When Gareth and Mary Wilcock bought a home in the Mueller housing development, they weren’t thinking about their children’s future earning power. They just wanted a better home to raise a family.
At the time, Gareth Wilcock said, they lived in a $125,000 house in University Hills that was affordable but didn’t have a proper foundation or sewer. So, on a whim, he and Mary, who was pregnant with their first child, stopped in at Mueller to explore. They ended up buying one of the neighborhood’s new affordable housing units for $165,000.
In the decade since, Gareth’s real estate work took off, as did Mary’s event-planning business. The couple now has two children, and in April they moved into one of Mueller’s market-rate homes, buying it for about $430,000.
Given their recent success, the Wilcocks could’ve moved to a more exclusive neighborhood.
“I kind of drank the Kool-Aid,” Gareth said. “I like the fact that it’s mixed use as well as mixed income. It’s just a really cool place to be.”
While the mix of incomes at Mueller wasn’t a major factor in their decision to stay in the neighborhood, it might have a greater influence on their children’s economic future than either Gareth or Mary could have imagined when they first moved there.
In a groundbreaking study of intergenerational economic mobility — essentially, a child’s chances of climbing up the income ladder — economists at Harvard University and the University of California-Berkeley found that low-income children who grew up in mixed-income neighborhoods were more likely to rise higher than their counterparts in economically segregated areas.
The share of Austin residents living in mixed-income neighborhoods has dropped sharply over the past 40 years, related research shows. Increasingly, the area’s residents are separating out into low- and high-income neighborhoods, and that growing segregation of incomes could be a key factor in limiting a child’s economic success.
In Austin, children born to parents in the lowest fifth of national incomes had a 6.9 percent chance of moving to the top fifth by age 30, notably lower than other tech-savvy cities and lower than all but four Texas cities, according to the Equality of Opportunity project created by the Harvard and UC-Berkeley economists.
The research revealed “just how much variation there is in people’s ability to move up the income distribution in different parts of America,” said Alex Olssen, a pre-doctoral fellow at Harvard and research assistant on the project.
By identifying a range of environmental factors that predict greater or lesser economic mobility, the study cast a new light on the core American belief that our children will grow up to be more prosperous than we are. It suggests that the birth lottery — your parents and where you’re born — might have as much to do with your success as any personal attributes.
The researchers scrutinized dozens of factors, but none stood out in Austin as distinctly as the growing separation and isolation of rich and poor neighborhoods.
Among the 100 largest metro areas in the country, Austin had the ninth-highest level of income segregation in 2009, according to the latest data published by Stanford University sociology professor Sean Reardon and his research partners at US2010, a program that studies recent changes in American society.
If that segregation plays a key role in the upward mobility of Austin’s lower-income residents — and the data suggest it might — then the area’s growing scarcity of mixed-income neighborhoods could pose a primary threat to its economic stability in the years to come. And that, in turn, could further ratchet up the debate over affordable housing and other initiatives that could promote more economic integration.
“It’s not just how far apart the incomes of the rich and poor are, it’s how it becomes manifest in the communities within a city,” said Patrick Sharkey, a New York University sociology professor who studies issues of stratification and mobility.
‘Poor apart from the rich’
How much a higher rate of upward mobility would benefit the Austin economy is unclear. At present, Sharkey said, virtually no research exists to quantify mobility’s impact on the health of a city.
One intuitive argument suggests helping low-income children improve their standing would expand the tax base and reduce reliance on taxpayer-funded resources. But more directly, Sharkey said, promoting greater income integration helps prevent the calcification of low-income neighborhoods into areas of high crime, poor schools and a lower likelihood of children finding their way out — the kinds of issues that drain public resources.
“When the poor live apart from the rich,” he said, “it means that the nature of their communities starts to differ along multiple dimensions.”
In Austin and other major Texas cities, the separation of rich and poor neighborhoods has grown wider over the past three decades, tracking along with the region’s economic growth and evolution, according to Reardon’s data. Austin (9th), Dallas (5th), Houston (8th) and San Antonio (14th) all ranked among the most-segregated large metro areas in the country.
Immigration likely plays a role in that growing separation, said Steve Murdock, founding director of the Hobby Center for the Study of Texas at Rice University. The state’s large population of Hispanic immigrants tends to have lower incomes, and they tend to aggregate in common neighborhoods, Murdock said.
