The Rise of Poverty in Suburban and Outlying Areas

by Elizabeth La Jeunesse
Research Analyst

A key takeaway from our latest State of the Nation’s Housing report is that poverty is both increasing and becoming more concentrated across the country. Moreover, while a third of the poor live in high-density urban neighborhoods, the number of poor people and poor neighborhoods grew particularly rapidly in the “exurbs,” low-density neighborhoods on the fringe of the nation’s metro areas (Figures 1 and 2).

Figure 1. The Number of People Living in Poverty Has Increased Most in Suburban and Exurban Communities

Figure 2. Much of the Growth in High-Poverty Neighborhoods Has Been in Suburban and Outlying Areas

According to the report, from 2000 to 2015, the number of people living below the federal poverty line rose by 41 percent, from about 33.8 million to 47.7 million. Additionally, the number of high-poverty neighborhoods (census tracts where the poverty rate is 20 percent or more) rose by 59 percent, and the poor population living in these areas increased by 76 percent to 25.4 million. As a result, 54 percent of the nation’s poor now live in high-poverty neighborhoods, up from 43 percent in 2000.

The growth in high-poverty neighborhoods was widespread, occurring in all but three of the nation’s largest 100 metros (Honolulu, El Paso, and McAllen, TX). Moreover, the rise of poverty was particularly rapid in the exurbs, where the number of high-poverty neighborhoods more than doubled between 2000 and 2015, and the number of poor people living in these neighborhoods grew by 164 percent, rising from 1.5 million in 2000 to 3.9 million in 2015. Such growth presumably was due to the fact that housing generally is less expensive in these areas, but the savings in housing costs are often offset by higher transportation costs and more time spent travelling to work and other activities.

Our new interactive chart shows that these changes were not uniform in the nation’s 100 largest metropolitan areas. To begin with, two-thirds of these metros underwent a rise in concentrated exurban poverty from 2000-2015. Moreover, the magnitude of the increase varied. For example, the number of high-poverty, exurban tracts increased more than tenfold in the Detroit, Greensboro, and Cape Coral, FL metros, and increased by a factor of five or more in 11 other metros, including Atlanta, Denver, Charlotte, Cincinnati, Kansas City, Las Vegas, Nashville and Orlando. Other large metros where the number of high-poverty, exurban neighborhoods more than tripled included Baltimore, Philadelphia, Pittsburgh, Portland, St. Louis, and Tampa.

For example, in the Atlanta metro, the number of low-density, high-poverty, exurban tracts rose from only 11 in 2000 to 72 in 2015 (Figure 3). Meanwhile, in the St. Louis metro, there were 28 high-poverty, exurban neighborhoods in 2015, up from 8 such areas just 15 years earlier (Figure 4).

Figure 3. Atlanta

Figure 4. St. Louis

While poverty remains highly concentrated in dense urban areas, several large metros now have unusually large shares of high-poverty, exurban neighborhoods. In the Atlanta, Charlotte, and Nashville metro areas, for example, nearly a quarter or more of all high-poverty neighborhoods are located in low-density, exurban areas. Poverty’s shift to lower-density areas was especially pronounced in the Charlotte area, where 41 percent of high-poverty tracts are now situated in low-density, exurban areas, up from just 15 percent in 2000 (Figure 5).

Figure 5. Charlotte, NC

Moreover, in several smaller metros across the South – such as Columbia, SC; McAllen, TX; Greenville, SC; Jackson, MS, and Knoxville, TN – well over half of all high-poverty neighborhoods are located in low-density, outlying regions (Figure 6).

Figure 6. McAllen, TX 

Use our interactive tool to see the change in high-poverty neighborhoods in the nation’s 100 largest metro areas between 2000 and 2015.

Download Excel files for additional data on high-poverty neighborhoods. (W-1 and W-15)

Download Chapter 3 of our State of theNation’s Housing 2017 report, which contains additional discussions on the growth of poverty and the spread of high-poverty neighborhoods.

Are Home Prices Really Above Their Pre-Recession Peak?

by Alexander Hermann
Research Assistant

In 2016, national home prices not only rose for the fifth year in a row, they finally surpassed their pre-recession peak in nominal dollars, according to most national measures of home prices. However, as our new State of the Nation’s Housing report notes, when adjusted for inflation, home prices were still 9 to 16 percent below peak, depending on the measure used (Figure 1).



