By Willa Seldon and Debby Bielak
When it comes to our lot in life, where we're born has a lot to do with it. Case in point: according to research from the Equality of Opportunity Project, children born in San Jose and Salt Lake City--the country's most upwardly mobile cities--have a dramatically better shot at seizing the American Dream of a better economic life than children born in Atlanta and Charlotte, the two worst cities for upward mobility.
The Pew Charitable Trusts' Pursuing the American Dream report asserts that 70 percent of children born to parents in the bottom 40 percent of incomes remain at the bottom of the economic ladder--no matter how hard they try to climb it. Many of the people who are trapped in the economy's basement live in areas where poverty is concentrated. Discriminatory housing policies, dilapidated housing, substandard schools, limited job opportunities, and chronic crime all conspire to keep people right where they are.
Today, the number of people living in high-poverty neighborhoods is increasing rapidly. According to a US Census Report, in 2000, nearly 50 million people lived in neighborhoods where more than 20 percent of the population lived below the federal poverty line. In 2010, that number topped 77 million.
When talking about the role that geography plays in keeping people at the bottom of the income ladder, it's worth noting the stark disparities of race. Fifty percent of African Americans live in neighborhoods where poverty is concentrated--compared with 44 percent of Hispanics and 20 percent of whites. What's more, nearly half of black families living in the poorest 25 percent of American neighborhoods have lived there for three generations.
In its May 2016 report, 'Billion Dollar Bets' to Create Economic Opportunity for Every American, The Bridgespan Group identifies 15 areas where philanthropy can help restore economic opportunity for low-income Americans. Reducing concentrated poverty is one of these areas. Tackling a challenge of this scope requires patient capital. The federal government's investment in housing vouchers is one example of such long-term capital; this may be the time for philanthropists, who are willing to accept the risk, to capitalize on newfound momentum, as well as promising models for change.
Moving to Opportunity
Consider Baltimore, where a child who grows up in a low-income family earns less than any of the 100 largest counties in the country. But Baltimore also boasts one of the country's most promising programs for moving people up and out of poverty.
Since 2003, the Baltimore Housing Mobility Program has moved more than 3,200 African American families out of high-poverty, highly segregated neighborhoods into low-poverty, racially mixed neighborhoods. The program seeks communities with low poverty and crime rates, high-quality schools, racial and economic diversity, and employment centers--features that ensure families aren't just moving to neighborhoods that are a little less poor.
Moving low-income families into more promising neighborhoods is not a new idea. In the 1990s, the US Department of Housing and Urban Development (HUD) devised the Moving to Opportunity for Fair Housing (MTO) experiment. Working through public housing authorities in five major cities--Baltimore, Boston, Chicago, Los Angeles, and New York City--MTO randomly selected families living in intense poverty to receive housing counseling and vouchers. In Chicago, many families who made the move went on to thrive. Parents had lower rates of obesity and depression; kids who moved when they were 12 or younger went on to earn incomes nearly one-third higher than their peers who stayed behind.
Both programs show that moving to a better neighborhood can improve a child's life trajectory, increasing both college attendance and average income as young adults.
Of course, not all families want to leave their neighborhoods. Helping families where they are remains a critical need. Housing is an important issue when considering revitalizing communities. Private investors and the federal government are supporting initiatives that consider housing and other needs. For example, Purpose Built Communities provides social services to distressed neighborhoods. Meanwhile, HUD's Choice Neighborhoods initiative rehabilitates housing and commercial real estate.
There is growing recognition that housing policies are not serving poor communities well. In 2015, the US Supreme Court reached a decision that expanded the Fair Housing Act of 1968 to prohibit government housing policies that unintentionally discriminate against minority groups, such as policies that continue to concentrate black poverty.
Also in 2015, HUD established the Affirmatively Furthering Fair Housing (AFFH) Final Rule, which puts pressure on local and regional housing authorities to increase access to fair, affordable housing in their communities. Already, governments are feeling the heat to reverse underinvestment in low-income communities and build new housing-mobility programs.
For Philanthropists, Not an "Either/Or" Choice
For decades, the social sector has debated whether the best way to reduce concentrated poverty is to transform high-poverty communities or to help people move to communities with more opportunity. Now, we know it's not an "either/or" choice. The challenge is so complex, it makes sense to pursue both strategies simultaneously.
For philanthropists looking to improve the lives of the poorest Americans, there is ample opportunity to build on promising housing-mobility programs like those in Baltimore and Chicago. A starting point would be to invest in creating a national nonprofit to serve as a hub for expertise on housing-mobility programs. This entity could provide technical assistance and seed grants to regional programs, as well as create a consistent set of quality standards for housing-mobility programs. Investors could also develop regional mobility programs in as many as 20 to 25 targeted regions, providing many more families with the chance to move to higher-opportunity neighborhoods.
To help those people who remain where they live, there is a critical need to assess neighborhoods based on both the most distressing aspects of the neighborhood (such as crime), as well as their assets (such as potential funding streams that could be redirected or increased). Investors can also support community preservation strategies aimed at purchasing and maintaining affordable rental units for qualified, low-income families.
Better Homes, Higher Incomes
How might such investments pay off? Since data on the effects of revitalizing neighborhoods is limited, Bridgespan has focused on the potential outcomes of housing-mobility programs.
We estimate a $1 billion investment in building access to better housing opportunities could help provide housing vouchers to 4,000 to 8,000 families living in each of the 20 to 25 targeted regions. This would benefit between 45,000 to 85,000 children--and lead to potential lifetime family earnings returns of between $4.5 and $8.5 billion.
Most importantly, it would lift these children onto the rungs of the economic ladder and give them a real chance to climb upward.
Willa Seldon is a partner in The Bridgespan Group's San Francisco office. Debby Bielak, a partner in the same office, is the co-author of Bridgespan's report, "Billon Dollar Bets" to Reduce Concentrated Poverty.