U.S. Department of Housing and Urban Development 

The State of 

theCities 

1998 

June 1998

Andrew Cuomo, Secretary YOUR COMMUNITY PARTNER 
Executive Summary


In early 1997, President Clinton asked the U.S. 

Department of Housing and Urban Development 

(HUD) to examine two questions. First, as we come 

to the close of a century that saw the rise of many 

of America’s great cities, what is the state of those 

cities today? And second, what more can the 

Clinton-Gore Administration do to prepare our 

cities to meet the economic and social challenges 

of the future? 

In response last 

year, HUD’s 1997 State 

of the Cities report 

found both cause for 

optimism and reason for 

concern. The good news 

was that after two 

decades of decline, 

America’s cities were on 

the rebound. A strong 

national economy— 

combined with the innovation of a new breed of 

mayors and the success 

of the Administration’s targeted first-term urban 

agenda—left many cities fiscally and economically 

stronger than they had been in years. The bad 

news was that these same cities faced several 

structural challenges—on concentrated and 

growing poverty, on the job disparity between 

cities and suburbs, and on middle-class migration 

from the cities—that could eventually undermine 

the long-term success of urban America. This 

report finds that these problems didn’t happen 

overnight, and they won’t be solved overnight— 

but they must be addressed if America is going to 

thrive in the 21st century. 

This second annual report, The State of the 

Cities: 1998, picks up where last year’s report left 

off. It does so at a time of renewed appreciation for 

the role cities play in our national success. 

“To pr e America for the 21st 

centur 

communities....Our growing 

economy has helped to revive 

poor neighborhoods. But we 

must do more to empower them 

As the President noted in his 1998 State of the 

Union Address, “Cities are the vibrant hubs of great 

metropolitan regions.” This fact was illustrated in 

a recent report by the U.S. Conference of Mayors 

and the National Association of Counties, which 

showed that metropolitan areas have generated 

86 percent of the Nation’s total economic growth 

since 1992, 84 percent of all jobs—and are home to 

85 percent of our people. Perhaps more than ever, 

the fates of city and suburb are closely tied. 

It is now—when the economy is humming, 

our communities are growing, our Federal budget 

is balanced, and our Nation is at peace—that we 

should examine the state and fate of America’s 

cities. How America responds to the challenges 

articulated in this report will depend in large 

measure on how Congress responds to an Administration budget that goes a long way toward meeting 

those challenges. This report has three main 

findings: 

✦	 Finding #1: Driven by a robust national 

economy, cities are fiscally and economically 

the strongest they’ve been in a decade. 

✦	 Finding #2: Despite recent gains, cities still face 

the triple threat of concentrated poverty, 

shrinking populations, and middle-class flight 

that began two decades ago. 

✦	 Finding #3: Cities face three fundamental 

opportunity gaps—in jobs, education, and 

housing—that are critical to reducing poverty 

and attracting and retaining middle-class 

families. 

These three findings and President Clinton’s 

response to each are outlined in more detail below. 

iii 
Executive Summary 

Finding #1: Driven by a robust 

national economy, cities are 

fiscally and economically the 

strongest they’ve been in a 

decade. 

Time magazine recently said that “the U.S. 

now enjoys what in many respects is the healthiest 

economy in its history, and probably that of any 

Nation, ever.” Driven by a prudent strategy of fiscal 

accountability balanced with targeted investments, 

the national economy is experiencing an unprecedented run of economic expansion. The budget 

deficit had 11 zeroes at the beginning of 1993, but 

the budget is now in surplus, with surpluses 

projected for the next 5 years. More than 16 million 

new jobs have been created in the past 5 years, and 

unemployment is at a 28-year low. Since 1993, 

incomes have been growing for all income groups 

but fastest for those at the bottom of the income 

ladder. And low interest rates combined with 

steady economic growth last year produced the 

highest homeownership rate in history. 

While significant gaps remain, cities now are 

sharing in America’s economic comeback: 

✦	 National economic progress is steady and 

strong. 

—	 The economy has produced 16 million 

new jobs and record low unemployment. 

Incomes are rising, particularly among those 

at the bottom of the economic ladder. 

—	 Regional economies, with cities at their 

center, are now the primary engines of 

national prosperity. 

✦	 Jobs are growing and unemployment is 

falling in central cities. 

—	 Central city employment is on the rise. 

Between 1993 and 1998, the number of 

employed workers living in central cities 

increased by 10.4 percent, or by almost 

3.7 million people. 

—	 Central city unemployment rates have 

fallen. Unemployment in central cities fell 

to an average of 5.3 percent in March 1998, 

down from 8.2 percent in March 1993. In 

some cities—such as Austin, Charlotte, 

Phoenix, and San Jose, for example— 

unemployment is now under 4 percent. 

—	 Increased job opportunities in the cities. 

From 1991 to 1994, only 13 percent of the 

new low-skilled jobs were created in central 

cities. From 1994 to 1995, that number 

jumped to 34 percent. 

—	 Central city poverty rates are falling. 

Poverty rates for central cities have fallen 

from 21.5 percent in 1993 to 19.6 percent 

in 1996. For African-Americans, who have 

historically experienced high rates of 

poverty, central city poverty rates have 

fallen from 35.8 percent in 1993 to 31.0 

percent in 1996—the lowest level in 22 

years. 

✦ Cities are improving as places to live. 

—	 Many downtowns are experiencing a new 

renaissance as centers of tourism, sports, 

entertainment, and the arts. Cities as 

diverse as Baltimore, Cleveland, Denver, San 

Antonio, Seattle, and Washington, D.C., are 

becoming new destinations for tourists 

and residents of the larger regions. 

—	 Virtually every city in America has a 

stronger balance sheet today than it did 

a decade ago. A recent survey by the 

National League of Cities found that twothirds of participating cities reported that 

they “were better able to meet city financial 

needs” in fiscal year 1997 than in the previous year—and all but 3 of the 77 largest 

cities had investment-grade bond ratings 

that enabled them to borrow funds at 

favorable rates. 

—	 Crime rates—particularly for violent 

crime—have plummeted for 6 years 

straight. Nationwide, violent crime dropped 

an estimated 27 percent between 1991 

and 1997 and by 19 percent in large cities 

iv 
The State of the Cities 1998 

between 1993 and 

1997. During the first 

6 months of 1997 

alone, the rate 

dropped by 6 percent. 

— Public perceptions 

are changing. In a 

recent survey by Money 

magazine, the Washington, D.C., metro area 

was listed as the most 

“livable” community on 

the East coast—countering the trends over the 

past 10 years, when 

small towns often received the most attention. And U.S. News and 

World Report recently 

called attention to the 

growing number of “smart 

cities” that are leaner, 

more strategic, and more focused on sustainable growth. 

✦ Homeownership is on the rise. 

—	 City homeownership rates are at their 

highest level in 15 years. While there is still 

more work to do to reduce the 

homeownership gap between central cities 

and suburbs, half of all central city households owned homes in 1997—representing 

an increase of approximately 1 million new 

homeowners since 1994.1 

Administration Response: The President 

plans to continue on the course of fiscal prudence 

in three ways: (1) by preserving any budget surpluses until Social Security is reformed for the 21st 

century; (2) by adhering to a strategy of targeted 

investments in America’s people and communities; 

and (3) by continuing to reinvent and streamline 

the Federal Government to be a better, more 

effective partner for America’s communities. 

Finding #2: Despite recent gains, 

cities still face the triple threat 

of concentrated poverty, 

shrinking populations, and 

middle-class flight that began 

two decades ago. 

✦	 Central cities’ share of metropolitan populations continues to decline. Although most 

central cities continue to grow slowly, only 11 

of the 30 largest cities in 1970 have more people 

in them today than two decades ago. These 

population losses frequently translate into a 

shrinking municipal tax base. Population 

changes often reflect regional variation. While 

older industrial cities in the Northeast and 

Midwest—including Philadelphia, Washington, 

Detroit, and Chicago—continue to see their 

populations shrink, more “elastic cities” in the 

West, such as Las Vegas, Albuquerque, and 

Phoenix, continue their sharp population climb. 

✦	 Middle-class families are still leaving central 

cities. Since 1970, nearly 6 million middleincome and affluent families have left central 

cities. At the same time, between 1985 and 1995, 

the number of high-income families (defined as 

150 percent of median) that located in suburbs 

grew by 16 percent, compared with just 

2 percent for central cities. When asked why 

people are leaving cities, two answers most 

commonly cited are the poor quality of urban 

schools and the relatively high rates of urban 

crime. 

✦	 Poverty in cities is higher than in the 

suburbs. While overall poverty rates have 

dropped, poverty is more concentrated in 

distressed urban areas. Despite a drop in 

central city poverty rates between 1993 and 

1996, 1 in every 5 urban families lived in poverty in 1996, compared with fewer than 1 in 10 

suburban families. And there is a growing 

dichotomy in rates of minority poverty. While 

the rate of African-American poverty is at its 

v 
Executive Summary 

lowest level in history, poverty in cities disproportionately affects minority populations— 

72 percent of the poor in cities are minority. 

✦	 Poverty remains highly concentrated in 

certain neighborhoods. The persistence of 

discrimination in the housing market leads to 

discrimination in our cities. Even if people are 

not poor themselves, they are likely to live in 

tracts of concentrated poverty. Indeed, almost 

one in four African-American and Hispanic 

residents of central cities live in census tracts 

where more than 40 percent of their neighbors 

are poor, compared with only 3 percent of the 

white urban population. Such high-poverty 

areas are often plagued by severe social dysfunctions such as violent crime and drug abuse, 

as well as family problems such as teenage 

pregnancy. 

