Worlds Apart: Inequality between America’s Most and Least Affluent Neighborhoods

Source: Rolf Pendall, Carl Hedman, Urban Institute, Research Report, June 2015

Since households with higher income and wealth can live in more expensive houses, neighborhoods, cities, and metropolitan areas, one would expect that inequality among neighborhoods has increased in parallel with income and wealth inequality among households. This report uses the newly produced national Neighborhood Change Database (NCDB) to understand more about the magnitude of current inequality and inequality growth across the entire United States between 1990 and 2010. The NCDB reconciles both the changing boundaries of neighborhoods—defined as census tracts per their boundaries in 2010—and the changing definitions of the variables collected in successive US Census Bureau surveys of households so that researchers can study the same phenomenon over time in neighborhoods with fixed boundaries.

Usually, inequality among neighborhoods is based on income among households. But other aspects of inequality are also important and pervasive, like the distribution of wealth and human capital, which vary among neighborhoods just as they do among households. To get a more complete picture of geographic inequality, therefore, the Urban Institute used factor analysis to extract a single composite score from four of the NCDB’s indicators of advantage and disadvantage:
– Average household income, an indicator of purchasing power of households within the census tract
– Share with a college degree, an indicator of the “human capital” of the tract’s residents
– Homeownership rate, an indicator of the extent to which the tract’s residents have access to this source of wealth
– Median housing value, an indicator of the wealth of the tract’s homeowners—who generally have more wealth than renters