Supreme Court to Cities: Put Affordable Housing Where the Opportunity Is
July 15, 2015

Image courtesy of flickr user Wally Gobetz

Amid celebrations of the U.S. Supreme Court’s recent decisions on same-sex marriage and the Affordable Care Act, a third important ruling was largely overlooked — one that could have a profound impact on where affordable housing is built.

At issue was whether affordable housing for low-income, mostly black residents of Dallas should be built in the suburbs or in inner-city neighborhoods. The plaintiff, the Inclusive Communities Project, sued the Texas Department of Housing and Community Affairs, contending that the agency was using federal tax credits to build too much affordable housing in inner-city neighborhoods and not enough of it in the suburbs, where the life outcomes for residents would be better. In a 5-4 decision, the court ruled for the plaintiffs and agreed that concentrating affordable housing in poor, mostly minority neighborhoods was discriminatory because it would deepen racial isolation and deny residents access to the good schools and jobs in other neighborhoods.

The ruling will allow plaintiffs to challenge decisions about where federally funded affordable housing is sited on the grounds that the decision is discriminatory — without having to show evidence of discriminatory intent or motive. Instead, the plaintiffs can show evidence that the location of the housing can have a disparate impact on the lives of the residents. Given significant research published recently on the impact that neighborhoods have on life outcomes, the ramifications of this ruling could be profound.  

In Dallas, like in most other American cities, subsidized affordable housing is built predominantly in neighborhoods where there is a concentration of low-income residents. Between 1990 and 2010, such neighborhoods have gotten poorer and the percentage of residents with college degrees, the homeownership rate and the median housing value have all declined. This is disparate impact encapsulated.

Justice Anthony Kennedy, writing for the majority, noted that not only did the Fair Housing Act of 1968 ban outright racial discrimination in housing, it also required government agencies to dismantle segregation and foster integration.

The goal of integration, which is at the heart of the Fair Housing Act, has been largely neglected and unenforced, but that seems about to change. Following the Supreme Court ruling, the Department of Housing and Urban Development (HUD) released a new Affirmatively Furthering Fair Housing rule designed, in the words of HUD Secretary Julian Castro, to “provide all Americans with access to safe, affordable housing in communities that are rich with opportunity.” This rule will have a big impact on how cities and regions think about and try to build affordable housing, and it will doubtlessly be very controversial. As part of the new rule, cities will be required to track where federally subsidized affordable housing is built and submit an Assessment of Fair Housing to HUD that will report on levels of residential segregation and outline plans to foster integration.

To an increasing number of housing and civil rights advocates, integrated housing has become more than a civil rights issue — it is now an economic development and upward mobility issue. The intellectual backing for this view, and for Justice Kennedy’s reasoning, comes from recent analysis of the impact of the 1994–1998 Moving to Opportunity (MTO) program, in which 4,600 low-income families with children living in public housing project in Baltimore, Boston, Chicago, Los Angeles and New York City were given vouchers to move out of their neighborhoods and into higher-income ones. The report — by Raj Chetty, Nathaniel Hendren and Lawrence Katz of Harvard — found that:

Moving a child out of public housing to a low-poverty area when young (at age 8 on average) using a subsidized voucher like the MTO experimental voucher will increase the child's total lifetime earnings by about $302,000. … The additional tax revenue generated from these earnings increases would itself offset the incremental cost of the subsidized voucher relative to providing public housing.

Given that the children whose families participated in MTO have not been in the workforce for very long, the earnings gap between them and those who families did not move out of high-poverty areas will get wider over time.

Earnings are only part of what helps people to be upwardly mobile, though. Even more important is the ability to build wealth, and that is what the Supreme Court is really trying get American cities and regions to address through their housing policies.

Helping People Find Opportunity

The authors of The Racial Wealth Gap: Why Policy Matters note that in 2011, the median white household had $111,146 in wealth holdings, while the median black household had $7,113 and the median Latino household had $8,348. The main reason for this wealth gap was homeownership. White households are more likely to own their homes — 73 percent of white households compared to 47 percent of Latinos and 45 percent of blacks — and whites own homes that are worth more because they’re in neighborhoods where household values appreciates more.

Which brings us back to the Supreme Court. Currently, a large segment of the population is excluded from accessing the avenues to wealth, and homeownership is the main way that Americans build it. Which is why the court is trying to point us in the direction of creating greater access to homeownership in neighborhoods where home values will increase.

You Can’t Have Equitable Cities If You Don’t Have Equitable Suburbs

One impact of the court’s decision is that cities will no longer be able to think about affordable housing in limited geographies — they will have to think citywide. The same is true for counties and any other entity that receives Community Development Block Grants, distribute or spend Low Income Housing Tax Credits, administer federal urban development funds or build subsidized housing.

Another is that that those who advocate for and build affordable housing are going have to broaden their sights beyond the neighborhoods that they are accustomed to working in and begin to focus on getting housing built in all parts of town. They are also going to have to expand their focus beyond the struggle to improve low-income neighborhoods, as important as that struggle may be, and help families move to opportunity.

Perhaps the biggest impact, however, is that affluent neighborhoods and regions that have resisted affordable housing are going to be challenged by the federal government. In the decades since the passage of the Fair Housing Act of 1968, integration has remained elusive, at least in the Bay Area, not because local governments have “persist[ed] in dumping subsidized housing into depressed, racially isolated communities,” as the New York Times editorialized recently. Instead, it is because areas that offer better schools and job opportunities have fought off attempts to build affordable housing within their boundaries. With the new emphasis from the Supreme Court and new rules from HUD, perhaps this will change. If the point of fair housing policy is to help people find opportunity, all communities will have to rethink their approach to building affordable housing. 

Read the court decision >>


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