Administration Response: A three-part 

strategy concentrated on using incentives to bring 

jobs and businesses back to central cities, improving urban schools, and promoting homeownership 

and affordable housing is articulated in detail in the 

following section. 

Finding #3: Cities face three 

fundamental opportunity gaps— 

in jobs, education, and 

housing—that are critical to 

reducing poverty and attracting 

and retaining middle-class 

families. 

(A) Cities Face a Jobs Gap 

While more jobs are being created in cities, 

there is still a sizable but manageable mismatch 

between the number of low-skilled jobs and the 

number of low-skilled urban residents who need 

work. The coordinated efforts of all levels of 

government, along with the private sector, are 

needed to address this challenge. 

✦	 The challenge facing America’s cities. While 

projecting job gaps is difficult, one effort to do 

74 urban counties over the next 5 years, with 

substantial variation among areas. This report 

further estimates that across these 74 urban 

areas, the number of current welfare recipients 

who will need jobs over the next 5 years could 

exceed the growth in low-skilled jobs by 

353,000. 

Projections of these job gaps vary; in any case, 

the challenge is to create the kinds of jobs 

needed in the places where people need them 

most and to help urban residents take advantage of these job opportunities. This challenge 

is not insurmountable. For example, in the 

period 1991 to 1994, only 13 percent of the new 

low-skilled jobs were created in central cities, 

compared with 34 percent from 1994 to 1995. 

✦	 Minority youth unemployment remains high. 

The unemployment rate for minority youth 

(ages 16 to 19) was 26 percent in central cities 

in May 1998—five times the Nation’s overall 

unemployment rate. 

✦	 There is a wider wage gap. While progress has 

been made on the wage gap over the past few 

years, we haven’t regained what we lost over 

the past 20 years. Over the past two decades, 

earnings inequality widened as the inflationadjusted wages of low-skilled workers declined 

and the wages of high-skilled workers increased. 

According to a recent report by the U.S. Department of Labor, from 1982 to 1996, the inflationadjusted hourly wages of workers in the top 

so is a forthcoming report 

from the U.S. 

Conference of 

Mayors 

(USCM). With 

job forecasts 

prepared by 

Regional 

Financial 

Associates, the 

USCM projects 

that there could 

be two job 

seekers for each 

low-skilled job in 

but 

s mission is 

vi 
The State of the Cities 1998 

one-tenth of the workforce increased from 

$24.80 to $25.74 an hour while wages for workers in the bottom one-tenth of the workforce fell 

from $6.28 to $5.46. Adjusting for benefits added 

further to the growth of earnings inequality. 

✦	 People can’t get to the jobs. Transportation to 

entry-level jobs in the suburbs is a substantial 

barrier. In Boston, for example, 98 percent of 

welfare recipients live within one-quarter mile 

of a bus route or other mass transit stop, but 

only 58 percent of potential entry-level jobs in 

the Boston metro area are within 1 mile of mass 

transit. 

✦	 The lack of affordable child care hits central 

cities hard. Safe and affordable child care is 

necessary to allow parents to work. However, 

nationwide, only 10 percent of the families 

who qualify for Federal child care assistance 

receive help. Many cities have tens of thousands of families on waiting lists for child care 

assistance. 

Administration Response: The President’s 

budget includes several important initiatives aimed 

at reducing the low-skilled jobs gap by creating 

jobs where people live and by connecting people to 

the places where jobs are being created. To create 

jobs, the President has proposed a new Community Empowerment Fund, administered by HUD, 

which will help create an estimated 280,000 jobs 

alone. He has also proposed increased funding for 

the Community Development Financial Institutions Fund and creation of a second round of 

Empowerment Zones. And he has proposed 

extending the welfare-to-work tax credit, the work 

opportunity tax credit, and the brownfields tax 

incentive. 

In addition to these budget initiatives, the 

President has called on the private sector to 

expand its efforts in response to welfare reform. In 

May 1998, he challenged the private Welfare to 

Work Partnership to double its number of business 

partners to 10,000 and to double the number of 

people these businesses hire from the welfare rolls 

to 270,000 in 1998. 

To connect welfare recipients to jobs, the 

President has proposed $283 million for 50,000 

Welfare-to-Work Housing Vouchers. His Access to 

Jobs transportation initiative to help welfare 

recipients and other low-income workers get to 

their jobs was recently enacted as part of the 

Transportation Equity Act for the 21st century 

(TEA21)—the reauthorization of ISTEA.2

 In addition, the President recently released the first round 

of 49 Welfare-to-Work competitive grants from the 

U.S. Department of Labor to help local communities 

move the hardest to place welfare recipients into 

employment. Welfare-to-Work funds are also being 

provided to local communities through formula 

grants to States, which are in turn administered by 

local Private Industry Councils. 

The President has proposed other job support 

and workforce development initiatives that would 

enhance employment opportunities. He has proposed a $250 million Youth Opportunity Areas 

Initiative to increase employment for out-of-school 

youth in high-poverty areas. In addition, the 

President has proposed investing more than 

$20 billion over 5 years in a new Child Care Initiative to expand the availability, affordability, and 

quality of child care. The President also has proposed a G.I. Bill for America’s Workers to consolidate and streamline activities in the Job Training 

Partnership Act and empower adults to make 

better choices for job training services. 

(B) Cities Face an Education Gap 

Urban schools are failing to prepare an 

alarming number of America’s children to meet the 

challenges of the new high-technology economy, 

and—disproportionately—minority children are 

paying the highest price. In many cases, the poorest schools are serving the children with the 

greatest needs, and have the fewest resources— 

both financial and functional—to do so. More than 

81 percent of urban schools have a student population that is at least 70 percent poor and 50 percent 

minority. In addition, many urban schools have 

trouble recruiting teachers to keep class sizes small 

and teaching quality high—and too many schools 

have seen standards erode as systems of “social 

promotion” graduate students who lack basic skills. 

✦	 Basic achievement is lagging—especially in 

high-poverty inner-city schools. In both 1994 

and 1996, 60 percent of the children in urban 

vii 
Executive Summary 

school districts failed to achieve basic levels 

of competency in reading and math on the 

National Assessment of Educational Progress.3 

For children in high-poverty urban schools, 

outcomes were even worse: 77 percent failed to 

achieve basic competency levels in reading, and 

67 percent failed to achieve basic levels of 

competency in math. 

✦	 Low graduation rates in urban high schools. 

In the Nation’s 20 largest urban school districts, 

more than half of all students never graduate. 

For millions of urban youth, finishing high 

school and attending college seems an impossible dream—this in an era demanding high 

skills for high wages. 

✦	 School violence is concentrated in large 

urban schools. Though school violence is not 

just an urban problem, violent attacks and 

fights are much more common in city schools, 

especially large ones, than they are in suburban 

schools. In a national survey, 1,800 urban 

schools reported more than 5,400 fights in 

which weapons were used during the 1996–97 

school year. 

✦	 Many urban schools are crumbling. A sizable 

proportion of urban schools are literally falling 

apart. A recent General Accounting Office 

(GAO) study found that 38 percent of central 

city schools (serving more than 5.5 million 

students) had at least one inadequate building 

and two-thirds (with more than 10 million 

students) had at least one inadequate building 

feature, such as a roof or plumbing.4 

Administration Response: Urban education 

is a major priority in the President’s budget. 

Proposed initiatives include the creation of Education Opportunity Zones to direct $1.5 billion over 

5 years to low-achieving school districts in highpoverty areas; Federal tax credits to pay interest on 

an estimated $22 billion in School Modernization 

Bonds to rebuild and repair schools; $413 million 

for America Reads, a national campaign to increase 

children’s literacy; $140 million for High Hopes to 

launch a national effort to help young people 

prepare for post-secondary education; and 

$7.3 billion over 5 years to raise educational 

achievement by hiring new teachers and reducing 

class size in grades 1 to 3. 

With so many of the better jobs in today’s 

economy requiring post-secondary education, 

Administration policies, including HOPE Scholarships and Lifetime Learning Credits, the largest 

Pell Grant in history, and universal eligibility for 

subsidized loans, have made financial access to 

post-secondary education possible for everyone. 

(C) Cities Face a Housing Gap 

The Nation’s affordable housing crisis has 

reached record levels, especially in central cities. 

At the same time, while homeownership is at its 

highest level ever, the central city homeownership 

rate continues to lag significantly behind the 

suburbs. 

✦	 Urban homeownership—including middleclass homeownership—lags behind the 

suburbs. Homeownership rates are 70 percent 

in suburbs but just 50 percent in cities. According to data from the 1995 American Housing 

Survey presented in the Harvard University 

Joint Center for Housing Studies’ annual report, 

The State of the Nation’s Housing 1997, central 

city residents of all income levels are less likely 

to own a home than suburban residents with 

similar incomes. The Harvard report found, for 

example, that among moderate-income households, 71.3 percent of suburban residents own 

a home compared with just 51.8 percent of 

central city residents at the same income level. 

✦	 Racial discrimination at all income levels 

adds to the urban homeownership gap. The 

Harvard University Joint Center data also 

document that African-American and Hispanic 

households of all income levels are less likely 

to own a home than white households of the 

same income group. This racial gap persists, 

even among households with incomes that are 

20 to 50 percent higher than area median. While 

78.3 percent of white households in this income 

group owned homes, the share for AfricanAmericans is only 62.7 and for Hispanics, only 

64.5 percent. Home Mortgage Disclosure Act 

(HMDA) data show substantial differentials in 

viii 
The State of the Cities 1998 

the mortgage denial rates between whites and 

minorities—and between city and suburban 

residents. The Harvard study concludes that 

such differentials result in part from “prejudicial 

lending and housing market practices still 

plagu[ing] some areas of the country.” 

