When Opportunity Moves to You: Housing Deregulation and the Distribution of Child Outcomes

• In Event: Housing and Human Capital

Abstract

A large literature documents the economic benefits of moving children to low-poverty neighborhoods. However, it is not clear if children will benefit when their current neighborhood improves around them, especially for households paying market rents. I study how neighborhood revitalization affects incumbent children, focusing on a 1998 Houston housing reform that incentivized building single-family homes downtown. These new homes proved popular with affluent, college-educated households, spurring broader patterns of downtown gentrification. I estimate that the reform increased median household incomes by ten percent, rents by seven percent, and home values by 28 percent.

Using administrative data from the US Census Bureau and the Texas Education Agency, I examine impacts on children's long-run human capital, economic self-sufficiency, and criminal justice involvement. To do so, I compare children in downtown Houston to observably similar children in observably similar baseline neighborhoods in other large Sun Belt cities. I estimate difference-in-differences regressions that use children in untreated parts of Houston to account for baseline differences in outcomes between cities.

I find divergent effects depending on household tenure. Renters moved out of revitalized areas to avoid higher rents, meaning their children grew up in similar neighborhoods as untreated individuals. In contrast, homeowner children lived in better neighborhoods and parent home equity increased.As a result, young renter children had worse labor market outcomes due to disruption costs, with early-career earnings lower by more than 20 percent. Owner children attained more education and had better early-career labor market outcomes. However, they were also charged with crimes at higher rates, which is most likely explained by increased policing in gentrified areas.

Lastly, I study the implications of these findings for housing policy. Using a neighborhood choice model and estimates of the reform's effects on chlidrens' prime-age earnings, I estimate that the reform improved the well-being of incumbent homeowner households by more than $8,000 per year but led to welfare losses for incumbent renters of more than $4,000 per year. Because inner-city homeowners are also relatively low-income, a local policymaker would need to place disproportionate weight on the outcomes of renter households for the reform to be considered welfare-reducing overall. These findings highlight the limits of place-based policies in equitably expanding access to high-opportunity neighborhoods, as well as the trade-offs faced by policymakers aiming to revitalize downtown urban cores.

Author

• Micah Y Baum, University of Michigan
  Presenting Author