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Why Do Higher Income Households Move Into Low Income Neighborhoods? Pioneering or Thrift?

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This paper offers several hypotheses about which US higher-income households choose to move into low-income neighbourhoods and why. It first explores whether the probability that a household moves into a relatively low-income neighbourhood (an RLIN move) varies with predicted household and metropolitan area characteristics. Secondly, it estimates a residential choice model to examine the housing and neighbourhood preferences of the households making such moves. Thirdly, it explores responses to survey questions about residential choices. Evidence is found that, in the US, households who place less value on neighbourhood services and those who face greater constraints on their choices are more likely to make an RLIN move. No evidence is found that households making RLIN moves are choosing neighbourhoods that are more accessible to employment. Rather, it is found that households making RLIN moves appear to place less weight on neighbourhood amenities than other households and more weight on housing costs.

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Sources: U.S. Census, American Community Survey, IPUMS-USA, University of Minnesota, U.S. Department of Housing and Urban Development Section 8/HOME Program Income Guidelines, NYU Furman Center

Moderately Rent Burdened Households (% of all, low-income, and moderate-income households)

The share of renter households whose gross rent made up at least 30 percent of their monthly pre-tax income.

Sources: U.S. Census, American Community Survey, US Department of Housing and Urban Development Section 8/HOME Program Income Guidelines, NYU Furman Center

Higher-Cost Refinance Loans (% of home refinance loans)

The percentage of loan originations, for the refinancing of an owner-occupied 1-4 family home, that were reported as “higher cost” under the Home Mortgage Disclosure Act.

Sources: Home Mortgage Disclosure Act, NYU Furman Center