February 15, 2017

Housing and Opportunity

By: Arthur Acolin and Susan Wachter
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For much of U.S. history, moving to markets with better jobs has been a primary means for low-income workers to rise out of poverty and access opportunity. Recently, however, there has been a decrease in the rate with which workers have relocated to markets with better work opportunities. Average annual mobility has declined from nearly 20 between 1948 and 1980 to only about 10 percent in 2015 (U.S. Census 2016), which may be signaling a fundamental shift in the ability for workers to relocate to regions with greater job opportunities.

New research findings, which we document in our policy brief, "Housing and Opportunity," point to the role of housing costs in this decline. In the past, housing supply increased to accommodate population increases in areas with job growth.  Recently, however, housing supply has lagged behind demand nationally, and regions with above average job growth have seen faster rent and house price increases. Access to locations with high productivity jobs appears to be constrained by barriers to affordable housing.

This dynamic may result in persistent divergence in incomes across regions. A similar trend has occurred within regions, which have seen an increased spatial sorting of households by income. The increased importance of place and job clusters in the new knowledge-based economy may be a factor in both outcomes. The demand for housing by high skilled workers in tech clusters is driving up housing prices; less skilled workers experience lower wage gains than high skill workers when moving to higher opportunity areas and are thus crowded out of housing.

These trends may have long-term consequences for income inequality. Chetty (2016) describes intergenerational mobility as the ability of individuals to move beyond the socioeconomic status of their birth throughout their lifetime. Intergenerational mobility varies substantially across regions and, as we show, it has been historically higher in areas with access to affordable housing, a dynamic that may now be in question.

Policy options for localities and regions facing these new trends include those focused specifically on housing affordability as well as those designed to promote human capital development and skill training with the goal of improving employment outcomes. These and other options were discussed at length at a recent Philadelphia Federal Reserve Bank conference entitled "Reinventing Our Communities: Transforming Our Economies" as well as in a related set of papers, co-edited by William Lambe, Theresa Singleton, and Susan Wachter. Together, these papers, as well as our new policy brief, offer a blueprint for strategies that increase access to opportunity.

Policy Brief: Housing and Opportunity »

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