Worlds Apart: Inequality Between America's Most and Least Affluent

NEIGHBORHOODS, CITIE S, AND METROS RESEARCH REPORT Worlds Apart Inequality between America’s Most and Least Affluent Neighborhoods Rolf Pendall with Carl Hedman June 2015 ABOUT THE URBAN INSTITUTE The nonprofit Urban Institute is dedicated to elevating the debate on social and economic policy. For nearly five decades, Urban scholars have conducted research and offered evidence-based solutions that improve lives and strengthen communities across a rapidly urbanizing world. Their objective research helps expand opportunities for all, reduce hardship among the most vulnerable, and strengthen the effectiveness of the public sector. Copyright © June 2015. Urban Institute. Permission is granted for reproduction of this file, with attribution to the Urban Institute. Cover image by Tim Meko. Contents Acknowledgments iv Worlds Apart: Inequality between America’s Most and Least Affluent Neighborhoods 1 Inequality among Households Affects Neighborhoods 1 Key Findings: Inequality in the CZs in 2010 and Changes Since 1990 3 How the 2010 Top and Bottom Tracts Changed from 1990 12 Conclusions and Implications 15 Appendix A Summary Statistics 17 Notes 28 References 29 About the Authors 30 Statement of Independence 31 Acknowledgments This report was funded by the Rockefeller Foundation as part of its generous support for the preparation of the 2010 Neighborhood Change Database. We are grateful to them and to all our funders, who make it possible for Urban to advance its mission. Funders do not, however, determine our research findings or the insights and recommendations of our experts. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders. The dedicated efforts of the National Neighborhood Change Database (NCDB) team, led by Peter Tatian and including Chris Hayes and Rob Pitingolo, made this analysis possible. The NCDB is a product developed in a partnership between the Urban Institute and GeoLytics, which is responsible for producing the NCDB 2010 CD-ROM. Comments on drafts of this document were provided by Peter Tatian, Brett Theodos, Karen Chapple, and Margery Austin Turner. Serena Lei, Elizabeth Forney, and Tim Meko provided editorial and design support. Erwin de Leon managed the production of this and other research products out of NCDB 2010. IV ACKNOWLEDGMENTS Worlds Apart: Inequality between America’s Most and Least Affluent Neighborhoods Since 1990, inequality among households has grown significantly in the United States. At the top, incomes and wealth rose steadily, with the top 20 percent of households gaining an average of $35,000 in 2013 dollars from 1990 to 2013 and the top 5 percent gaining over $80,000. Meanwhile, the incomes of the bottom 20 percent of households grew a little between 1990 and 2000 but then dropped again between 2000 and 2013.1 Wealth inequality also increased during this period; the top quintile (20 percent) of American households held over 80 times the net worth of the second-lowest quintile in 2011 (Vornovitsky, Gottschalck, and Smith n.d.). Recent studies by Urban Institute researchers show that inequality of income and wealth also plays out between people of different races (McKernan et al. 2013). The average white household has five times the wealth of the average Hispanic household and six times that of the average black household. Inequality among Households Affects Neighborhoods Since households with higher income and wealth can live in more expensive houses, neighborhoods, cities, and metropolitan areas, one would expect that inequality among neighborhoods has increased in parallel with income and wealth inequality among households. This report uses the newly produced national Neighborhood Change Database (NCDB) to understand more about the magnitude of current inequality and inequality growth across the entire United States between 1990 and 2010. The NCDB reconciles both the changing boundaries of neighborhoods—defined as census tracts per their boundaries in 2010—and the changing definitions of the variables collected in successive US Census Bureau surveys of households so that researchers can study the same phenomenon over time in neighborhoods with fixed boundaries. Usually, inequality among neighborhoods is based on income among households. But other aspects of inequality are also important and pervasive, like the distribution of wealth and human capital, which vary among neighborhoods just as they do among households. To get a more complete picture of WORLDS APART 1 geographic inequality, therefore, the Urban Institute used factor analysis to extract a single composite score from four of the NCDB’s indicators of advantage and disadvantage:2 . Average household income, an indicator of purchasing power of households within the census tract . Share with a college degree, an indicator of the “human capital” of the tract’s residents . Homeownership rate, an indicator of the extent to which the tract’s residents have access to this source of wealth . Median housing