Market-Savvy Housing and Community Development Policy: Grappling with the Equity-Efficiency Trade-off

This chapter addresses how housing policies to combat segregation often fail to consider housing market strength, which varies significantly within and between metropolitan areas. In weak housing markets, policymakers should not focus on increasing the housing supply but on building market demand. This is very difficult in the weakest markets, and it often makes more sense to encourage residents to move to better neighborhoods. Housing development funds should be concentrated on “middle neighborhoods”—areas where the market is still healthy but there is a threat of decline. Middle market strategies to improve market confidence can be highly effective. By contrast, it makes no sense to invest scarce development funds in strong market neighborhoods. Instead, cities should help low-income households to stay or move into these high-opportunity areas. The chapter concludes by arguing that policymakers who embrace the build-on-strength approach advocated here need to take into account how racist practices have unfairly trapped minorities in weak market areas.