✦	 Worst case housing needs are at a record 

high. Despite robust economic growth, between 

1993 and 1995, a record 5.3 million very lowincome renters paid more than 50 percent of 

their income for rent or lived in substandard 

quality housing—commonly referred to as 

“worst case housing needs.” 

✦	 Central cities are hardest hit. Households 

with severe housing problems are disproportionately found in central cities: 18 percent of 

central city renters—a total of 2.8 million 

families—have severe housing problems. 

✦	 Worst case needs increasingly affect the 

working poor. Between 1991 and 1995, worst 

case needs for families with at least one 

person earning a full-time paycheck rose by 

265,000 families—an increase of 24 percent. 

✦	 There has been a sharp decline in affordable housing. Between 1993 and 1995, there 

was a loss of 900,000 rental units affordable 

to very low income families—a reduction of 

9 percent. There was an even greater reduction 

of 16 percent in the number of units affordable 

to extremely low-income renters, who are 

people earning less than 30 percent of an area 

median income. 

✦	 Congress has provided no new housing 

vouchers to families on the waiting list for 

housing assistance since 1994. Until then, for 

as long as housing records have been kept—no 

matter what state the economy was in or who 

occupied the Oval Office—America had always 

increased its supply of affordable housing. 

✦	 Homelessness continues to plague our 

Nation’s cities. Driven by a lack of affordable 

housing, inadequate access to decent jobs, 

and myriad problems ranging from mental 

illness and substance abuse to domestic violence and outdated or nonexistent job skills, 

homelessness continues to be a challenge to 

cities across the Nation. Best estimates suggest 

that 600,000 men, women, and children are 

homeless on any given day, with several times 

that many persons experiencing homelessness 

each year. 

Administration Response: The President’s 

budget includes a range of proposals to expand 

homeownership, expand rental housing assistance, 

and reduce homelessness. These include an 

additional 100,000 Section 8 housing assistance 

rental vouchers; a new HOME Bank that will 

expand the use of HUD’s successful HOME housing 

block grant funds; another round of Homeownership Zones; record amount of funding for Homeless 

Assistance programs; a 40 percent expansion of the 

Low-Income Housing Tax Credit; increased promotion of Fair Lending; expansion of the Federal 

Housing Administration (FHA) loan limits, which 

will enable central city mixed-income development 

to help attract more middle-class families back to 

central cities; and a 73 percent increase in funding 

for fair housing education and enforcement. 

Building Safe, Secure, and 

Sustainable Communities 

In addition to closing opportunity gaps in 

the areas of jobs, housing, and education, the 

President’s FY 1999 budget includes several important initiatives that will strengthen the environment 

and improve the quality of life in our cities. These 

include cleaning up and redeveloping brownfields, 

improving access to health care, continuing support for local efforts to prevent and reduce crime, 

and ensuring that there is a level playing field and 

equal opportunity for immigrants and minorities. 

Conclusion 

In our cities, we still see America’s greatest 

problems. The great progress we’ve made in the 

past few years causes us to believe we can solve 

the remaining problems if we direct sufficient 

attention, commitment, and resources to doing so. 

After more than two decades of wrenching 

change that undermined both the economic and 

ix 
Executive Summary 

social foundations of America’s cities, 1998 finds 

most cities as financially strong as they have been 

in years. America’s central cities—and the metropolitan areas that surround them—have helped fuel 

the most aggressive economic expansion in our 

Nation’s history. Jobs, homeownership, and consumer confidence are all up. Crime, unemployment, 

and inflation are all down. 

At the same time, many of the old challenges 

remain—poverty, middle-class flight, and shrinking 

populations. The divisions in urban America are 

still strong, but they are no longer strictly black 

and white. Urban America today is Korean, Dominican, Mexican, and Latvian, among many others— 

the greatest influx of new immigrants in nearly 100 

years. Today, more than 100 languages are spoken 

in Los Angeles schools, and 140 different racial and 

ethnic groups live in Detroit and Wayne County, 

Michigan, alone. The complexity of this new 

melting pot casts a light on three serious but 

surmountable gaps facing cities at the turn of the 

21st century—namely, how we work, how we are 

educated, and how and where we live. 

The primary observation of the President’s 

“One America” Race Initiative—that the great 

unfinished work of democracy is the creation of a 

true union, a single society—takes on new urgency 

as well. Thirty years ago, there were 10 people 

working for every 1 person living on Social Security. 

Within 10 years, there will be just three people 

working for every one person living on Social 

Security—and those three people are more likely 

than ever before to speak a different language at 

home or come from a different country. At a time 

when fewer than 50 urban school districts are 

educating nearly half of our minority population 

we had better be sure as a Nation that our people 

are trained and educated to carry the workload in 

the 21st century. By default, we must be more 

unified than ever before. Our common future 

depends on it. 

With this new urgency comes new opportunities. Our economic success has given us two great 

gifts. First, it has helped show us what is possible. 

For example, since 1994, we’ve added 1 million new 

homeowners in urban America. The combination 

of a good economy and a national homeownership 

strategy supported the success. This report 

identifies serious remaining challenges and at the 

same time, offers answers which have a proven 

track record. 

The second great gift is that our strong 

economy has created a unique window of opportunity to address the challenges that face us, and 

the President has moved aggressively into that 

window—proposing the most wide-ranging budget 

for cities in more than a decade. This program will 

go a long way toward addressing the challenges 

articulated in this report. It is a program that 

recognizes that government alone cannot solve 

every problem, that it must be a good partner 

with the private sector. Ultimately, it is a program 

that recognizes we will only succeed if we are 

together—not city or suburb, not black or white, 

not rich or poor—but One America. 

Rarely has the Nation ever been better positioned to tackle the challenges of rebuilding and 

re-energizing our Nation’s proud cities. If we are 

not now ready to take on these challenges when 

the budget is in surplus, unemployment is at record 

lows, and the stock market is at record highs, when 

will we be ready? 

Alternatively, if we have the courage and 

foresight—both as a Nation and on Capitol Hill— 

to address these challenges headon and to enact 

many of the ideas and FY 1999 budget initiatives 

proposed by the President, we can ensure that 

America’s cities have not only a proud past but a 

bright future. And we don’t have a moment to 

waste. Our cities and their people are waiting. 

x 
Contents 

Part One: The State of America’s Cities ........................................................................................................................... 1


Finding #1: Driven by a robust national economy, cities are fiscally and economically


the strongest they’ve been in a decade. ................................................................................................................... 2


Finding #2: Despite recent gains, cities still face the triple threat of concentrated poverty,


shrinking populations, and middle-class flight that began two decades ago...................................................... 8


Finding #3: Cities face three fundamental opportunity gaps—in jobs, education, and


housing—that are critical to reducing poverty and attracting and retaining middle-class families. ............. 10


Conclusion.................................................................................................................................................................. 21


Part Two: Closing the Opportunity Gaps ...................................................................................................................... 23


Key Components ....................................................................................................................................................... 23


A. Closing the Jobs Gap ............................................................................................................................................ 24


B. Closing the Education Gap .................................................................................................................................. 29


C. Closing the Housing Gap ...................................................................................................................................... 31


D. Creating Safe, Healthy, and Sustainable Communities..................................................................................... 34


E. Moving Beyond Business as Usual...................................................................................................................... 37


Conclusion.................................................................................................................................................................. 38


Appendix: The President’s FY 1999 Budget—Highlights for Cities ............................................................................ 41


List of Exhibits .................................................................................................................................................................. 43


Endnotes ............................................................................................................................................................................ 45


xi 
For more than 200 years, America’s cities have 

been testaments to our innovation and monuments 

to our progress. They have been gateways to 

generations of 

travelers and doorways to millions of 

people who seek to 

live in freedom. They 

have been ports of 

entry for trillions of 

dollars of products 

and ports of exit for 

some of the most 

breathtaking technology the world has ever 

known. They remain as 

centers of science and 

engineering, the axis of 

commerce and banking, 

“Cities are at the core of 

metropolitan regions, which are 

the engines driving our Nation’s 

economic growth. These regions 

are generating more than 80 

percent of the Nation’s 

and the lifeblood of arts and culture. 

And in 1998, America’s cities are more relevant and perhaps more vital to the state of our 

union than they have ever been. Today, metropolitan regions—and the cities that drive them—are 

home to 85 percent of America’s people and nearly 

80 percent of its jobs. Since 1992, they have generated more than 86 percent of the Nation’s total 

economic growth. More than one-third of America’s 

growing minority population are educated in fewer 

than 50 urban school districts. And an overwhelming majority of America’s great colleges and universities call central cities home. All told, in 1998, the 

arithmetic of urban America is clear and unquestionable: If America is going to remain strong in the 

21st century, our cities must be strong. 

Today—fewer than 600 days away from the 

beginning of that new century—is a particularly 

important time to ask about the state of America’s 

cities. We do so at a time of profound optimism in 

America. Guided by the social and economic 

strategies of the Clinton-Gore Administration, 

Part One: The State of America’s Cities 

America today is both strong and at peace. The 

economy is breaking new records, opportunities 

are increasing for many, the Federal budget is in 

surplus, and consumer confidence is at a 30-year 

high. And after more than 20 years of erratic fits 

and starts that saw the fraying of much of the 

social and economic fabric of urban America, our 

cities are—in many ways—sharing in America’s 

economic comeback. The record is clear: While 

jobs, incomes, and homeownership are all increasing in our Nation’s cities, unemployment, crime, 

welfare, and fiscal unrest are decreasing in most 

cities. 

