High Costs and Segregation in Subsidized Housing Policy

Abstract

This article examines the public policies determining the distribution of subsidized housing in the Twin Cities metropolitan area of Minnesota, the resulting distribution of subsidized housing, and the comparative costs associated with building in the region's central cities or in suburbs. The analysis concludes that current policies are clearly not meeting the region's responsibility to affirmatively further fair housing. The metropolitan area abandoned its role as a national leader in this area decades ago. The result is an affordable housing system that concentrates subsidized housing in the region's poorest and most segregated neighborhoods. This increases the concentration of poverty in the two central cities, in the region's most racially diverse neighborhoods, and in the attendance areas of predominantly nonwhite schools. In the long run, this hurts the regional economy and exacerbates the racial gaps in income, employment, and student performance that plague the Twin Cities.

Keywords::

• low-income housing
• minorities
• community development
• suburban

Acknowledgments

The authors would like to thank a number of people who provided comments on drafts of this article, including Douglas Massey, Paul Jargowsky, Robert G. Schwemm, Florence Wagman Roisman, Elizabeth Julian, and Todd Swanstrom. Two anonymous reviewers also provided valuable comments, many of which were accepted. All opinions and any remaining errors in the article, of course, are the responsibility of the authors alone. Finally, we want to thank the Ford Foundation, the Kresge Foundation, and the McKnight Foundation for their ongoing support of our work.

Notes

^1. See Freilich and Ragsdale (1974a). The report was later published in the Minnesota Law Review (Freilich & Ragsdale, 1974b) with the following note: “This article is the result of a 1971–73 grant from the Met Council to Professor Freilich to study and recommend a legal policy for regional growth in accordance with the council's decision to pursue growth in a timed and sequential manner” (p. 1009).

^2. For the purposes of this work, the Twin Cities metropolitan area is defined as the region's seven central counties: Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and Washington counties. The HousingLink data set is limited to these counties, which contain the overwhelming majority of subsidized housing in the official 13-county metropolitan area.

^3. The analysis is for new construction only. An effective model of costs for rehabilitation projects would be impossible with the available data given how varied these projects are. The cost data are based on budgeted costs, and the data set was edited to exclude duplicated records resulting from revised budgets. In the case of duplicates, the most recent entry was used. The resulting sample of 166 projects is meant to capture all new construction projects that received MHFA funding. Cost data include total development costs—funding from all sources, including non-MHFA public funding and private money. The sample includes projects that received LIHTC funding only from MHFA as well as projects that received LIHTC funds from both MHFA and another regional suballocator. See Other Factors Leading to Greater Spending in Central Cities for a description of the suballocator system.

^4. This comparison is based on standardized coefficients shown in Table 6. Only the LIHTC and units per building coefficients exceed the Minneapolis and St. Paul coefficients (in absolute value).

^5. Nonprofit financial data are drawn from the Form 990s Aeon, Artspace, Twin Cities Habitat for Humanity, RS Eden, Commonbond, the Greater Metropolitan Housing Corporation, Project for Pride in Living, and the Community Housing Development Corporation for the year 2011, available at www.guidestar.com.

^6. This correlation is statistically significant at a 99% confidence level.

^7. See Loan & Acquisition Map, Twin Cities Community Land Bank, http://www.tcclandbank.org/downloads/Map-Property-Acquisition-and-Loans.pdf.

^8. All information on project costs and funding in the Franklin–Portland development is collected from a spreadsheet of proposed funding sources provided by MHFA.

^9. Information about the Franklin–Portland Gateway is from the City of Minneapolis Community Planning and Economic Development. http://www.ci.minneapolis.mn.us/cped/projects/cped_franklin_portland_gateway, last accessed 12/5/2013.

^10. See the HUD Empowerment Zone locator, available at http://egis.hud.gov/ezrclocator/.

^11. Income growth rates were not adjusted for inflation.

Additional information

Notes on contributors

Myron Orfield

Myron Orfield is a professor of law, the executive director of the Institute on Metropolitan Opportunity, and a nonresident senior fellow at the Brookings Institution in Washington, DC, and an affiliate faculty member at the Hubert H. Humphrey Institute of Public Affairs. He teaches and writes in the fields of civil rights, state and local government, state and local finance, land use, questions of regional governance, and the legislative process. For 2008–2009, Orfield was named the Julius E. Davis Professor of Law, and in 2005–2006, he served as the Fesler–Lampert Chair in Urban and Regional Affairs.

Will Stancil

Will Stancil is a researcher at the Institute on Metropolitan Opportunity. He holds a juris doctorate and a master's degree in public policy from the University of Minnesota and a master's degree in modern history from Queens University Belfast. He received his undergraduate education from Wake Forest University.

Thomas Luce

Thomas Luce, the Institute on Metropolitan Opportunity's research director, has a 25-year record of research on economic development and fiscal issues in American metropolitan areas. Most recently, he co-authored Region: Planning the Future of the Twin Cities, a book on development and planning issues in the Minneapolis–St. Paul metropolitan area. His other work includes three co-authored books on economic and fiscal issues in the Philadelphia metropolitan area, quantitative analysis of the effects of tax rate disparities on metropolitan growth patterns, research on the Twin Cities Fiscal Disparities Tax Base Sharing Program, and various pieces on other aspects of economic development in metropolitan areas.

Eric Myott

Eric Myott develops and conducts research projects at the Institute on Metropolitan Opportunity. Previously, he served as a geographic information systems specialist for six years with the institute. Myott has worked on Neighborhood Planning for Community Revitalization and Sustainable Lakes Projects, as well as on projects for St. Paul Water Utility Maps and Engineering. He has a bachelor's degree in geography from the University of St. Thomas, St. Paul, and a master's of geographic information systems from the University of Minnesota.