While the most common image of poverty is a high-rise public housing project, in fact many of America’s poor live in the very type of neighborhood where investment is impeded by current financing regulations. These are the neighborhoods with three and four story buildings, many with ground floor retail uses that predominate in many cities and in older, inner ring suburbs. The rapid growth in suburban poverty is hitting many of these former streetcar communities or older downtowns outside of the urban core. Limiting investment in these communities reinforces poverty in two ways. It reinforces a cycle of disinvestment that leads to deteriorating housing stock, fewer jobs, higher crime and worse schools. And by limiting supply and adding cost to what is built, it also puts greater pressure on housing prices in walkable communities with changing demographics.

Neighborhoods that are walkable are often not affordable. Not developing more affordable housing within denser, urban communities that are in high demand will result in higher rents and further displacement of lower income individuals from increasingly desirable, mixed-use urban communities. Recent analysis shows that gentrification is accelerating, with 20 percent of low income, low property value census tracts gentrifying since 2000, while only 9 percent gentrified between 1990 and 2000. Part of the answer is to increase supply in mixed-use walkable communities to put demand and supply in better balance. Less restrictive financing can also make it possible to provide housing at a wider range of price points. There will still be a need for subsidies to preserve and upgrade existing low-income housing and protect tenants, but making it easier to accommodate market demand also provides more opportunity for cross-subsidizing below market rents. And the majority of poor households receive no subsidy at all. Of households living below the poverty line, 70 percent do not live in housing units that benefit from Section 8 or Low Income Housing Tax Credits .

America’s poor urban neighborhoods need investment

While the risk of displacing low-income residents through new investment is real, continued disinvestment is worse for these populations. Bringing new development, and therefore a mix of incomes to these struggling urban and suburban downtowns can, in theory, increase school performance, revitalize public space, and increase investment in shops, restaurants and other amenities and services. Despite recent suggestions that cities are once again desirable and not as distressed as they were, there has been an increase in the number and geographic coverage of high-poverty neighborhoods since 2000. This can largely be attributed in part to the continuing expansion of suburban development, which has been pulling investment out of weak market cities. Poverty is also increasing most rapidly in the suburbs, especially in older, inner ring suburbs. A large proportion of these high-poverty neighborhoods are located in low-rise, mixed use areas, yet current housing regulations largely prevent investment in these locations.