Figure 1. National Home Prices Now Exceed Their Previous Peak in Nominal Terms, But Not in Real Dollars

Note: Prices are adjusted for inflation using the CPI-U for All Items less shelter.

Source: JCHS tabulations of S&P CoreLogic Case-Shiller Home Price Index data.

Moreover, as our interactive maps show, changes in home price vary widely across the country and often exhibit strong regional patterns (Figure 2).

Figure 2. How Much Have Home Prices Changed?

Our interactive maps give users the ability to view price changes in 951 markets across the country over two time periods—since 2000 and since each area’s mid-2000 peak. Viewable markets include 371 Metropolitan Statistical Areas and 31 Metropolitan Divisions (derived from 11 additional metro areas), which together contain about 85 percent of that nation’s population, as well as 549 smaller Micropolitan Statistical Areas, which are home to another nine percent of the population.

The data indicate that nominal home prices were above their mid-2000s heights in 48 percent of all markets (454 total). These markets were largely concentrated in the middle of the country, the Pacific Northwest, and Texas.

However, in real dollars, prices reached their peaks in only 138 (15 percent) of all markets. Furthermore, while prices were above peak in only 10 percent of Metropolitan Statistical Areas and Metropolitan Divisions, they topped their peak in 17 percent of the smaller micro areas, which experienced less home price volatility over the last decade.

In contrast, real prices were still 20 percent below peak in about one-third of all markets, most located in areas hardest hit by the housing crisis, including Florida and large parts of the Southwest, Northeast, and parts of the Midwest.

There were notable differences in long-term patterns in areas where real prices remained well below their pre-recession peak. In many markets on both coasts—such as Miami, Washington, DC, and Sacramento—prices have risen significantly over the last several years and, in real terms, are now well above their levels in 2000. However, because prices in these areas rose significantly during the boom years and fell so sharply during the recession, the recent gains have left prices far below what they were in the mid-2000s.

In contrast, in some Midwestern and Southern markets—such as Detroit, Chicago, and Montgomery, Alabama—prices rose only modestly in the 2000s, dropped significantly during the recession, and have grown only slightly in recent years. Consequently, real prices in these areas were not only well below their peak levels from the mid-2000s, but remained below 2000 levels in many cases.

The uneven growth in home prices over the past two decades has led to increasing differences in housing costs. Illustratively, in 2000 the inflation-adjusted median home value in the 10 most expensive metros (of the country’s 100 largest metros) was about $350,000, about three times higher than the median value of homes in the 10 least expensive metros. But between January 2000 and December 2016, real home values in the ten highest-cost housing markets rose by 64 percent to about $574,000, more than five times the value of homes in the least expensive areas, which grew by only 3 percent, to $113,000.

A broader look at home prices further highlights these stark disparities. Nationally, real home prices rose 32 percent between 2000 and 2016. But home prices in 30 percent of markets (290 total) actually declined in real terms, including 28 percent of metro and 33 percent of micro areas, most of them in the Midwest and South. In the Detroit metro area, home prices declined 26 percent, the largest decrease among large metros. Prices also fell significantly in the Cleveland (22 percent decline), Memphis (15 percent decline), and Indianapolis (13 percent decline) markets.

At the opposite end of the spectrum, between 2000 and 2016 real median home prices rose by more than 40 percent in 153 markets (16 percent), most of them on the East and West Coasts. In fact, prices doubled in twelve markets, including the Honolulu metro areas, which saw 104 percent growth. Home prices also rose considerably in the Los Angeles (97 percent), San Francisco (84 percent), Miami (73 percent), and Washington, DC (62 percent) markets. While micro areas were more likely to be past their previous peak, the lower price volatility also meant they experienced less price growth since 2000, with only 12 percent of micros exceeding 40 percent growth.

Making Collaboration Work: Four Lessons from Chicago CDFIs

by Alexander von Hoffman
and Matthew Arck

Although many in the housing and community development field are excited by the idea of collaboration between organizations, such partnerships are often easier said than done. In practice, as our new case study of a partnership in Chicago shows, effective collaboration requires the partners to be thoughtful, nimble, and flexible.