Rarely have cities and the Nation been 

better positioned to tackle the challenges that 

remain. As Robert Kennedy observed more than 

30 years ago, while America’s cities are the center 

of the possibilities of American life, they are also 

the centers of the problems of American life. As 

reported in last year’s The State of the Cities report, 

cities continue to find themselves on the losing 

side of fundamental structural and demographic 

trends that have reshaped the face of metropolitan 

America over the past 30 years. Namely, cities 

continue to be home to an intolerably high and 

concentrated level of poverty and a shrinking 

middle class. 

This report finds that cities face three fundamental challenges—or opportunity gaps—that will 

ultimately determine whether urban America can 

reduce poverty and retain and attract the middleclass families it needs to survive and thrive. First, 

employment is increasing, but central cities are 

generating relatively few new jobs—and even fewer 

of the entry-level opportunities that their residents 

most urgently need. Second, as America’s mayors 

agreed in a White House summit on educational 

opportunity in May 1998, too many inner-city 

schools are leaving urban America ill-prepared 

to compete for 21st-century jobs. Third, the 

central city homeownership rate has risen but 

1

Part One: The State of America’s Cities 

still significantly lags behind the rate in the suburbs. At the same time, low-income renters still 

face an affordable housing crisis. 

The strength of the American economy today 

provides us with an unprecedented opportunity to 

address these challenges. At the same time, the 

strategy undertaken by the Clinton-Gore Administration over the past 5 years provides a roadmap— 

a strategy that emphasizes a Federal menu of 

opportunity rather than Federal mandates, with 

solutions that are community-driven rather than 

Washington-driven, in partnership with the private 

sector rather than in opposition. Our progress over 

the past 5 years has come hand-in-hand with a 

recognition that government alone cannot solve 

every problem, but working together—with innovative mayors and county officials, business leaders, 

and community organizations—we can go a long 

way toward solving the challenges that face us. 

Part One of this report sets the stage for 

action by surveying the impact of these policies 

on cities and the dimensions of the problems that 

remain. Part Two describes President Clinton’s 

proposals and other Administration initiatives to 

tackle the critical opportunity gaps facing our 

Nation’s cities. 

Finding #1: Driven by a robust 

national economy, cities are 

fiscally and economically the 

strongest they’ve been in a 

decade. 

The economic course charted by the ClintonGore Administration not only aids the efforts of 

individuals and businesses in very tangible ways, 

it fosters a climate of confidence that encourages 

people to invest in their own futures. Businesses 

have the confidence to expand. More families have 

the confidence to invest in a home of their own or 

in their children’s education. Even the hard-core 

unemployed have the confidence to step onto 

the first rung of the economic ladder and move to 

self-sufficiency. 

Dollars (in billions) 

Source: Economic Report of the President, February 1998, 

table B–78 and OMB mid-year estimate 

-300 

-250 

-200 

-150 

-100 

-50 

0 

50 

100 1979 

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 

Exhibit 1: President Clinton Eliminates the Deficit 

Federal Budget Deficit, 1979–99 

National Economic Progress Is Steady and 

Strong 

The United States is on track for the longest 

peacetime economic expansion in our history.

5

 The 

budget deficit has been eliminated and surpluses 

are projected for the future. The Nation’s gross 

domestic product (GDP) has grown by an average 

of 3.1 percent each year since President Clinton 

took office, recording a very robust 3.9-percent 

annual increase in 1997. More businesses are 

starting and growing, more people are working, 

interest rates are low, and inflation has fallen to 

2.2 percent in 1997, its lowest level in 30 years. 

There are 16 million new jobs and record 

low unemployment. For many years, it seemed 

that high employment could only be bought at the 

price of high inflation. But today’s recovery has 

succeeded beyond most economists’ expectations. 

Under President Clinton’s leadership, the U.S. 

economy has created more than 16 million jobs, 

driving unemployment under 5 percent for the first 

time since the early 1970s. Black unemployment 

has fallen to rates lower than any since 1973.6 

Incomes are rising, particularly among 

those at the bottom of the economic ladder. In 

the past, many of the poorest Americans were 

falling further behind, even as the Nation as a 

whole prospered. However, prolonged economic 

recovery has now slowed that trend. The poverty 

rate has fallen from 15.1 percent in 1993 to 

2

The State of the Cities 1998 

0.0 

0.5 

1.0 

1.5 

2.0 

2.5 

Lowest Second Third Fourth Highest

Percent 

Income Quintile 

Source: Economic Report of the President, February 1998, chart 1–2 

2.2 

1.4 1.5 

1.3 

1.7 

Exhibit 2: Incomes at the Bottom of the Economic Ladder 

Are Growing Fastest 

Percent Growth in Real Household Income by Quintile, 1993–96 

13.7 percent in 1996; the black poverty rate stands 

at 28.4 percent, its lowest level since 1966.7 Over 

the same period, incomes grew among households 

at every income level, but incomes at the bottom 

grew fastest. 

Regional economies, with cities at the 

heart, are now the primary engines of our 

national prosperity. Only a few decades ago, it 

was possible to see the national economy as a vast 

constellation of thousands of interlocking and 

competing local markets. Cities dominated this 

system by virtue of their greater ability to concentrate the basic ingredients of commerce—capital, 

workers, and customers—in one place. Today, 

these rival local economies have consolidated into 

a much smaller number of regional economies. To 

compete in the global economy, cities and their 

suburbs must cooperate more than they compete, 

drawing together resources from an ever-wider 

metropolitan area to create dynamic clusters of 

industries. 

A recent report prepared by Standard & 

Poor’s DRI for the U.S. Conference of Mayors and 

the National Association of County Officials shows 

that metropolitan areas have generated 86 percent 

of the Nation’s total economic growth since 1992, 

as well as 84 percent of all jobs.8

 This economic 

power is particularly concentrated among a relatively few regional giants, which dwarf not only 

their own States but most of the world’s nations. 

Metro New York City’s economic output, for example, is greater than that of 45 of the 50 States. 

Exhibit 3: Metropolitan Economies Drive Nation’s Growth 

Growth in Employment and GDP, 1992–97 

Employment (millions) 

Total 

GDP 

(billions) 

Source: The Role of Metropolitan Areas in the National Economy, 

Standard & Poor's DRI, March 1998, table 2 

All metro areas Non-metro areas 

$266 

13.1 

$1,573 $1,839 

The roots of these metropolitan economies 

lie in America’s great cities. While central cities 

“Conditions in inner cities and 

the suburbs are inter 

Through regional strategic 

planning, we can build upon our 

collective strengths, link all 

residents to jobs and affordable 

contain barely 30 percent of the U.S. metropolitan population, 

they were home to 

more than 43 percent 

of all metropolitan jobs 

in 1990.9 And these jobs 

are more likely to be in 

the highly paid financial 

services and transportation/communications/ 

utilities industry sectors. 

Cities are also 

particularly rich in the 

resources and characteristics essential to developing new industries. 

Cities boast many great 

universities and research 

institutions that help 

11.0 2.1 

spawn new ideas and provide advanced technical 

training and resources. The highly specialized 

professional and business services needed to 

support dynamic regional economies also tend to 

congregate in central cities. And cities—particularly their downtowns—have traditionally offered 

dense and diverse concentrations of people, firms, 

and customers that allow knowledge and innovations to spread throughout an industry more 

3

Part One: The State of America’s Cities 

rapidly. Metropolitan economies thus depend on 

these urban strengths and have a huge stake in city 

job growth. 

Jobs Are Growing and Unemployment Is 

Falling in Central Cities 

While the problems confronting struggling 

communities cannot be reduced to merely economic terms, the search for solutions usually 

begins with one word—jobs. That is because 

employment has benefits that ripple throughout a 

community. Every adult who is working is better 

able to provide for his or her family, purchase a 

home, invest in the community, gain self-esteem, 

offer a positive role model for the next generation, 

and support local merchants or start a business. 

Employment is on the rise. The economic 

recovery is putting paychecks in the hands of 

additional hundreds of thousands of city residents. 

Between March 1993 and March 1998, the number 

of employed workers living in central cities of 

metropolitan areas increased by 10.4 percent, or 

almost 3.7 million people.10 This rate is almost 

twice as fast as the growth in these cities’ labor 

force, suggesting that many previously unemployed 

adults were finding jobs. Many workers are joining 

city-based industries that are integral parts of the 

“knowledge economy” of the 21st century, including innovative manufacturing, financial services, 

producer services—even tourism and the arts. 

City unemployment has fallen sharply. 

Between March 1993 and March 1998, central city 

unemployment fell from 8.2 to 5.3 percent. The 

unemployment rate tumbled by more than onethird in the Nation’s 50 largest cities, with every 

city registering declines. Four of the 10 largest 

cities saw their unemployment rate cut by at least 

one-half. Detroit, for example, has come roaring 

back—only 1 of every 16 workers remained unemployed in March 1998, compared with more than 

1 in every 7 workers in March 1993. By early this 

year, the demand for workers in cities such as 

Austin, Charlotte, Phoenix, and San Jose was so 

strong that the unemployment rate had fallen 

below 4 percent.11 

More new jobs are being created in cities. 

