America may be turning 250, but its most prosperous neighborhoods are barely 25

Here’s a striking observation as the nation celebrates its 250th birthday: its most prosperous neighborhoods are barely 25 years old.

While America’s well-off places come in many forms and have many birthdates, when a neighborhood was built turns out to be a pretty good predictor of the level of economic well-being enjoyed by its residents. Generally speaking, our best-off neighborhoods are those with the shortest histories.

Youthful exuberance

Using measures of educational attainment, workforce participation, poverty, incomes, housing vacancies, and employment and business trends, EIG’s Distressed Communities Index (DCI) allows us to compare economic well-being across nearly every zip code in the United States.¹ In the DCI’s methodology, a neighborhood’s distress score is equivalent to a percentile based on its average rank across the seven metrics. Each quintile is then assigned a label from “prosperous,” for the top 20 percent, to “distressed,” for the bottom 20 percent.

Plotting distress scores against community ages reveals a distinct relationship between neighborhood newness and prosperity. As a rule, economic well-being runs higher in newer places and lower in older ones.

To approximate a neighborhood’s age, I used the American Community Survey to obtain the year its median residence was built — meaning an equal number of residences in the area are older and an equal number are newer. The line in the graph below shows the average distress scores for zip codes according to those median years, grouped by decade.²

The average zip code built out in the 2010s posts a distress score of only 16.7, firmly in the prosperous quintile. It stands more than 35 points ahead of the average zip code built out in the 1980s, and it enjoys a nearly 45-point lead over the oldest neighborhoods.³

Of course, new places aren’t the only ones that are well-off. There are plenty of prosperous zip codes that were built out in earlier decades. The median home was constructed in the 1970s or 1980s in 51 percent of all zip codes nationwide and in 42 percent of zip codes that score as prosperous on the DCI. Zip codes that combine both old and new housing stock can also register mid-century medians.

But the relationship between the age of homes in a neighborhood and the economic well-being of its residents is strong. The scatterplot below shows the year in which the median home was built for the average zip code in each percentile on the DCI.⁴ Newer places are more likely to be thriving communities in which the population enjoys high levels of well-being.

Heritage assets

The age of the housing stock offers a proxy for where the country channels its growth and investment. True, Agglomerations readers may be more likely than most to live in older neighborhoods that combine high-levels of well-being with a historical housing stock. But such neighborhoods are the exception. Nationally, for every one prosperous “historic” neighborhood — which I’ll define as a zip code in which the median residence was built in the 1940s or earlier — there are three categorized as distressed.

Stately Massachusetts manages to have more prosperous historic zip codes than distressed ones, although there are more housing units in distressed and historic parts of Fall River, New Bedford, and Springfield than there are in heritage corners of tony Brookline, Marblehead, or Newton. In California, the ratio between prosperous and distressed historic zip codes is balanced, with every Berkeley matched by a Stockton, and every Presidio by a Skid Row.

The picture is very different across much of the rest of the country.

Consider the city of Chicago. Of its historic zip codes, one prosperous spot lies at the heart of downtown and three “comfortable” zips (second quintile on the DCI) line Milwaukee Avenue as it extends northwest out of the city. Covering Wicker Park, Logan Square, and adjacent neighborhoods, these zip codes encompass some of the city’s trendiest enclaves. Yet they are far outnumbered by the 16 deeply distressed zip codes arrayed across the city’s South and West Sides with housing of similar vintages.

Or consider Ohio, where more than half of the state’s nearly one hundred historic zip codes are outright distressed. Only eight are prosperous, and only two of those are urban, covering the Hyde Park and Oakley neighborhoods in Cincinnati. Pennsylvania has 14 distressed historic zip codes for every one prosperous one, and Missouri 18. Florida’s only heritage zip code, just north of downtown Jacksonville, is distressed.

The determining factor, of course, is investment. Some historic neighborhoods have retained their value and received ample investment over the years in upgrades and rehabilitations. But this feat does not come easily for the typical neighborhood as its housing stock fades into obsolescence.

Building the American dream

The other way investment flows into a community is new builds. By definition, an old housing stock is synonymous with a lack of new housing construction. Where new housing gets built follows a distress-prosperity gradient, as people seek out amenities, opportunities, and high levels of well-being. But it also reinforces the gradient, by channeling new investment, new residents, and new incomes into already-growing and well-off places.

Consider two emblematic cities that have approximately the same population (~275k people) but couldn’t be more different: Buffalo, New York, and Gilbert, Arizona. The former is one of the most distressed cities on the DCI and has experienced long-term population decline, while the latter is one of the best-off boomtowns. Only 4 percent of all housing units in Buffalo have been built since 2000, and the median home in 15 of its 17 zip codes was constructed before 1940. In Gilbert, by contrast, 56 percent of all homes have been constructed since 2000.

In some ways, the comparison is unfair. Gilbert is part of the country almost completely unencumbered by history, while Buffalo suffers from the weight of it — saddled with legacies of segregation and deindustrialization. But it also points to a key fact: Unencumbrance makes it easier for new Sun Belt cities to thrive, just as the burdens of the past — which include zoning codes and other administrative accretion — make it harder for their Rust Belt cousins to renew. Housing is not the root cause of Buffalo’s travails, but speak with Rust Belt civic leaders, and a lack of the type of housing people want usually comes up quickly as a key barrier to their regeneration. A quality housing/quality workforce chicken-and-egg problem is one of several obstacles standing between them and renewal.