The case study analyzes the work of the Chicago CDFI Collaborative, a partnership of the Community Investment Corporation (CIC), the Chicago Community Loan Fund (CCLF), and Neighborhood Lending Services (NLS). In 2014, the collaborative received a 3-year, $5 million grant from PRO Neighborhoods, a $125 million, 5-year grant program of JPMorgan Chase & Co. that supports community development financial institutions (CDFIs) pursuing innovative collaborations. The Chicago CDFI Collaborative used the money to restore abandoned and dilapidated housing in economically depressed neighborhoods, such as Englewood and West Woodlawn, which were particularly affected by foreclosures in the financial crisis. To do so, it provided loans and technical assistance that helped small-scale investors and owner-occupants purchase and rehabilitate one-to-four-unit buildings, which comprise nearly half of the affordable rental stock in Chicago.

The Chicago CDFI Collaborative helped a small-scale investor acquire and rehabilitate this home in the Chatham neighborhood on Chicago’s South Side. (Photo by Nathan Hardy.)

By 
By early 2017, the collaborative had lent nearly $25 million, acquired or financed the acquisition of 430 properties, and helped to preserve almost 600 housing units in low-income communities.  In interviews, leaders of the Chicago CDFIs identified four important lessons that emerged from their work.

1. Try new approaches

Although each member of the Chicago CDFI Collaborative is a well-established community lender, none of them had focused extensively on abandoned one-to-four-unit buildings. The new partnership enabled the officers of these groups to tackle this vexing problem on a large scale. The lesson, according to Robin Coffey, Chief Credit Officer of NLS, is that instead of “trying to play it safe” by simply expanding the volume of their current lending practices, collaborating CDFIs should imagine “how can we work together to change the way that we’re approaching something” so they can better aid residents of troubled low-income communities.

Some CDFI leaders might be wary of this approach because they perceive other CDFIs as rivals, but participants in the Chicago collaborative said that is not the case. In the CDFI field, Wendell Harris, Director of Lending Operations for CCLF, asserts, “there is so much work that needs to be done, there really is no discussion of us being competitors.”

2. Pursue many lines of attack

CDFIs must develop and carry out a multi-faceted strategy to overcome the multiple and systemic obstacles to revitalization in depressed neighborhoods. One way to do this is by targeting neighborhoods that have other revitalization programs already in place. For example, the Chicago CDFIs prioritized lending in seven neighborhoods where their organizations already were working.  Moreover, since NLS’s parent organization, Neighborhood Housing Services of Chicago, also dispersed grants from the City of Chicago that help low- and moderate-income homeowners improve the exteriors of their homes, NLS was able to direct some of those outside grants to the same neighborhoods targeted by the Chicago CDFI Collaborative. According to Coffey, this reinforced the coalition’s revitalization efforts. When a potential buyer saw improvements being made to other buildings, the NLS leader explained, he or she would conclude that the neighborhood was “not as bad as I thought.”

In addition, the neighborhoods selected by the Chicago CDFIs were part of a larger set of neighborhoods that received funding from the City of Chicago’s Micro-Market Recovery Program, which supports a variety of revitalization efforts. Adding the PRO Neighborhoods funds to these other tools, such as financial assistance and community organizing, Coffey noted, “made it that much more effective.”

3. Communicate regularly and in-person

Leaders of the collaborating CDFIs stressed that regularly scheduled, in-person meetings were a key to their success. Monthly meetings facilitated open communication, which in turn helped create an effective, adaptive partnership. Doing so in face-to-face meetings rather than conference calls meant that the partners had fewer distractions and were more likely to focus on the work at hand.

The face-to-face meetings also helped partners discover issues sooner than they might have otherwise, and, according to Coffey, gave them a “sense of urgency” to solve the problems that emerged in their discussions. Conferring in person, Harris added, encouraged the partners to share information about their networks of people in the field as well as details about properties that were under discussion. In one meeting, for instance, CIC’s representative told the group that it had acquired a building in a particular neighborhood, and NLS’s representative suggested an owner-occupant who would likely be interested in acquiring and rehabbing it.  

4. Expect the unexpected and adapt to it

Leaders of collaborating CDFIs must be prepared to respond to unexpected conditions on the ground. Going into the venture, the partners in Chicago initially thought the best strategy was to target long-vacant homes for rehabilitation. However, Coffey recalled, “we learned really quickly that getting people into homes so that they wouldn’t become vacant” was easier for the homeowner and better for the block. The partners also discovered that, despite the robust technical assistance provided by the Chicago CDFI Collaborative, many potential owner-occupants remained doubtful they possessed the expertise necessary to rehab long-vacant properties. To adapt, NLS’s leaders broadened their strategy to include run-down buildings that were not currently vacant, but were likely to become vacant if major repairs were not done in the near future.

