How a Tennessee Housing Policy Concentrates Poverty, Denies Opportunity

Latoya Akinyemi watches her youngest children as the warm-for-winter weather allows them to play outside on a Sunday afternoon.

Her 4-year-old son shows off his scooter skills on the driveway, stopping periodically to make sure he’s got spectators. His older brother rides his bicycle nearby, crashes into the grass and laughs. Akinyemi, who works in medical billing, likes living in the quiet Winsdor Pointe subdivision in Whitehaven. There’s little traffic to interrupt her kids’ play and relatively little crime.

But Akinyemi, who grew up nearby, isn’t as thrilled with the surrounding neighborhood. She and her husband see too many teens with too little adult supervision and too few constructive outlets, as well as decline in the neighborhood’s schools.

The Akinyemis and thousands of other Memphians live in neighborhoods with poorly rated schools and low incomes because of policy choices made by a little-known state agency. As part of a federal program, the Tennessee Housing Development Agency largely dictates in which neighborhoods affordable housing is built. In the last 15 years, THDA has awarded just over $2 billion to subsidize more than 200 low-income housing developments across the state, including Windsor Pointe.

Tennessee’s system for determining which developments receive subsidies makes it an outlier. Of the nation’s 20 largest states, only Tennessee and Florida don’t reward developers for building in middle-class neighborhoods or in neighborhoods that have amenities like grocery stores.

Without such incentives, known as Low-Income Housing Tax Credits or LIHTC, developers build where the land is cheap, test scores are low and poverty rates are high.

In Shelby County, these are almost always majority-Black neighborhoods. Because the developments have virtually no white residents, experts say the program perpetuates racial segregation.

Decades of research – including the THDA’s own – shows when affordable housing is built in higher-income neighborhoods, it improves residents’ health and economic opportunities.

But in the last 15 years, none of the 18 developments built or renovated with the credits in Shelby County are located in such neighborhoods, according to an analysis by MLK50: Justice Through Journalism.

And in recent years, when THDA’s staff proposed new policies that would push development toward such neighborhoods, the agency’s board of directors rejected them. Developers argued such changes would increase their costs, which could mean fewer apartments built.

The board, which has one Black member and five with ties to either the development or banking sectors, has opted to uphold the status quo.

In effect, THDA policy steers thousands of Black Memphians toward neighborhoods that are segregated and where research shows their children have little chance of reaching the middle class.

The THDA could direct affordable developers to other parts of town but chooses not to, said multiple experts, including Roshun Austin, a prominent community developer. She recently built housing with the LIHTC (lie-TEK) subsidy in Frayser, where the poverty rate is 42%.

While THDA sometimes talks about the benefits of having people of different income levels living side-by-side in mixed-income apartment complexes, its LIHTC policies make her question its commitment to economic desegregation.

“‘We don’t want (low-income people) in our mid-income areas.’ … [The THDA is] saying that loud and clear,” Austin said.

Where the Land Is Cheap

When developers build rental housing for the middle class, they place it in areas where they’ve determined that people want to live. A new apartment building in Midtown or Downtown has become a sure bet to attract tenants willing to pay top dollar, so that’s where the construction is.

For low-income housing, though, developers’ calculations are dramatically different.

Developers can only charge rental rates the federal government deems affordable for low-income Memphians. And because of the Grand Canyon-sized deficit of quality affordable housing, finding occupants is rarely a problem.

In this environment, developers hunt for cheap land, developers and experts told MLK50.

The problem is that the cheapest land often sits in the least desirable parts of town, said Adam Gordon, executive director of the Fair Share Housing Center in New Jersey. One of the largest tax credit projects in recent years, the Crescent Bluff Apartments, is sandwiched between two loud railroads and the busy E.H. Crump Boulevard. Two others sit in the shadows of I-55 in Whitehaven.

“(Tax credit developers choose) the sites that nobody else wants,” Gordon said.

Other states are increasingly forcing developers to build in places where people with means choose to live if they want to receive the tax credits. Massachusetts, for instance, places a major emphasis on the quality of nearby schools and proximity to jobs, leading to LIHTC developments throughout suburban Boston.

“It’s state policy that determines where people have the choice to live,” Gordon said.

Where the Test Scores Are Low

In interviews with MLK50, advocates for affordable housing in middle-class neighborhoods all pointed to the research of Harvard University economics professor Raj Chetty.

Chetty’s now-famous Opportunity Insights research shows a distressing connection between the neighborhood a child grew up in and how much they earn at age 35. For example, a 35-year-old who grew up in Whitehaven tends to make half the income of someone who grew up in the more affluent Germantown — even if both had low-income parents. Chetty and other experts refer to neighborhoods as “high-opportunity” or “low-opportunity,” depending on how well they set children up for economic success.

In Shelby County, the median household income is just over $52,000. However, in the last 15 years, THDA hasn’t granted a tax credit in a Shelby County census tract where low-income children would be expected to have household earnings of $30,000 per year by age 35, according to the research. That’s the equivalent of a single full-time worker earning about $15 an hour. Someone who grew up with low-income parents in the Akinyemis’ tract would be expected to earn about $20,000 per year at 35 – or about $10 an hour.

The Harvard economist’s work fits with other research that shows economically disadvantaged students have brighter futures when they attend low-poverty schools, thanks to the school’s quality themselves and the social network benefits of learning alongside the children of college-educated parents.

“Because of multiple levels of systemic racism … high-poverty areas are often the ones with the least educational resources,” Gordon said.

Before the pandemic interrupted standardized statewide testing, Tennessee evaluated public schools primarily using its Tennessee Value-Added Assessment System.

Here’s how TVAAS (TEE-vahs) works: Using a five-point scale, with five being the best, it measures how well a school improves its students’ knowledge.

For example, a school that helps a student move from a second-grade reading level to a fourth-grade reading level will score higher than a school that takes a student from a fourth-grade level to a fifth-grade level. TVAAS is designed to level the playing field between schools in under-resourced neighborhoods and those in wealthy suburbs.

For instance, Westside Elementary, which is in a Frayser census tract where the median household income is just over $35,000, received a 5 in the 2018-19 TVAAS rankings, the most recent year available. In a Collierville census tract where the median is just under $105,000, Tara Oaks Elementary received a 3.

Of the competitive credits the THDA has awarded in Shelby County in the last 15 years, it’s given 75% of them to projects where the neighborhood elementary school received a 1.

In other words, the State of Tennessee is awarding these credits next to the schools it’s rated as the worst at helping students improve.

The Developers Won

The THDA knows the ways its LIHTC system can harm low-income families.

In early 2021, it published five research papers on fair housing. In one, staff members Laura Swanson and Teresa Anderson write that placing affordable housing in high-poverty neighborhoods, through LIHTC or other means, “may exacerbate the incidence of poverty by pushing low-income households further from jobs, schools, and services, such as broadband access.”

In another, researcher Kevin McCarthy, who has since left the THDA, wrote that the lack of affordable housing in high-opportunity areas is a major impediment to fair housing in Tennessee and that targeting state programs to “opportunity-rich” areas would “expand housing choice for Tennessee families.”

In July 2020, the THDA staff sent the board a plan that would have evaluated projects based partially on the school quality, transit access, poverty and unemployment rates in the surrounding census tract.

“These are the factors real households use to evaluate housing opportunities,” said McCarthy in an email MLK50 obtained through a public records request.

Developers, though, fought back.

To learn how developers won and why the THDA’s system may run afoul of the Fair Housing Act, click here.

Thanks to MLK50: Justice Through Journalism for allowing us to republish this story.