Some neighborhoods lift children out of poverty. Others trap them there.

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There’s a hopeful new sign that how we build our cities, and specifically, how good a job we do of building mixed-income neighbourhoods that are open to everyone can play a key role in reducing poverty and promoting equity. New research shows that neighbourhood effects the impact of peers, the local environment, neighbours contribute significantly to success later in life.

Poor kids who grow up in more mixed-income neighbourhoods have better lifetime economic results. This signals that an important strategy for addressing poverty is building cities where mixed-income neighbourhoods are the norm, rather than the exception. And this strategy can be implemented in a number of ways not just by relocating the poor to better neighbourhoods, but by actively promoting greater income integration in the neighbourhoods, mostly in cities, that have higher than average poverty rates. Economist Justin Wolfers reports on groundbreaking work by Eric Chyn of the University of Michigan that found previous research may have understated the effect of neighbourhoods on lifetime earnings and employment. The paper shows that moving low-income children in very poor neighbourhoods to less poor neighbourhoods can have a major positive effect on their life chances. Most media outlets have covered this story as reinforcing the importance of “mobility programs”: that is, policies that encourage residents of very low-income neighbourhoods to move to more economically integrated areas, usually with some form of direct housing assistance like vouchers. And the ability to move to neighbourhoods with good amenities and access to jobs, without having to pay unsustainable amounts for housing or transportation, is a crucial part of creating more equitable, opportunity-rich cities. But the coverage may be missing the other half of the policy equation: Chyna's paper adds to the evidence about the value of mixed-income neighbourhoods in general, not just mobility. That means it’s just as important that cities find a way to invest in low-income neighbourhoods to bring opportunity to them, rather than simply trying to move everyone out.
Why the new research is so important
The policy implication: Mixed-income neighbourhoods promote opportunity.
Neighbourhoods for everyone. 

The results of the voucher demonstration illustrate that there can be large benefits from even modest changes in economic integration. The average household moved about 2 miles from their previous public housing location and still lived in a neighbourhood that had a higher than average poverty rate. Chyna's results show the effects of moving from neighbourhoods dominated by public housing (where the poverty rate was 78% on average), to neighbourhoods that had poverty rates initially 25 percentage points lower, on average. Most participants still lived in neighbourhoods with far higher levels of poverty than the typical American neighbourhood. But compared to their peers who remained in high poverty neighbourhoods, they enjoyed better economic results later in life.The experiment was made possible by the decision to demolish large-scale public housing in Chicago in the early 1990s. The families dislocated from the old style public housing which was in neighbourhoods of extremely concentrated poverty had to find new housing. The Chicago Housing Authority (CHA) provided the families with vouchers to move to privately operated rental housing, typically in neighbourhoods with far lower levels of poverty. The kids who moved to new lower-poverty neighbourhoods saw a significant increase in their lifetime earnings compared to otherwise similar kids who remained in the public housing that wasn’t torn down. This natural experiment has an important advantage over the “Moving to Opportunity” (MTO) housing experiment conducted by the federal government in the 1990s. In MTO, public housing households had to apply for a voucher lottery. This created the possibility that the people who had applied were particularly motivated and able to make the transition to a new neighbourhood. That would mean that even those households that lost the lottery might have better-than-average outcomes, reducing the gap between those who moved and those who didn’t and making the effect of moving appear smaller than it really was. But unlike MTO, the participants in the CHA relocation program were not self-selected. They represented a more or less random cross-section of public housing residents, and so the differences between the outcomes of treatment groups (those who got vouchers) and those who didn’t (control groups) could be treated as purely the result of the voucher program.
But it’s important to put this finding in a broader context. Evidence about mobility programs, in turn, is part of a larger body of research that neighbourhoods matter for economic opportunity. While the focus has been helping people leave neighbourhoods with high concentrations of poverty, it’s also possible to bring investments and resources to these communities. Of course, when that happens, it often happens in conjunction with or even because of a return of middle- and upper-income people to the neighbourhood. In other words, gentrification. For some, that’s enough to reject that policy avenue. But some research suggests we ought to give it another look. While news from neighbourhoods in San Francisco and Brooklyn, where incredibly high levels of demand and tight supply have led to spiralling housing costs, makes it sound like gentrification inevitably and utterly displaces all a neighbourhood’s residents, other research suggests that displacement is far less widespread than commonly thought. While housing costs can be an issue, a recent study from the Philadelphia Federal Reserve suggests that displacement is much less common than we might expect and another study of New York public housing residents in gentrifying areas showed an increase in earnings and school test scores. This research also occurs against a backdrop of widening inequality and economic segregation. And inequality has an important spatial dimension: low-income and high-income households are increasingly segregated from one another in separate neighbourhoods. As we’ve documented in our research at City Observatory, the effects of this segregation on the poor, in the form of the growing concentration of poverty, are devastating, and the number of Americans living in neighbourhoods of concentrated poverty in large metropolitan areas has more than doubled since 1970, from 2 million to 4 million. While the spatial response, as we’ve said, has focused on mobility, enabling the poor to move to higher income neighbourhoods is challenging for a number of reasons. The raison d’etre of many suburbs is exclusion using zoning requirements to make it essentially impossible for low-income households to afford housing and efforts by outside organizations or governments to reduce these barriers have been difficult. If we want to make the biggest difference in economic integration, we need to try to integrate low-income neighbourhoods as well as high-income neighbourhoods.
Taken together, the new Chyn results add to the growing body of literature on neighbourhood effects and strongly suggest that we ought to be looking for all kinds of opportunities, large and small, to promote more mixed-income neighbourhoods. Even the small steps like lowering the poverty rate in a kid’s neighbourhood from 75 per cent to less than half pay clear economic dividends. But we also need to remember that integration isn’t just about moving around people with low incomes. We can reinvest in neighbourhoods of concentrated poverty in ways that improve quality of life and enhance opportunity in place.