The members of the Chicago Collaborative also encountered unexpected difficulty when they tried to carry out their core strategy to acquire and renovate large numbers of distressed properties in close proximity. In response, they expanded their efforts beyond simply acquiring foreclosed buildings to include buying tax liens on properties and purchasing and reconverting condominiums back into single properties. Without such changes, said Andre Collins, vice-president of acquisition and disposition strategy for CIC, the Collaborative would have rehabilitated fewer properties and preserved fewer affordable units than they did.

Taken together, these practices can help collaborative efforts succeed, which, Harris says, is particularly important because “it takes a collaborative effort to make things better.”

Our Disappearing Supply of Low-Cost Rental Housing

by Elizabeth La Jeunesse
Research Analyst

It’s not an illusion: low-cost rental housing in the US is disappearing. And our 2017 State of the Nation’s Housing report has the numbers to prove it.

Using ACS data from 2005 and 2015, our new report shows how gains in the supply of high-end units and losses of low and modest-priced units over the past decade has shifted the entire rental stock toward the high end. Nationwide, the number of units renting for $2,000 or more per month (in constant, inflation-adjusted dollars) nearly doubled between 2005 and 2015, while the number of units renting for below $800 fell by 2 percent (Figure 1).

Figure 1: Across the US

Released in conjunction with the report, our new interactive tool shows how this shift played out differently in the nation’s 100 largest metropolitan areas. Metros reporting the most dramatic losses of units renting for less than $800 per month included Austin, Seattle, Portland, and Denver – all places where apartment markets heated up in recent years.

Austin’s transformation was particularly striking. The number of units with rents under $800 declined by nearly 40 percent (a loss of around 27,000 units), while those with rents at $2,000 or more increased more than three-fold (Figure 2).

Figure 2: Austin

The pattern was similar in Denver, where the number of units renting for under $800 declined by nearly a third, a loss of 31,000 modest-priced rentals, even as the number of units with rents over $2,000 per month tripled, an increase of more than 24,000 units (Figure 3).

Figure 3: Denver

The largest aggregate increases in high-cost rentals took place in the New York, Los Angeles, San Francisco, and Washington DC metro areas. According to ACS data, the New York metro added nearly 250,000 units renting for more than $2,000 per month, while it lost more than 120,000 units renting for less than $800 a month (Figure 4).

Figure 4: New York

Los Angeles underwent a similar shift in rental stock, losing over 94,000 units renting for less than $800 between 2005 and 2015, while gaining over 200,000 high-cost units (Figure 5).

Figure 5: Los Angeles

The San Francisco and Washington DC metropolitan areas both added over 100,000 high-cost rental units. In San Francisco, the highest-cost rental segment (those renting for more than $2,400 per month) underwent particularly rapid growth, rising by 145 percent, from almost 60,000 units in 2005 to more than 146,000 units in 2015. In contrast, the stock of low-priced rentals in the region, which was quite low in 2005, was virtually unchanged over the subsequent decade (Figure 6).

Figure 6: San Francisco

In general, areas with large numbers of assisted rental units saw little or no growth in their stock of low-priced rentals but significant growth in the most expensive units. For example, the number of units renting for less than under $800 in the Boston metro was basically unchanged, while the number of units renting for more than $2,000 grew by 70 percent (Figure 7).

Figure 7: Boston

Because of such shifts, in most metro areas the share of units that rented for less than $800 a month fell between 2005 and 2015. In Austin, for example, the share of units renting for under $800 per month declined from over a third in 2005 to less than 15 percent in 2015. Similarly, the share of units renting for under $800 per month in New York City metro, home to around 3.5 million renter households, dropped from 23 percent of all units in 2005 to just 18 percent in 2015. And in the Washington, D.C. metro, the number of units renting for less than $800 per month dropped from 15 percent in 2005 to just 10 percent in 2015.

In contrast, both the number and the share of low-rent units rose in a few metros, including the Las Vegas, Cleveland, Sacramento, and Detroit metros. These areas tended to have larger numbers of distressed properties as well as lower rates of economic growth and multifamily construction, which combined to hold down the growth in real rents between 2005 and 2015. In Detroit, for example, there was a 17 percent increase in the share of units renting for less than $800 a month and only a small rise in the number of high-rent units (Figure 8).

