voucher which makes sense economically, and ethically, for all parties involved. In 2002, Baltimore unveiled the Thompson Voucher as the key feature of the Baltimore Housing Mobility program. The voucher could only be used in areas with poverty under 10%, the non-white population under 30%, and other residents with housing assistance under 5%. The program also offered counseling, the security deposit, and transportation. The results are staggering: recipients moved from areas 80% to 21% black,  as well as a poverty rate of 33% to 8%. Stefanie Deluca, a professor at Johns Hopkins University, says the evidence unequivocally shows that programs like the Thompson vouchers can move the needle for parents and children. However, the program was only able to give out 4300 vouchers due to funding issues.

Many thought that the Affirmatively Furthering Fair Housing (AFFH) requirement passed by the Obama era Department of Housing and Urban Development (HUD) would lead to more cities attempting such programs. However, Trump HUD director Ben Carson not only appears disinterested in expanding such programs, but also has been scaling back funding for affordable housing programs.


Bottom Line

All governing strategies must weigh both short and long-term effects of policies. While it will cost extra money today to subsidize housing vouchers to desegregate metropolitan areas, the proven results of moving low-income residents to low poverty areas are a boon for future economies. Further, the country would be ending decades of fallout results from redline housing districts— a direct result of systemic racism— and instead introduce decades of positive externalities. When a family moves into a better area, and are also given services such as transportation and counseling, their future lineages are also positively impacted as a result. More cities should look to introduce programs like the Baltimore Thompson Voucher program, and the Federal Government should be more than willing to help.
Article written by Eli Wachs.


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