Rising employment levels among city residents 

reflect, in part, the growth of entry-level jobs in 

cities across the country. The economies of many 

cities—particularly those in the Northeast and 

Midwest—stagnated during the 1980s and early 

1990s, losing jobs at all skill levels. Particularly 

problematic was the sluggish growth of low-skilled, 

entry-level jobs in the retail and service sectors. 

As documented in last year’s The State of the Cities 

report, in the early 1990s, cities produced just 

13 percent of metropolitan growth in low-skilled 

retail and service-sector jobs. As the economic 

recovery gathered strength, job growth spread to 

the older industrial base located in the cities. 

Between 1994 and 1995, central cities captured 

34 percent of all metropolitan area low-skilled jobs. 

Some turnarounds were modest, others 

dramatic. Among the Nation’s largest cities, Detroit, 

New York, and San Diego lost low-skilled jobs in the 

period 1990–1993 but notched modest gains from 

1993 to 1995. In other large cities—Dallas, Houston, 

Philadelphia, Phoenix—the growth rate of entrylevel jobs more than doubled. Among the 10 largest 

cities, only Los Angeles was slow to recover, but 

even there, by the mid-1990s the reviving economy 

was beginning to stem the loss of entry-level jobs. 

San Antonio’s already high growth rate diminished 

little, remaining the second-highest rate among the 

top 10 cities. 

Exhibit 4: Jobs Are Up in Cities 

Growth Rate for Retail Trade and Service Jobs 

in the Top 10 Cities (in Percent), 1991–95 

City 1991–93 1993–95 

New York -0.1 2.7 

Los Angeles -1.3 -1.0 

Chicago -0.7 5.6 

Houston 3.0 6.8 

Philadelphia 2.1 4.3 

San Diego -0.1 4.8 

Phoenix 5.8 12.5 

Dallas 1.7 5.6 

Detroit -3.6 3.4 

San Antonio 8.5 7.7 

Source: Standard Statistical Establishment List, Special Extraction 

4

The State of the Cities 1998 

Exhibit 5: Urban Unemployment Has Fallen Substantially 

Unemployment Rates for Selected Cities (in Percent), 

March 1993–March 1998 

City March March Change in 

1993 1998 Rate 

1 New York 10.7 9.0 -1.7 

2 Los Angeles 11.2 6.9 -4.3 

3 Chicago 9.6 5.5 -4.1 

4 Houston 8.7 4.8 -3.9 

5 Philadelphia 9.1 6.0 -3.1 

6 San Diego 7.5 3.5 -4.0 

7 Phoenix 5.6 2.7 -2.9 

8 San Antonio 6.0 4.1 -1.9 

9 Dallas 7.9 4.0 -3.9 

10 Detroit 14.2 7.2 -7.0 

Central Cities of Top 9.7 6.4 -3.3 

10 MSAs*—Total 

Central Cities of Top 8.4 5.5 -2.9 

50 MSAs*—Total 

Central Cities of ALL 8.2 5.3 -2.9 

MSAs* 

Source: Bureau of Labor Statistics 

*Metropolitan Statistical Areas 

Central city poverty rates are falling. The 

poverty rate for central cities has fallen from 

21.5 percent in 1993 to 19.6 percent in 1996. For 

blacks, central city poverty rates have fallen from 

35.8 percent in 1993 to 31.0 percent in 1996, the 

lowest level since 1976. Higher employment rates 

are helping many families and formerly jobless 

adults to escape the deprivation and insecurity 

associated with a life in poverty. 

Cities are Improving as Places to Live 

Many downtown urban cores are coming 

back as centers for tourism, sports, the arts, 

and entertainment. Cities across the country 

are rediscovering the advantage of being the 

geographic and cultural centers of their regions. 

Entrepreneurial mayors and innovative publicprivate partnerships are leading the way as many 

Americans are rediscovering cities as great places 

to visit, not just work. Examples of the downtown 

renaissance include Baltimore, Cleveland, Denver, 

Detroit, Newark, San Antonio, Seattle, and Washington, D.C. These efforts not only lift the spirits of 

Exhibit 6: Central City Poverty Has Dropped in Recent Years 

Persons in Poverty, by City and Suburban Residence 

(in Percent), 1959–96 

Year Central Cities Suburbs 

1996 19.6 9.4 

1995 20.6 9.1 

1994 20.9 10.3 

1993 21.5 10.3 

1992 20.9 9.9 

1991 20.2 9.6 

1990 19.0 8.7 

1985 19.0 8.4 

1980 17.2 8.2 

1970 14.2 7.1 

1959 18.3 12.2 

Source: U.S. Bureau of the Census, Current Population Survey 

city residents, they boost the economy as well as 

increased numbers of visitors spend money in 

establishments that hire local workers. 

City balance 

sheets are healthier. 

City governments have


emerged from the


fiscal distress of the


1970s and 1980s and


the recession of the


early 1990s leaner, more


efficient, and better able


to innovate. The Na­


tional League of Cities’


annual survey of city


fiscal conditions found


local governments on


comparatively healthy


footing. According to the


survey, two-thirds of participating cities reported


that they “were better able to meet city financial


needs” in fiscal year (FY) 1997 than in the previous


year. And local leaders most often credited the


health of the local economy and the value of their


tax base as the primary reasons for this confidence.


City revenues increased by 2.2 percent in FY 1996—


the largest jump since FY 1991.12 All but 3 of the


77 largest cities in the Nation had strong Standard


& Poor’s DRI investment bond ratings of BBB or


5

Part One: The State of America’s Cities 

higher and so can borrow at favorable rates to 

invest in infrastructure and other critical needs. 

Crime is falling dramatically in many 

major cities. Cutting crime is both cause and effect 

of the economic comeback in many cities. A job can 

be a very effective weapon against crime, providing 

a positive alternative to those who otherwise might 

be tempted to turn to criminal activity. Aided by 

the tailwind of a strong economy, local crime 

prevention and law 

enforcement efforts 

have brought greater 

safety to the streets 

once notorious for 

crime problems. And 

gains in safety, in turn, 

fuel reinvestment in 

the urban cores so 

important to the longterm health of regions— 

their economies and 

their quality of life. 

In many cities, the 

reductions in crime have 

been staggering. Nationwide, violent crime has 

fallen for 6 straight years, 

dropping an estimated 

27 percent between 1991 

“Thanks to our partnership with 

the Clinton-Gore Administration, 

Louisville has experienced a 

22- percent drop in total crime 

and a 42-percent decrease in the 

murder rate so far this year. The 

Salt Lake City Reinvents Local Government 

Since 1992, Salt Lake City Mayor Deedee 

Corradini, working with city department directors and 

an advisory group of about 30 local business persons, 

has been reinventing city government—improving 

efficiency and saving taxpayer dollars in the process. 

In the first 15 months of the effort, the city “permanently 

cut $5 million from the cost of providing basic city 

services,” says Mayor Corradini. 

Consolidation of city agencies has yielded dramatic 

savings and efficiency gains. For example, combining 

the city’s public works and parks and recreation 

departments enabled the once-separate staffs to share 

expensive heavy equipment. Management restructuring 

within the police department produced new stability 

and efficiencies. One key reform, eliminating the police 

investigation of routine traffic accidents, freed up 

10 officers for crucial community policing work at a 

yearly savings of $400,000. 

and 1997 and by 19 percent in large cities between 

1993 and 1997. During the first 6 months of 1997 

alone, the rate dropped by 6 percent. 

In the space of 6 years, violent crime fell by 

45 percent in Dallas and New York City, by more 

than 35 percent in Los Angeles, and by more than 

25 percent in Boston and Houston. Crime rates are 

up, though, in some high-growth, medium-size 

cities, such as Louisville, Minneapolis, and San 

Jose.13 

Exhibit 7: Violent Crime Has Plummeted in Many Large Cities 

But Continues To Rise in Some Growth Hubs 

Change in Violent and Property Crime Rates, 1991–97 

City Violent 

Crime Rate* 

Property 

Crime Rate†* 

San Antonio -48.5 -29.4 

New York City -45.4 -44.1 

Dallas -45.2 -36.5 

Los Angeles -36.0 -31.6 

Kansas City, MO -32.6 -6.6 

Seattle -31.7 -13.0 

San Diego -31.3 -48.4 

Boston -27.0 -22.4 

Houston -25.4 -31.0 

CharlotteMecklenburg** -24.1 -23.1 

Atlanta -23.1 -7.8 

Cleveland -20.3 -15.6 

Phoenix -17.7 -2.6 

Philadelphia -10.8 -0.8 

Washington, D.C. -8.5 13.4 

San Jose 13.2 -27.8 

Minneapolis 18.0 -3.1 

Louisville 35.6 14.8 

Source: FBI, Uniform Crime Reports (UCR) 

† Does not include arson figures. 

* Percent change from 1991 to 1997. 

** In 1991, Charlotte-Mecklenburg was labeled as “Charlotte” 

in the UCR. 

6

The State of the Cities 1998 

Homeownership Is on the Rise 

Prompted by steady income growth, low 

interest rates, and affordable home prices, over 

the past several years the Nation has witnessed a 

homeownership boom of substantial proportions. 

With increasing employment opportunities, improved fiscal conditions, and reduced crime rates, 

central city homeownership is on the rise for the 

first time in over a decade. This trend is welcome 

relief to those cities struggling to hold onto their 

middle-income families. 