But the state’s booming population growth as a whole would likely lead to greater segregation as well, he said.
In Austin, the physical separation between rich and poor residents accelerated as its population grew, but also as the region’s economy started to transition from one based primarily on university and state government jobs to one fueled by high-tech entrepreneurialism.
From 1980 to 1990, around the time Austin was emerging as a tech hub, the metro area’s level of income segregation soared 24 percent as increasingly affluent residents moved to more affluent neighborhoods.
That affluence is concentrated in neighborhoods west of Interstate 35. According to data compiled by American Enterprise Institute researcher Charles Murray, eight of the ZIP codes to the west and southwest of downtown Austin qualify as what he calls “Super ZIPs,” meaning their combination of income and education levels rank in the top 95 percent nationally.
Mapping Murray’s data shows a sharp demarcation of high- and low-income neighborhoods — a bright line that runs right up the interstate.
In the past couple of decades, however, the nature of Austin’s economic segregation changed. What once was a story about growing affluence became a tale of both growing affluence and growing poverty.
Poor residents have become increasingly isolated in low-income neighborhoods, with the share of Austin families living in low-income neighborhoods growing to 19.2 percent in 2009 from 16.3 percent in 1990, according to Reardon’s data.
When mapped against the economic mobility research, the isolation of poverty could be especially troubling for Austin. The Equality of Opportunity team found that both the segregation of affluence and the segregation of poverty share a strong correlation with lower rates of mobility, but the growing separation between low-income and middle-income neighborhoods had an especially stultifying effect.
Essentially, Austin’s growing separation between its poor and its middle class has widened the distance between the lower rungs of the economic ladder.
“We’re more segregated from one another than we were 50 years ago,” said Jo Kathryn Quinn, executive director at Caritas of Austin, which works to put homeless residents into homes. “Now, it literally is possible to live someplace and never encounter someone who’s poor.”
‘Affordability as an asset’
Economists and sociologists have noted that the lack of shared experiences can allow neighborhood differences to calcify into lower-quality schools, fewer role models and connections, less green space, limited access to nutritional food and other amenities that can help promote a child’s development.
“In a very economically segregated area, you can still pass on advantages to kids in all kinds of ways, but the ability to afford a house in better neighborhood can get some people to a better place,” said Erin Currier, director of economic mobility research at the Pew Charitable Trusts. “A lower-income family can’t necessarily do that.”
And it’s becoming harder to do that in Austin. Median incomes have stagnated, while housing costs have soared — the latter fueled by the acute combination of a short supply of homes and a high level of demand for them.
“Those prices aren’t going to go down,” said Terry Mitchell, president of Momark Development. “They’re not going to go down until something happens … and demand bottoms out.”
Eldon Rude, principal at 360° Real Estate Analytics, agreed.
“We’ve created an unusual situation,” Rude said. “We’ve seen it before in Austin (during the tech bubble), but here it is again. … Will developers and builders catch up and will we see more moderation in pricing? Yes. When? It’s hard to say.”
In the meantime, efforts to encourage more mixed-income neighborhoods face little chance of success without the carrots and sticks of government intervention.
“People see it as helping out poor people and not as an investment in the city’s infrastructure,” said Kelly Weiss, president and CEO of Austin Habitat for Humanity. “That doesn’t just benefit the family who lives there, but the city’s housing infrastructure as a whole.”
One way to encourage economic integration is to preserve the region’s existing mixed-income infrastructure, particularly the multifamily housing units built around the 1980s, said Francie Ferguson, board president of the nonprofit HousingWorks of Austin. That could help maintain a stock of affordable homes throughout a range of neighborhoods.
“We have to be creative and view affordability as an asset,” Ferguson said, “just as we view heritage trees as an asset.”
‘Getting together socially’
Next to preserving the existing mix, new developments built from scratch offer another possible avenue for increasing a greater mix of incomes.
But in most cases — including Mueller — creating a neighborhood with a significant mix of incomes requires outside intervention, usually in the form of government incentives or requirements. In Mueller, the city wanted about 25 percent of the housing to be affordable and interspersed throughout the development, said Greg Weaver, an executive vice president with Catellus, which oversees the development.
