Buying in an inclusionary neighborhood is on the nationwide spectrum of a positive return for buyers in dollars as well as quality of life and giving back to your community. Recent in-depth studies are indicating that living in an inclusionary neighborhood is providing payoffs for families of all socio/economic and ethnic backgrounds.
Follow these three tips if you are considering buying in a mixed neighborhood:
- Understand inclusionary neighborhoods and their impact on a city and on you and your family
- Search out lenders and agents to guide you when buying in an inclusionary neighborhood
- Identify inclusionary neighborhoods in your city
First of all what exactly is an inclusionary neighborhood (aka mixed neighborhoods). In a few words, they are neighborhoods that are diverse in mix of peoples and income levels. City Observatory defines inclusionary neighborhoods as: both diverse (having a mix of people from different racial and ethnic groups) and inclusive (composed of people from many different income groups). …we mean “diversity” in the strictest sense of the word: not as a synonym for “people of color” or any non-majority racial/ethnic group. A neighborhood that is composed entirely or predominantly of people from one racial or ethnic group is not “diverse,” whether the majority population is black, white or Latino. Similarly, we define a mixed income neighborhood as one with households from a variety of different income groups. Source: City Observatory
Inclusionary housing means different things in different cities/markets. New York, San Francisco, Boston, Nashville are hot markets. They are suffering from a lack of affordable housing.
Cities like St Louis, Detroit and Cleveland are soft markets. The issues in these cities are not a lack of affordable housing. These soft/weak urban markets are suffering from more and more high concentration of poverty. Some of the reasons for these high poverty neighborhoods has been brought about by governmental policies that are backfiring. For example the tax incentives for low income development that do not have housing policies/restrictions attached to them.
The impact of concentrated poverty areas on a community are many:
- High poverty neighborhoods lack jobs and networks that allow residents to find job openings. Research shows that children who grow up in high poverty areas have worse economic outcomes than children who grow up in other kinds of neighborhoods.
- Public services are inferior in neighborhoods of concentrated poverty resulting in a lower quality of life for the residents and an inability to attract residents and businesses that would contribute to the tax base. This is particularly poignant in the quality of the schools.
- Racial segregation is compounded in areas with high concentrations of poverty with blacks eight times more likely to live in these neighborhoods.
Cities have an important role to play in turning this around. Building great livable places encourages a concentration of talent that helps urban economies to thrive. Cities in weak market areas have some options for adopting an inclusionary housing policy/strategy in communities
- provide tax breaks and incentives to encourage market-rate development in distressed areas
- implement a geographically constrained mandatory program in high-cost parts of town with voluntary programs elsewhere
- phase in inclusionary requirements over a time period; ie start with an inclusionary set-aside of only 4% increasing each year to 20 percent by year five.
- create special property taxes to subsidize affordable housing
A recent study indicates that U.S. neighborhoods which became more socioeconomically diverse between 1970 and 1990, a full 90 percent of those neighborhoods were as diverse, or more diverse, in 2010.
Cutting to the bottom line, what exactly does buying in a mixed/inclusionary neighborhood mean to you and your quality of life. Findings of a study by City Observatory claim:
- integration gives more people better connections to jobs schools and civic resources
- integration is important from a fiscal perspective as it defrays the high costs to a city from the financial burdens of segregation
- it was found that socioeconomically mixed neighborhoods create opportunities for interactions between diverse cultures and diverse communities have a higher level of civic cohesion
- children who grew up in inclusionary neighborhoods were more likely to earn more than their parents
Joe Cortright, president of City Observatory, points to Raj Chetty and his colleagues at Opportunity Insights for their important research findings on inclusionary neighborhoods. For more information on their findings go the The Opportunity Atlas to explore data on specific cities across the United States.
Map from City Observatory showing America’s most diverse mixed income neighborhoods.
Just as it’s foolish to wait until a stock peaks before buying it, it can be foolish to wait until a neighborhood is established before looking to buy property. Aside from the benefits of buying when a market is low and reaping the financial benefits associated with living in a cheap neighborhood, living in a transitional area means having more free time, a healthier life and a neighborhood that is culturally diverse. Investopedia.com
Buying in an inclusionary neighborhood has some risks. One is finding a lender and an agent who know the ropes. (We will talk about this in the article on Tip #2 The importance of your lender and your agent when buying in an inclusionary neighborhood). Another is that, generally speaking, homes in these types of neighborhoods will need a lot of repairs. Another is that your insurance rates may be higher. US Mortgage Calculator
I practice what I preach. As an adult, I have never bought in anything but an inclusionary neighborhood and that is by design. I currently live in Skinker-DeBalivier and am in total love with it.