Central city homeownership rates are the 

highest in 15 years. Reversing the downward 

spiral of the 1980s, the homeownership boom of 

the 1990s has pushed the national homeownership 

rate in 1997 to an all-time record high of 65.7 percent. Particularly encouraging is the fact that the 

recent surge is now expanding homeownership 

opportunities in the Nation’s central cities. By 1997, 

fully half of all central city households owned 

homes—the highest rate in 15 years. While urban 

homeownership continues to lag far behind suburban rates, the increase of more than 1 million 

central city homeowners since 1994 is a welcome 

sign of hope. 

Exhibit 8: Homeownership Among Minorities Is on the 

Rise in Cities 

Change in Homeownership Rates by Race/Ethnicity and Metro 

Location, 1993–97 

Central Suburbs White Black Hispanic 

Cities 

Percent 

Source: U.S. Bureau of the Census, Current Population Survey, 

March 1998 supplement 

1.2 

2.2 

1.5 

4.0 

3.7 

0.0 

0.5 

1.0 

1.5 

2.0 

2.5 

3.0 

3.5 

4.0 

4.5 

The growth in homeownership and resulting 

increase in home construction, home sales, and 

housing rehabilitation provides an important 

economic lift to both regional and local economies. 

The National Association of Home Builders, 

for example, estimates that construction of 

100 typical single-family homes (valued at an 

average of $162,000) generates 158 full time jobs; 

nearly $7 million in income for local builders, 

business owners, and workers; and $655,000 in 

local taxes. Overall, housing investment and 

consumption contribute fully one-fifth of the 

Nation’s Gross Domestic Product. 

Homeownership stimulates economic 

activity. Homeownership is also a powerful force 

in enhancing individual well-being and promoting 

community development. Home equity represents 

a major source of household wealth, and the 

housing stock constitutes one of the Nation’s 

principal assets. Homeownership also can foster 

community stability and safety by encouraging 

families to maintain their properties, to look out for 

their neighbors and watch for trouble, and to get 

involved in other activities that improve the quality 

of life in their neighborhoods. 

Minority families lead the way. While the 

homeownership boom has touched all demographic segments of the population, the growth of 

homeownership among minority households has 

been particularly strong—805,000 more AfricanAmerican households and 867,000 more Hispanic 

households became homeowners between 1994 

and 1998, bringing their homeownership rates to 

46.0 percent and 44.4 percent, respectively.

14 

Long restricted in their homebuying opportunities, minorities have now emerged as a powerful 

force in the market for new and existing homes. 

According to The State of the Nation’s Housing 1998 

by the Harvard University Joint Center for Housing 

Studies, minorities account for 42 percent of the 

growth in homeowners between 1993 and 1997, up 

from the 36-percent share that was recorded in the 

1985 to 1993 period. In large measure, this surge in 

minority homeownership reflects a growth in 

lending activities, including the growth of Federal 

Housing Administration insured loans to first-time 

minority home seekers. Since 1993, conventional 

mortgage lending to African-Americans has increased by 67 percent, lending to Hispanic borrowers is up nearly 50 percent, and lending activity in 

7

Part One: The State of America’s Cities 

low- and moderate-income communities has risen 

by 37 percent.15 

Finding #2: Despite recent gains, 

cities still face the triple threat 

of concentrated poverty, 

shrinking populations, and 

middle-class flight that began 

two decades ago. 

Even as the economic health of cities improves, the movement of population—particularly 

the middle class—from city to suburbs continues. 

This decentralization process has been operating 

for more than a century, pushing the boundaries of 

metropolitan areas far from the city and prompting 

rapid development of outlying counties. 

Many factors explain middle-class flight and 

poverty and racial concentration, from job growth 

on the suburban fringe to persistent housing 

discrimination, from the resource and quality 

advantages of suburban schools to the greater 

incidence of crime (and greater fear of crime) in the 

cities. These long-run trends call for concerted 

action now, while the economy is strong, from 

leaders in the private, public, and nonprofit sectors 

working together. 

The City Share of Metropolitan Population 

Continues To Decline 

Although most central cities continue to grow 

slowly, only 11 of the 30 largest cities in 1970 have 

more people in them than two decades ago. Population losses were particularly severe in St. Louis, 

which lost 40 percent of its population, and in 

Detroit, Cleveland, Pittsburgh, and Buffalo, each of 

which lost approximately one-third of its population. Other cities posting significant population 

losses since 1980 include Baltimore, Chicago, 

Philadelphia, and Washington, D.C. Some cities 

such as Las Vegas, Los Angeles, Orlando, Phoenix, 

Salt Lake City, and San Antonio are growing rapidly, 

yet even in these metropolitan areas, suburban 

areas are growing faster still. The shift of population to the suburbs not only reduces the tax base of 

central cities but diverts limited resources away 

from much-needed urban revitalization projects. 

Outmigration from cities continues in the 

1990s. Despite well-documented examples of 

central city revitalization, for the period 1990 to 

1997, the rate of population growth for the Nation’s 

suburbs was twice that of central cities. In 1996 

alone, 2.7 million people moved from a central city 

to a suburban area—compared with only 800,000 

people who moved from suburbs to the city. 

Exhibit 9: Suburban Population Is Growing Twice as 

Fast as Cities 

Percent Change in Metropolitan Population and Families, 1990–97 

Percentage Growth 

Source: U.S. Bureau of the Census, Current Population Survey 

0.0 

2.0 

4.0 

6.0 

8.0 

10.0 

Suburbs 

Central Cities 

Total Population Families 

9.6 9.5 

4.2 

6.0 

1.0 

3.0 

5.0 

7.0 

9.0 

Immigrants bolster central city populations. Since foreign immigrants tend to settle first 

in central city neighborhoods, selected highdensity central cities have been spared even more 

significant population losses. During the 1980s, 

the vast majority of immigrants settled in just 

11 metropolitan areas—led by Los Angeles (with 

2.1 million immigrants), New York (1.5 million), San 

Francisco (598,000), and Miami (463,000), as well as 

Chicago, Washington, D.C., Houston, San Diego, 

Boston, Dallas, and Philadelphia. 

Because of the rapid influx of immigrants— 

particularly immigrants from Latin America and 

Asia—minorities today comprise 33 percent of the 

urban population, compared with only 22 percent 

in the suburbs.16 Cities such as Los Angeles and 

Miami have been transformed over the past 

30 years from majority-white to minority-dominated 

cities; others will join them in the years to come. 

8

The State of the Cities 1998 

Some cities are experiencing the dynamism— 

and the strains—associated with a new wave of 

immigrants. Although immigration provides a net 

boost to the Nation’s economy as a whole— 

estimated to be between $1 billion and $10 billion 

per year—and has little impact on wages or the job 

market, it can impose significant net fiscal burdens 

in the short run on the relatively few “gateway” 

areas where the tide of immigration is concentrated. 

Minorities are also moving to the suburbs. 

While discriminatory practices still limit the 

residential choices of many minorities, minority 

households are now moving in record numbers 

to the suburbs. During the first half of the 1990s, 

the share of minority households living in the 

suburbs of metropolitan areas with populations 

over 1 million rose from 27.0 percent to 29.3 percent. Even immigrants are joining the move away 

from the central city. Of the 2 million foreign-born 

households that have arrived in the United States 

since 1990, almost 35 percent now reside in the 

suburbs of large metropolitan areas. 

Exhibit 10: Minority Americans Are Concentrated in Cities 

Population of Cities and Suburbs by Race/Ethnicity, 1997 

Source: U.S. Bureau of the Census, Current Population Survey, 

March supplement, 1997 

Central Cities Suburbs 

17.9% 

53.0% 22.6% 

6.5% 

7.7% 

78.9% 

9.4% 

4.1% 

Other Race Non-Hispanic Hispanic 

White Non-Hispanic Black Non-Hispanic 

Middle-Class Families Are Still Leaving 

Central Cities 

In 1970, the income profile of central cities 

was almost identical to the Nation as a whole. 

Persistent long-term outmigration—particularly 

of middle-class families—has fundamentally 

changed the income distribution of central cities. 

With the portion of high- and middle-income 

families decreasing, city incomes have fallen 

relative to suburban incomes. 

While the number of families in America’s 

suburban areas increased by 9.5 percent between 

1990 and 1997, the number in central cities grew 

only 6 percent.17 The long-run trend is more stark— 

a 60-percent jump in the number of suburban 

families between 1970 and 1997 versus the modest 

12-percent increase for cities over that period. 

More families of every income level move out 

of cities than move in, but the disparity is particularly stark among middle- and upper income 

families. From 1970 to 1997, nearly 6 million middleincome and affluent families have left the cities. 

At the same time, between 1985 and 1995, the 

number of high-income families—with 150 percent 

or more of area median income—living in suburbs 

grew by 16 percent, compared with just 2 percent 

for central cities. When families are asked why they 

leave cities, the two most common answers are the 

poor quality of city schools and the higher rates of 

crime in cities as compared with suburbs. 

As families with the resources to do so move 

to suburban areas in search of better housing, good 

schools, and safer neighborhoods, income growth 

in the city lags behind suburban income growth. In 

the Northeast and Midwest, the 1996 median 

household income in the suburbs was 67 percent 

higher than in central cities, up from the 58-percent 

gap reported in 1989. City/suburb income disparities were less in the South and the West. Even so, 

in 1996 suburban incomes were 31 percent higher 

than central city incomes, up sharply from the 1989 

figure of 22 percent. 