Developers who worked on similar projects encouraged Catellus to intersperse the affordable and market-rate units and to craft design guidelines so the two types of housing would be indistinguishable, Weaver said. So he and his colleagues asked builders to construct both types of homes, hoping that requirement would result in a more consistent design.
“It was a bit of an experiment for us, and it has worked” for the builders and buyers alike, he said. “You know it’s probably an affordable home right next door to a market-rate home, and all these people are getting together socially and doing things together socially.”
For Gareth Wilcock, that has been bit of an adjustment. The British expatriate remains sensitive to class structure — a legacy, he says, of his upbringing in England. But he loves that his kids can interact and go to school with kids from diverse economic and cultural backgrounds, he said.
“There are four-plex houses where two of them are market rate and two of them are affordable,” he said. “If your kids are hanging out in the same building with people of (different incomes), I can’t see how it could possibly hurt anyone. The kids are just kids.”
Ultimately, the hardest way to develop more mixed-income neighborhoods is to set affordable housing in existing neighborhoods. For one, current zoning regulations — many of which were developed to help preserve housing values and neighborhood character — prohibit many of the types of housing projects that could facilitate more integration.
“The reason (income integration) doesn’t happen more in central cities is because that’s what all the machinery of our zoning rules is designed to prevent — people from going in and building smaller, denser units on the same amount of land,” said Chris Bradford, a local real estate attorney and a member of the CodeNext committee studying revisions to Austin’s development regulations.
For example, Bradford said, current rules often require a 7,000-square-foot plot be preserved as a single-family home, when it could house several smaller units that would attract buyers of different income levels. But changing those rules and inviting lower incomes into an area hits a nerve with existing homeowners, who want to protect their investments.
“They’re very risk-averse, because they have a large percentage of their net worth — both economically and psychically — tied up in these houses,” Bradford said.
For affordable housing advocates, that becomes a double whammy of sorts. Not only does the lack of development in more affluent neighborhoods prevent more mixing of incomes, it exacerbates the levels of segregation by forcing affordable housing projects into more low-income neighborhoods.
Ironically, it’s the gentrification of neighborhoods around the city’s urban core that has probably done more to mix incomes.
“We have a very narrow, limiting view of the word ‘gentrification,’” said Brian Kelsey, principal at Civic Analytics. “Gentrification usually means higher incomes in an area, which is really the right goal. But there are many ways to go about raising incomes that focus on existing residents to achieve mixed-income communities, not just through new people moving into an area.”
The move of more affluent residents into Austin’s traditionally low-income neighborhoods can bring social, business and other support networks that can help lift lower-income residents, said Weiss, of Habitat for Humanity. And it increases the potential for investments in parks, better schools, good grocery stores and other amenities that tend to promote greater economic mobility.
“You want mixed incomes because it helps people of lower incomes rise up,” Weiss said. “But, at the same time, if you have rampant displacement of people in East Austin with increasing housing prices and no backstop to keep low- or middle-income families in the neighborhood, that’s a problem.”
Like virtually every effort to foster more mixed-income neighborhoods, finding a beneficial balance of neighborhood gentrification would almost certainly require some form of government intervention. And, as with most public interventions, that raises cost-benefit questions, said Jon Hockenyos, principal of TXP Inc., an Austin economic consulting firm. Would it result in as much economic benefit as you’d pay to make it happen?
It’s too early to tell when looking at a development like Mueller or appraising the effectiveness of the city’s affordable housing bonds, and national researchers have yet to reach a conclusive answer to the question. But to some, the impact on the overall economy shouldn’t necessarily matter.
“I see economic mobility as an outcome in and of itself,” said Sharkey, the NYU sociologist. “It’s kind of a fundamental part of what Americans think our nation should be.”
Why it matters
Austin has one of the nation’s highest rates of income segregation among major U.S. metro areas. Increasingly, local residents are separating into low- and high-income neighborhoods. Research suggests this income segregation could lessen a child’s chances for upward mobility — meaning the issue could pose a threat to Austin’s economic stability in the years to come.
Local economic coverage
Dan Zehr writes about economics and finance for the American-Statesman, focusing on the region’s overall economic health and how that’s affected by specific trends and industries.