Figure 8: Detroit

Use our interactive tool to see how the distribution of rental units changed in the nation’s 100 largest metro areas between 2005 and 2015.

Download an Excel file with the data for each metro area (W-16).

Wait... What? Ten Surprising Findings from the 2017 State of the Nation’s Housing Report

by Daniel McCue
Senior Research Associate

Every year, when we release our State of the Nation’s Housing report, we’re asked some variation of the question: “What surprised you in this year’s report?” Given all the time and effort that goes analyzing the data and writing the report, we are so close to it that little surprises us by the time of publication. Nevertheless, here are 10 findings in this year’s report that were new and maybe even a bit surprising:

1. For-sale inventories dropped even lower over the past year.   

For the fourth year in a row, the inventory of homes for sale across the US not only failed to recover, but dropped yet again. At the end of 2016 there were an historically low 1.65 million homes for sale nationwide, which at the current sales rate was just 3.6 months of supply - almost half of the 6.0 months level that is considered a balanced market.

2. Fewer homes were built over the last 10 years than any 10-year period in recent history.

Even with the recent recovery in both single-family and multifamily construction, markets nationwide are still feeling the effects of the deep and extended decline in housing construction. Over the past 10 years, just 9 million new housing units were completed and added to the housing stock. This was the lowest 10-year period on records dating back to the 1970s, and far below the 14 and 15 million units averaged over the 1980s and 1990s.

3. Single-family construction grew at a faster pace than multifamily construction.

The slow recovery in single-family construction picked up its pace in 2016. For the first time since the Great Recession, the rate of growth in single-family construction outpaced multifamily construction.

4. Smaller homes may be coming back.
Behind the growth in single-family construction, and as a new development in 2016, construction of smaller homes is back on the rise. The median square footage of newly completed single-family homes declined slightly, due to increase in construction of smaller-sized homes (less than 1,800 sqft).
 
5. Rental markets are still strong.  

Although there are signs of moderation, the slowdown in multifamily rental markets appears to be limited, so far, to a small number of markets. Indeed, last year, multifamily construction levels were still on the rise in most of the country, rents declined in just 10 of the 100 markets, multifamily loan originations and lending volumes both hit new record highs, and rental vacancy rates were at a 30-year low.

6. Long-term, metro-area home price trends show surprisingly wide variations.

Home prices have rebounded widely across the nation. In 2016, prices were up in 97 of 100 metros, and 41 metros had regained their nominal peak price levels from the mid-2000s. Over the longer period of time, however, the combined impact of the boom and bust has resulted in significant differences in home price appreciation across the country. In some metros (particularly on the coasts) real home prices have grown by 50 percent or more since 2000, while prices in 16 of the top 100 metros (mainly in the Midwest and South) were below 2000 levels, after adjusting for inflation.

7. The 12-year decline in the US homeownership rate may be nearing an end.

Homeownership rates flattened last year and the number of homeowners increased for the first time since 2006, suggesting trends in homeownership may be strengthening. In addition, first-time homebuyers accounted for a higher share of sales in 2016 than the year before. Still, lending remained skewed to highest credit score borrowers.

8. The homeownership gap between whites and African-Americans widened to its largest disparity since WWII.

The post-2004 decline in homeownership has been especially severe for African-Americans and has pushed black homeownership rates to fully 29.7 percentage points lower than that for whites. Comparing census data going back to WWII, the white-black difference in homeownership rates has never been wider.

9. More than half of all poor now live in high-poverty neighborhoods.

Poverty is growing, concentrating, and suburbanizing all at the same time. Overall, the total number of people living in poverty in the US increased by nearly 14 million in 2000-2015. Moreover, 54 percent of the nation’s poor live in high-poverty neighborhoods (those with poverty rates over 20 percent).

10. Poverty is growing across metros and in rural areas.

Poverty has been on the rise throughout cities, suburbs, and rural areas. Indeed, while the number of poor living in high-poverty tracts in dense, urban areas grew by 46 percent between 2000 and 2015, the number of poor living in high-poverty tracts in moderate- and lower density suburban areas more than doubled.

Read the full State of the Nation’s Housing report on our website.