Poverty Is More Frequent and Affects More 

Minorities in Cities 

While cities contain 30 percent of metropolitan America’s population, they are home to half 

of all low-income families in metropolitan areas.18 

This concentration of poverty in cities persists 

even as overall poverty declines. Poverty rates in 

central cities rose steadily from 1970 to 1993, 

increasing by 50 percent. Even with the drop in 

central city poverty rates since 1993, 1 in every 

5 city families lived in poverty in 1996, compared 

with fewer than 1 in 10 suburban families. And 

9

Part One: The State of America’s Cities 

there is a growing dichotomy in rates of minority 

poverty. While the rate of African-American poverty 

is at its lowest level in history, poverty in cities 

disproportionately affects minority populations— 

72 percent of the poor in cities are minority. 

High poverty rates impose a heavy burden on 

cities. In 1990, the poverty rate exceeded 30 percent in Detroit, New Orleans, and Miami. The 

poverty rate surpassed 40 percent for AfricanAmericans in Miami, Milwaukee, New Orleans, and 

Pittsburgh and for Hispanics in Buffalo, Cleveland, 

Hartford, and Philadelphia. 

Poverty Remains Highly Concentrated in 

Selected Neighborhoods 

Lack of affordable housing opportunities in 

the suburbs combined with persistent housing 

market discrimination adds to the concentration 

of poor families in central city neighborhoods. 

More than 10 percent of all city residents live in 

neighborhoods where the U.S. Bureau of the 

Census reports that 40 percent or more of the 

households are living below the poverty line, 

doubling the concentration in 1970. In many of 

these places, intense and long-standing poverty 

and welfare dependency occur simultaneously with 

alarmingly high rates of crime, drug abuse, single 

parenthood, high school dropout rates, and other 

social problems. 

Tracts with high poverty rates are almost 

exclusively inhabited by minorities. Indeed, minority families are far more likely than whites to live in 

high-poverty neighborhoods even if they are not 

poor themselves. Almost one in four black and 

Hispanic residents of central cities live in census 

tracts where more than 40 percent of their neighbors are poor, while just 3 percent of white urban 

families live in such areas. 

Finding #3: Cities face three 

fundamental opportunity gaps— 

in jobs, education, and housing– 

that are critical to reducing 

poverty and attracting and 

retaining middle-class families. 

Cities face three key challenges or opportunity gaps. First, employment is increasing, but 

central cities are generating relatively few of the 

entry-level jobs that their residents urgently need. 

Second, too many urban schools are failing, leaving 

many children ill-prepared to compete for 21stcentury jobs. Third, homeownership is on the rise 

in cities but still lags in suburbs—and many poor 

families are in desperate need of decent and 

affordable rental housing. With the economy 

running at record levels, the time is ripe to close 

these opportunity gaps for the benefit of those who 

live in our cities and for the Nation as a whole. 

Cities Face a Jobs Gap 

While cities are making significant economic 

progress, they lag behind their suburban neighbors 

on key measures of economic health. The mismatch between the number of low-skilled jobs and 

the number of urban residents with low skills who 

need and want to work is a critical challenge for 

cities, particularly as families transition from 

welfare to work. It is little wonder that city officials 

across the country welcome the Clinton-Gore 

Administration efforts to close the job gap that 

confronts urban America. 

Employment Opportunities Limited for 

Low-Skilled Workers 

Limited entry-level job opportunities keep 

unemployment rates relatively high in cities— 

especially large cities. The unemployment rate 

for central cities in March 1998 was 5.3 compared 

with 3.9 percent for suburbs. In some metropolitan 

areas, the difference was more pronounced: In the 

Detroit and New York metropolitan areas the city 

unemployment rate was more than twice the rate 

of the suburbs. 

10

The State of the Cities 1998 

Unemployment is also high for subgroups 

that tend to live in cities. Minority youth unemployment (ages 16 to 19), for example, was 26 percent in central cities in May 1998—five times the 

Nation’s overall unemployment rate. These disparities result in substantial labor shortages in key 

suburban areas and industries at the same time 

many urban residents are without work. 

There is a wider wage gap. While progress 

has been made on the wage gap over the past few 

years, we haven’t regained what we lost over the 

past 20 years. Over the past two decades, earnings 

inequality widened as the inflation-adjusted wages 

of low-skilled workers declined and the wages of 

high-skilled workers increased. According to a 

recent report by the U.S. Department of Labor, from 

1982 to 1996, the inflation-adjusted hourly wages 

of workers in the top one-tenth of the workforce 

increased from $24.80 to $25.74 an hour. In contrast, over this same period wages for workers in 

the bottom one-tenth of the workforce fell from 

$6.28 to $5.46. Adjusting these wage figures for the 

value of employer-provided benefits added further 

to the growth of earnings inequality. For example, 

more than 80 percent of all workers received paid 

holidays and vacation, but less than 10 percent of 

low-wage workers received paid leave of any kind. 

Adjusting for benefits, from 1982 to 1996 highly 

paid workers gained $1.73 an hour in inflationadjusted total compensation, while low-end workers lost 93 cents an hour. While 1997 earnings data 

for low-wage workers show a significant increase, it 

is too early to know whether this gain will continue. 

The Welfare Reform Challenge—Cities 

Must Create More Jobs 

While hundreds of thousands of welfare 

recipients are already making the transition from 

welfare rolls to payrolls—indeed, the percentage of 

the U.S. population on welfare is at its lowest since 

1969—big challenges remain. Half of all households 

that receive public assistance income live in cities. 

This concentration of welfare recipients means that 

Exhibit 11: Joblessness Remains Higher in 

Most Central Cities Than in Suburbs 

Unemployment Rates by Location for 10 Largest Metropolitan Areas, 

March 1998 

Percent 

Source: Bureau of Labor Statistics 

Suburbs 

Central Cities 

Detroit

Dallas

San Antonio

Phoenix

San Diego

Philadelphia

Chicago 

Houston

L

Ne

os Angeles

w York 

0 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

cities will need to produce more low-skilled jobs 

and do a better job of connecting city welfare 

recipients to jobs throughout the metropolitan 

economy.

19 These challenges call for sustained 

work by private-sector employers, communitybased organizations, and government at all levels 

working together. 

Urban caseloads remain relatively high. 

According to a recent report issued by the 

Brookings Institution, caseloads in large urban 

counties have been declining, but at a substantially 

slower rate than for the remaining portions of their 

States. The Brookings Institution found that the 

slowest reductions in caseloads occurred in urban 

counties with high-poverty neighborhoods. As a 

result, urban caseloads are accounting for an 

increasing percentage of total State welfare rolls. 

For example, while caseloads in Milwaukee County 

declined by nearly 30 percent between 1996 and 

1997, as of March 1998, Milwaukee County households accounted for fully 86 percent of all households receiving cash welfare in Wisconsin. 

11

Part One: The State of America’s Cities 

Detroit Empowerment Zone 

Spurs Jobs, Investment 

Spurred by an approach that promotes collaboration 

among businesses, lenders, community- and faith-based 

groups, and the public sector, the Detroit Empowerment 

Zone (EZ) is spearheading the remarkable turnaround of 

a city hit hard by decades of disinvestment and decline. 

Under Mayor Dennis Archer, the city is generating 

jobs and as much as $4.7 billion in new investment in 

the old industrial neighborhoods of the EZ. 

The EZ is a major catalyst for public and private capital 

flowing into Detroit—for example, the Financial 

Institutions Consortium has already invested $956 

million (of its 10-year pledge of $1.1 billion) in Detroit’s 

future, including loans to minority-owned suppliers to 

the Big Three. EZ-related investments will ultimately 

create thousands of jobs and state-of-the-art manufacturing capacity in the city. “I have seen what happened 

in Detroit,” President Clinton told the National Urban 

League. “I have watched unemployment be cut in half 

in 4 years, when private employers work with vigorous 

community leaders and take maximum advantage of the 

incentives in the Empowerment Zones.” 

There is a job gap in America’s cities. While 

projecting job gaps is difficult, one effort to do so is 

a forthcoming report from the U.S. Conference of 

Mayors (USCM). This report estimates the need for 

jobs for welfare recipients and other low-skilled job 

seekers and compares them with the 

projections of job 

growth in 74 urban 

counties. These job 

projections were 

compiled by Regional 

Financial Associates 

(RFA): 

✦ USCM/RFA estimates that there could 

be 353,000 fewer lowskilled jobs than the 

number of current welfare 

depending on public transportation, cannot get there. They 

don’t own cars, and public 

transportation doesn’t get you 

from the city to the suburban 

recipients who need jobs over the next 5 years 

in 74 urban counties. 

✦	 The Conference of Mayors estimates that over 

1.2 million current welfare recipients in these 

74 urban counties will need jobs over the next 

5 years and that these welfare recipients will 

be competing with an additional 409,000 

✦


low-skilled job seekers. However, RFA projects 

that these 74 central counties will produce only 

856,000 low-skilled jobs. 

As a result, these cities could face a total job 

gap—the difference between total low-skilled 

job growth and total number in need of those 

jobs—of more than 760,000 over the next 

5 years. 

There will be two job seekers for every lowskilled job. The new Conference of Mayors report 

also notes that when welfare recipients are combined with other low-skilled competitors, there 

may be two job seekers for every low-skilled job 

added over the next 5 years. In just 12 of the 

74 cities, there could be more jobs than job seekers. On the other hand, the ratio of low-skilled job 

seekers (including welfare recipients) to low-skilled 

jobs may be as high as 10 to 1 in cities like Cleveland, Detroit, and Newark and 4 to 1 or greater in 

Chicago, Memphis, New Orleans, and New York 

City. 

