Income Inequality on the Rise

A report by Alan Berube and Natalie Holmes of the Brookings Institution, City and Metropolitan Inequality on the Rise, Driven by Declining Incomes, shows that income inequality in the United States is higher today than before the Great Recession. The report also notes that housing is less affordable for low income households in cities with higher levels of inequality.

Using data from the American Community Survey, researchers compared the ratio of households with the highest incomes (95th percentile) to those with the lowest incomes (20th percentile) from 2007 to 2014. The ratio of highest incomes to lowest incomes rose nationally during those years from 8.5 to 9.3, indicating a marked increase in inequality.

Of the 100 metropolitan areas examined, 57 saw inequality rise. In most of metropolitan areas where inequality rose, incomes dropped significantly at the bottom of the income distribution while remaining stable or dropping only modestly at the top of the income distribution. Income inequality in cities followed a similar pattern but, compared to metropolitan areas, fewer registered statistically significant changes. The largest increases in inequality for cities were observed in mid-sized cities such as New Haven, New Orleans, Boise, Knoxville, Stockton, and Cincinnati.

The authors also examined the relationship between income inequality and housing affordability across cities. They looked at the 20th percentile of rental costs as a percentage of the 20th percentile of household incomes and found that greater income inequality correlates with decreases in housing affordability for low income households. Additionally, the percentage of incomes at the 95th percentile correlated significantly with rental costs for low income households. This suggests that housing markets in cities with high inequality are more responsive to the demand for rental housing for higher income households and less responsive to the demand for housing affordable to lower income households. 

City and Metropolitan Inequality on the Rise, Driven by Declining Incomes is available at