Worlds Apart: Inequality between America's Most and Least Affluent Neighborhoods

36 Pages·2015·1.46 MB·English

by  Rolf Pendall

NEIGHBORHOODS, CITIES, 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
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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
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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. Our interactive map
(http://datatools.urban.org/features/ncdb/top-bottom/index.html) shows that, though poverty may
have grown in suburban areas, distressed tracts are still predominantly either dense urban
neighborhoods or low-density rural areas.
Most top tracts, on the other hand, are located well outside the limits of a central city. Often they
have low housing and population densities and occupy wide swathes of suburban, exurban, and rural
countryside. However, some central cities have a “favored quarter” where some of the commuting
zone’s most affluent households live. Some examples include Boston’s Back Bay, Baltimore’s Roland
Park, and neighborhoods in DC west of Rock Creek Park. Like bottom tracts in the same cities, these
high-income, central-city areas often form part of much larger zones that extend into the suburbs. Some
of these areas began as “suburbs within the city” in the 1800s and early 1900s and have maintained
their positions atop the neighborhood hierarchy thanks to their appeal to a subset of high-income
households.
New York stands out from most other cities in that so many of its top households live in the middle
of the central city. These super-rich neighborhoods—which spread into previously affordable areas,
giving rise to much recent debate on gentrification—form the densest concentration of affluence in the
United States, eclipsing the smaller privileged areas that have recently gentrified in Boston and DC.
Populous CZs Have More Advantaged Top Tracts than Less-Populous CZs
The largest commuting zones in the United States have higher incomes, housing values, and college-
education levels in their top tracts than smaller ones (figure 2). Large CZs are more economically
productive than small CZs (Combes et al. 2012). This means that people with a certain level of
education employed in a particular job in a big CZ like Chicago or New York will earn more than those
with the same education and the same job in smaller CZs like Toledo or Syracuse.
Second, large CZs have more potential for the formation of homogeneous neighborhoods than
small CZs. Tracts have about 4,000 residents on average. The largest CZs have hundreds of tracts,
offering many opportunities for the development and evolution of neighborhoods that are internally
homogeneous. When these CZs have large numbers of exceptionally privileged people, builders and
local governments have many incentives to accommodate clustering of the affluent into their own
neighborhoods.
WORLDS APART 5
FIGURE 2
Top Neighborhoods Are More Advantaged in Large Commuting Zones Than in Small Ones
Neighborhood advantage score, top neighborhoods
4
3
2
1
0
-1
-2
10,000 100,000 1,000,000 10,000,000 100,000,000
Commuting zone population, 2010

Source: Neighborhood Change Database 2010; underlying data from American Community Survey 2006–10.
Notes: Includes only 570 commuting zones with at least 10 census tracts. Population is on a logarithmic scale.
High Wealth and Income in Big CZs Do Not Trickle Down
The productivity and higher costs of big CZs do not translate to higher incomes, education levels, and
housing values in their bottom tracts (figure 3). If anything, conditions in the bottom tracts are a little
better on average in the smaller CZs—measured on this national scale—than in larger ones. The
processes that add up to clustering by affluent households in privileged neighborhoods may therefore
be leaving disadvantaged people behind in distressed neighborhoods.
6 WORLDS APART