Mixed-Income Neighborhoods and Economic Mobility

Morning walks around the neighborhood take me down some rapidly changing blocks. On a side street backed up to the creek, rows of beige-brick duplexes built in the late 50s and early 60s renting for $800-$1,000 a month have been replaced over the past two years by looming three stories with woodgrain trim and two-car garages listed for $1.2 million.

It’s a common scene in this neighborhood four miles from the center city, on a greenway backing up to the old money boulevard of mature oak trees and, most importantly, in a “good” school district. Still, the aging duplexes on side streets or the old Tudors turned to apartments have provided small pockets of affordability. Affordability for the elderly woman who sat on the small porch with her terrier on summer evenings or the father warming up his work van in the predawn haze as his kids got ready for school.

The market economist in me wonders why I’m bothered by their disappearance. Isn’t this just developers maximizing the value of rapidly appreciating land? The planning wonk bristles. Unlike a few blocks away, where four old ranches are giving way to 18 new townhomes, there will be no net gain of housing here, just the turnover of rental units affordable on incomes of $40,000 a year or so to $6,000 monthly mortgages with two Audis in the driveway. The elderly woman might move to some senior housing complex. The family will probably move somewhere in the suburbs with the nearest “good” school district, if they can swing it. Zillow will up the estimated value of our nearby condo.

Across the street, a complex of two-bedroom brushed-brick cottages, built about the same time as these disappearing duplexes, stands in good shape. Zillow says the cottages, mostly owner occupied, are selling for $260K a piece — more than double the price of about 15 years ago.

Like a lot of Sunbelt cities and regions, Charlotte remains relatively affordable. But the slow pace of homebuilding since the mortgage crisis of 2008, combined with continued migration from other parts of the country, is pushing prices up and homebuilding further out into the suburbs. All of this is happening against the backdrop of a major national housing shortage. In Charlotte, average prices are up 16% year-over-year to $358,000 in the metro and supply stands at 1.2 months (meaning that if not more listings came on the market, all existing listings would be sold within about 6 weeks).

With fewer new houses being built and land prices appreciating in closer-in neighborhoods, the cost of existing housing rises. In theory, the development of new luxury housing should be a net-positive for owners (and to a lesser extent renters) of older housing stock. In a process real estate economists call “filtering,” as previously fashionable housing ages, its relative affordability increases. The luxury apartments of the 1980s become today’s “workforce housing.” With one caveat — enough new high-end housing has to be built to satisfy demand. Otherwise, the value of the old-stock housing shoots up (see Silicon Valley).

But what happens when that higher-end housing replaces the old? When a duplex is replaced by two townhomes or even one single-family mansion? The anecdotal answer in the past decade or so has been something like this: Those with lower incomes filter into rentals in older, inner-ring suburbs while the middle-class seek homeownership further out into far-flung exurbs, leading to sprawl and segregation — both economic and ethnic.

With prices rising fast in closer-in neighborhoods, some long-disinvested neighborhoods have organized around anti-gentrification strategies like community land trusts that buy up land in high-demand neighborhoods, then develop housing that could be sold or rented for below-market rates. The goal in those cases is to preserve affordable housing in previously low-cost, historically redlined neighborhoods that have seen sudden increases in demand for high-end housing.

Preventing displacement in these neighborhoods rightly takes high priority because of the larger scale of affordability and existing community organizations and social networks. Neighborhoods and social networks are closely linked and influence life in countless direct and indirect ways. A recent Brookings Institution study of social networks within Charlotte noted that social networks in Charlotte were remarkably segregated, with 76% of white respondents reporting only other whites in their professional, social and family networks. Middle-class respondents had the largest and broadest networks. The wealthy had the smallest networks, but their networks were the most effective in providing information and assistance in job-seeking, educational decisions and homebuying. (Here’s a link to the study and my podcast conversation with study author Camille Busette)

This gets to the heart of the stagnation of economic mobility both in Charlotte and the US as a whole. And at the end of the day, social networks affect life outcomes. Where you live influences where you go to school. Because the strongest social networks are formed in educational institutions, where you go to school influences who you know. Who you know influences the opportunities that come your way. But social networks that don’t cross class or racial boundaries can be less effective, particularly for young people looking to move from working-class backgrounds into professional careers.

Ultimately, neighborhoods that don’t mix older and newer housing stock, will become more homogenous in building type, social class and race. You can see in many metros an emerging pattern of ultra-high-income neighborhoods and lower-income neighborhoods in cities, surrounded by middle-income suburbs.

This lack of daily, cross-class interaction undermines opportunities for information sharing and further hardens political and cultural divides. The admirable urban-planning goal of “15-minute neighborhoods,” where all life’s necessities are within a 15-minute walk, becomes a farce if the restaurant and grocery store workers that make it possible have to commute in from aging suburban apartment blocks.

It’s a complex problem rooted in land values, interest rates and zoning codes, but preserving neighborhoods with mixed-income residents and mixes of housing types should remain a priority. Otherwise we will end up with misguided attempts like this one that caught attention on urbanist Twitter over the weekend. A wealthy Boston suburb celebrating racial diversity while explicitly rejecting new housing that might result in class or economic diversity.

Matthew Petersen @meptrsn

In Hingham, a “YIMBY” group is forming, not to promote housing, but to encourage wealthy people of color to move to Hingham

I’ll take a look at some specific policies and case studies on mixed-income housing in future newsletters.

Economic analyst and storyteller. North Carolinian. #urbanplanning #economicdevelopment Subscribe to “Growth and Dreams” newsletter: chuckmcshane.substack.com

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