Economically distressed neighborhoods have less housing overall, and the housing they do have skews older.⁵ The below graph shows the count of all housing units constructed in each decade across all prosperous and distressed zip codes in the country (about 5,000 zip codes each). Very few housing units have been constructed in distressed communities in the past 15 years, and one-fifth of distressed community housing stock predates 1940. Top quintile communities are skewed in the other direction, with a preponderance of housing units built in more recent decades, and 36 percent since the turn of the millennium.

Where we build thus reinforces geographic inequality. Forty-one percent of all housing units built since 2020 have risen in prosperous communities. Only 8 percent have risen in distressed ones. These figures likely would have been even more skewed away from distressed communities absent the federal Opportunity Zones tax incentive.

The phenomenon does not only operate between cities or metro areas, but within them, too. Across the greater Dallas-Forth Worth metro area, 1.16 million new housing units have been constructed since the turn of the millennium. Of those, 677,000 have risen in prosperous zip codes, compared to just 72,500 in distressed zip codes. Suburban Dallas is home to five of the 10 fastest growing cities in the country, all of which are considered prosperous on the DCI.

Even in the country’s most vibrant growth pole, neighborhood age and well-being are closely linked. The median residence was built in 1974 in the typical distressed zip code in Dallas-Fort Worth, compared to 2001 in the typical prosperous one. Growth has occurred in distressed zip codes — the average one has welcomed nearly 2,100 new housing units since 2000 — but at about a quarter the magnitude of well-off parts of the metro area.

Rehabbing Pleasantville

Housing growth is part of the recipe that sustains high levels of well-being in a community.

Americans have always had a predilection towards the new, and new housing is no exception. New builds command a premium in the market. But when that preference for newness grafts onto a map of already-steep geographic inequality, and widespread variation in where new building is even possible, it becomes a dynamic that reinforces social and economic divides. Where we build impacts where we grow. Where we build affects where opportunity rises. The fact that building is so hard in many corners of the country is part of what contributes to the lack of economic opportunity in them.

Consider the country’s quintessential mid-century city, Los Angeles. Only five zip codes have had at least one-third of their housing stock constructed since 2000. Three cover downtown, representing the sorts of densely urban distressed zip codes that have absorbed growth in recent years. The fourth is Koreatown, an at-risk zip code (fourth quintile) that has densified its commercial corridor. And finally there’s Playa Vista, a master-planned district that arose on a massive old industrial site and was reborn as one of the most prosperous mixed-use corners of the city.

Such second leases on life are rare, even at much smaller scales than Playa Vista. But they do exist: in Highland Park, Denver, where single family neighborhoods abut riverine mixed-use districts; in Over the Rhine, Cincinnati, where reinvestment has revived one of the nation’s finest concentrations of Italianate architecture; in South Bend, Indiana, where new builds along the St. Joseph River are mirrored by new student housing adjacent to the University of Notre Dame; and in Washington, DC, where more housing units have risen along the Southwest Waterfront in the years since 2000 than were constructed in the 1960s.

But for every Georgetown or Beacon Hill, in which prosperity has endured across generations, the fact remains that the highest levels of well-being offered by the U.S. economy are much more typically found in wholly new places, like Playa Vista, Gilbert, or Dallas’s northern exurbs. That our best-off communities tend to have the shortest histories is in some ways a triumph of the suburbs, a uniquely American social innovation. But it also reflects a failure of more mature communities to retain the capacity to grow. Millions of Americans are mired in low-investment, low-opportunity neighborhoods, and many aging neighborhoods find themselves battling deteriorating social and economic conditions, because they are structurally and administratively unable to renew.

The tight connection between place and opportunity that pervades our society at the nation’s semiquincentennial surely would have shocked the nation’s founders. But patterns of growth and investment are not inevitable. Public policy choices, not just private economic calculations, help explain why the U.S. economy is much better at building prosperous communities from scratch than it is at sustaining prosperity in legacy neighborhoods. As the nation turns 250 years old, there’s much it can learn from its youngest places — and the older ones that have managed to rejuvenate.

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The Distressed Communities Index (DCI) is EIG’s flagship data tool for exploring geographic inequality in the United States. To learn more about the DCI, explore the interactive map, or download the data for your own use, visit: eig.org/dci.

1. The DCI combines seven equally-weighted measures into a single summary statistic for an area’s well-being relative to the rest of the country. For more detail on how the DCI is constructed, visit https://eig.org/dci-hub/.

2. Housing statistics are obtained from the American Community Survey’s 2019-2023 5-Year Estimates, tables used are B25034 and B25035.

3. We say a neighborhood was “built” or “built out” the year in which the median residential structure was built according to the American Community Survey.

4. The relationship is likely even starker, but data on the age of residential structures was not collected prior to the 1940 Census. As a result, the Census Bureau left-censors observations from earlier periods, meaning that anything built before 1940 gets lumped into a “1939 and earlier” bin.

5. To be fair, they have fewer people, too, and 14 percent of housing units stand vacant in the average distressed zip code, compared to 4 percent in the average prosperous one.