value, an indicator of the wealth of the tract’s homeowners—who generally have more wealth than renters In 2010, the highest neighborhood advantage score was just over 4.30. The three most advantaged tracts in the United States are just outside Washington, DC, with neighborhood advantage scores of 4.31, 4.20, and 4.19. The first tract in these areas, in Chevy Chase, Maryland, has an average household income of over $466,000 a year, and the other two, in neighboring Bethesda, have average annual incomes of $270,000 and $290,000. Their median housing values exceed $900,000. At least 9 out of every 10 adult residents have college degrees, and over 90 percent of the neighborhoods’ homes are owner occupied. The populations and housing stock in these top neighborhoods were stable or grew between 1990 and 2010, and few homes were vacant in 2010. Two tracts at the other end of the scale, with neighborhood advantage scores less than –3.40, are in Columbus, Ohio, and Memphis, Tennessee. Both have average annual household incomes of less than $16,000, median home values less than $40,000, and owner-occupancy rates lower than 10 percent. Practically none of their adults have a college education. Both tracts lost population between 1990 and 2010, and over a fifth of their remaining houses were vacant in 2010. Neighborhoods close to the top or the bottom of the advantage index are among the nation’s most advantaged or disadvantaged on all four components of the index. Therefore, the index’s meaning is easy to interpret at the extremes: either all factors are very high, or all of them are very low. In the middle, however, the advantage index can yield similar scores for neighborhoods that are distinct from one another. A neighborhood with a high level of one characteristic but a low level of another could have a score similar to another neighborhood with the reverse situation.3 For this reason, we limit our analysis here to neighborhoods at the top or the bottom of the advantage index. 2 WORLDS APART Inequality within Commuting Zones: Comparing Neighborhoods To understand the differences between neighborhoods that share the same housing and labor markets, we used commuting zones (CZs), county-based regions defined in the 1990s. Unlike metropolitan areas, commuting zones cover the entirety of the United States, and their definitions are constant over time. We ranked every CZ’s tracts from lowest to highest neighborhood advantage score. Then we identified the top 10 percent and the bottom 10 percent of tracts—the most advantaged and least advantaged neighborhoods in each CZ—for further exploration. We call these top and bottom tracts. In CZs like New York City or DC, which have many high-income households, expensive housing, and high rates of college education, the top tracts have higher average scores than those in poorer CZs like Brownsville, Texas, or Bakersfield, California. We analyze only the 570 CZs that had at least 10 census tracts in 2010 (there are 740 CZs in the United States). To show how large neighborhood inequality is in each CZ, we developed a final index—the neighborhood inequality score—by subtracting the average neighborhood advantage score of the CZ’s bottom tracts from the average of its top tracts. Baltimore, Columbus, Dallas, Houston, and Philadelphia were the large CZs with the highest inequality scores; all exceeded 5.5. Most of the CZs with low inequality scores were small, with fewer than 30 census tracts. Appleton, Wisconsin, had the lowest score among CZs with at least 500,000 residents: 3.19. (Table A.1 in the appendix lists the neighborhood advantage indices and neighborhood inequality indices for all CZs with at least 250,000 residents in 2010.) Key Findings: Inequality in the Commuting Zones in 2010 and Changes since 1990 Top and Bottom Tracts Are Worlds Apart The differences between top and bottom tracts go deeper than their residents’ incomes, wealth, and education level. These neighborhoods are physically separate from one another too—often by fairly large distances. The Northeast Corridor, running from Boston to DC, provides some vivid examples of this separation (figure 1). WORLDS APART 3 FIGURE 1 Worlds Apart on the Northeast Corridor Top neighborhoods in suburbs, except in New York and DC; bottom neighborhoods mostly in central cities Source: Neighborhood Change Database 2010; underlying data, American Community Survey 2006–10. Notes: All maps at same scale. Cities with over 100,000 residents are outlined in gray. Almost always, the central city accounts for the majority of its CZ’s bottom tracts. For instance, in large CZs like Boston, Newark, and Philadelphia, some of the bottom tracts are in their small, former industrial cities (Lawrence, Paterson, Camden, and Chester). In DC, distress has spread beyond the 4 WORLDS APART district boundaries and into suburban tracts in Prince George’s County, but in the other Northeast Corridor cities this impoverishment of suburbia is not the main story.

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