Promoting Inclusive Communities: How Cities Can Utilize Local Housing Policy to Combat Economic Segregation

Significant attention has been paid in recent years to the alarming increase in household income inequality in the United States. However, neighborhood income inequality has been rising at an even faster rate. Across the top 264 metro areas in the U.S., neighborhood income inequality, as measured using an indicator of inequality known as the Gini Coefficient, increased on average in cities by 21 percent between 1970 and 2010, as compared to 13 percent for household income inequality. Two conceptually different processes contributed to this worrisome trend. First, household income inequality increased nearly everywhere, mostly due to factors outside the control of local policymakers – globalization, wage stagnation and earnings returns to skills, and changes in the national economy. Second, in many metropolitan areas, the sorting of households into neighborhoods on the basis of income – known as economic segregation – also increased. This brief reviews the rapid rise of neighborhood income inequality in the U.S. and discusses some of the housing policies and programs that municipal leaders are using to combat it.