The Conference of Mayors report confirms 

earlier studies projecting job gaps for low-skilled 

workers. For example, researchers at Northern 

Illinois University estimated that there would be 

between 4 and 7 low-skilled job seekers for each 

low-skilled job in the city of Chicago in the year 

2000.20 The same ratio for Minneapolis-St. Paul was 

estimated to be between 1.7 and 3.2 workers for 

each low-skilled job; in Milwaukee the range was 

between 3.6 and 6.9 to one job. The California 

Budget Project estimated six to eight public assistance recipients for each available low-skilled job in 

several large urban California counties (Los Angeles, San Diego, and San Bernardino).21 

Barriers Limit Access to Existing Jobs 

The job gap facing city residents is compounded by the lack of transportation access to 

available suburban jobs and lack of affordable, 

high-quality child care and affordable housing. For 

a regional labor market to work efficiently, job 

seekers must have access to all the jobs for which 

they are qualified, wherever they are located in a 

metropolitan area. 

12

The State of the Cities 1998 

St. Louis Region Comes Together to Create 

Job-Friendly Transportation Network 

Under the leadership of Mayor Clarence Harmon, 

city and suburban governments in the St. Louis area, 

along with businesses and civic groups, are finding 

common ground in initiatives that align transportation 

resources with the needs of job seekers and employers 

in the region. Working through the East-West Gateway 

Coordinating Council—the region’s Metropolitan 

Planning Organization—public and private institutions 

are launching cooperative strategies to increase access 

to job opportunities and amenities for all residents. 

These include programs such as the HUD-sponsored 

Bridges to Work demonstration program, a city-tosuburb job links program that provides reverse commuting and other transportation services to city residents in 

need of access to employment growth centers on the 

urban fringe; and the St. Louis Regional Jobs Initiative, 

funded in part by the Annie E. Casey Foundation, which 

includes employment training, placement, and transportation services tailored to the needs of major employers 

and key industries. 

People cannot get to the jobs. The rapid 

growth of jobs in the suburbs has created a “spatial 

mismatch” that prevents many relatively unskilled 

residents of distressed urban neighborhoods from 

reaching the entry-level jobs in the suburbs. Few 

welfare recipients own their own cars. Cashstrapped urban mass transit systems find it difficult 

and expensive to expand into lower density suburban job centers, and most do not provide adequate 

service for those with nontraditional work hours. In 

Boston, for example, 98 percent of welfare recipients live within one-quarter mile of a bus route or 

mass transit stop, but only 32 percent of potential 

entry-level jobs in the Boston metropolitan area are 

within this distance. Only 58 percent of these entrylevel jobs are within one mile of the nearest mass 

transit. 

However, the construction of new or expanded transit rail lines in Dallas, St. Louis, San 

Diego, and other cities, as well as growing interest 

in various “reverse commuting” models like those 

being tested in HUD’s Bridges to Work program and 

those to be funded through the U.S. Department of 

Transportation’s recently enacted Access to Jobs 

program, offer a hopeful sign that new urbansuburban transportation linkages will be forged. 

important for those 

moving from welfare 

to work. It enables 

adults to leave home 

for training and fullday work. Quality child 

care provides a 

healthy, nurturing 

environment, safe from 

the dangers of the 

streets and staffed with 

positive adult role 

models. It can help 

young children prepare 

to succeed in school, 

reinforcing the academic 

and social lessons they 

learn there. While a stayat-home parent may also 

be beneficial for young 

children, many inner-city 

families cannot give up 

Limited housing choices block job access. 

Housing discrimination and the Nation’s critical 

shortage of affordable housing in the suburbs 

further limit the ability of low-skilled workers—and 

particularly low-skilled minority workers—to 

access jobs in the suburbs. By concentrating many 

poor and minority families in central cities and 

aging inner-ring suburbs, housing discrimination 

contributes to the reality that areas with the 

weakest tax bases are home to the greatest needs 

for investment, stronger job connections, and the 

education and other services that prepare people 

to seize opportunity. 

The lack of affordable child care hits cities 

hard. Safe and affordable child care is necessary to 

allow parents to work. Child care is especially 

“Many central city job applicants 

are physically isolated from 

places of employment, socially 

isolated from the informal job 

networks that have become a 

major source of job placement. 

any adult income, so quality child care becomes 

essential to providing one’s family with basic 

needs. 

Unfortunately, affordable, quality child care 

remains out of reach for many working families, 

including single-parent families and the working 

poor, who are concentrated in cities. Only 10 percent of the families who qualify for Federal child 

care receive help. Many cities have tens of thousands of families on waiting lists for child care 

13

Part One: The State of America’s Cities 

assistance. While the average family pays about 

7 percent of its income for child care, such care 

consumes one-quarter of the income of low-income 

families, on average. 

The challenges of welfare reform confront the 

already overburdened networks of licensed child 

care providers. A recent U.S. Conference of Mayors 

survey of 34 cities confirms that in many communities, both the number of child care slots and the 

available subsidy funds provided by the State fall 

far short of meeting even the needs of former 

welfare recipients, to say nothing of low-income 

working families. Los Angeles, for example, reported that in the 43 code areas with the heaviest 

concentrations of Temporary Assistance for Needy 

Families (TANF) recipients, there are approximately 

78,000 children of TANF families—but only 30,000 

licensed child care spaces available.22 More than 70 

percent of cities responding reported that State 

reimbursement rates would not cover the average 

cost of full-day, center-based child care. 

In Wichita, Cessna Aircraft Helps 

Welfare Recipients Soar 

Cessna Aircraft Company, in partnership with the City 

of Wichita, Kansas, is spearheading the revitalization of 

the city’s poorest and most crime-stricken district with a 

new comprehensive “learning and work complex” that 

is helping local TANF recipients prepare for well-paying 

manufacturing jobs. 

The new complex, which is being financed primarily 

through a $3.64 million loan guarantee from HUD’s 

Economic Development Loan Fund, continues the rebirth 

of Cessna’s long-vacant 21st Street subassembly and 

training facility—itself funded in part through a HUD 

Community Development Block Grant commitment from 

the city. At the facility, participants in the State of 

Kansas’ KanWork welfare-to-work program pursue a 

flexible job training program that includes education, 

help with work readiness skills, child care, and other 

services. Local groups have pitched in to make the 

program a success: The public schools provide literacy 

instructors, a local hospital provides exercise instructors 

to help workers prevent repetitive motion disorders, and 

AmeriCorps volunteers staff the daycare center. Of the 

237 individuals who have graduated from the program 

so far, 200 have moved into Cessna jobs that start at 

more than $10 per hour, with full benefits, and 26 are 

currently employed at other local companies. 

Cities Face a Large Skills Mismatch 

Workforce development will be critical for 

upgrading skills and earning power. The evidence is 

clear—education and training have a significantly 

greater impact on earning power today than they 

did a generation ago. Holding other factors equal, 

a 2-year post-secondary degree raises earnings by 

20 percent (on average), and a 4-year bachelor’s 

degree by 40 percent, over a high school diploma 

alone.23 Leaving high school before graduating, on 

the other hand, substantially lowers one’s earning 

power relative to those who have a diploma or 

higher credentials. Ninth-grade dropouts earn onequarter less, on average, than workers with diplomas and no higher degree. 

The cost of low skills is greatest for women 

with young children, suggesting the vital role of 

skill building and job readiness as part of making 

welfare reform work. According to a recent report, 

while 41 percent of all women work steadily in 

“good” jobs by age 27, only 22 percent of mothers 

and 15 percent of women who have not completed 

high school do so.24 While some women who make 

the transition from a “bad” job—one with low 

wages, low or no benefits, and few prospects for 

advancement—to a good job do so quickly, many 

do not. The least skilled are at greatest risk of 

working only intermittently and of being mired in 

bad jobs. 

Together with schools and colleges, training 

organizations of many kinds must raise skills for 

workers who are more mobile than ever, changing 

jobs and even careers many times over the course 

of decades.25 Urban workers who are more likely to 

face other barriers to employment need these skills 

all the more. 

Cities Face Barriers to Business 

Development 

Although cities offer important advantages 

to businesses—proximity to clusters of related 

companies and knowledge-based services, direct 

access to underserved urban markets, highly 

developed infrastructure, a motivated workforce, 

etc.—these are too often overshadowed by the 

problems that new entrepreneurs and existing 

14

The State of the Cities 1998 

enterprises encounter in trying to do business in 

large cities. 

Businesses face obstacles to assembling 

capital. Capital has tended to follow the movement 

of people and jobs to the suburbs. Lenders and 

investors, nervous about urban problems and 

prospects, have been reluctant to back even the 

most promising business ventures in inner-city 

neighborhoods. Disinvestment has had a devastating impact on many urban areas, leaving temporary 

economic setbacks to turn into long-term decline. 

Public spending alone cannot reverse this downward spiral—that solution has been tried. However, 

cities can help make central cities more attractive 

places for investment by lowering the barriers that 

make business development riskier. 

Environmental hazards pose a barrier to 

redevelopment. One of those barriers is the very 

land on which cities—and the Nation’s economic 

prosperity—were once built. Many cities have large 

inventories of underutilized land, but key parcels 

are often “brownfields,” former industrial sites 

which may have low-to-moderate levels of hazardous contamination that would need to be cleaned 

up before they could be redeveloped. The General 

Accounting Office has estimated that there may be 

as many as 450,000 brownfields nationwide, with 

the majority in urban areas.26 These sites, which 

are likely to be otherwise attractive commercial 

and industrial sites, represent a tremendous 

resource for cities. However, this resource has 

remained largely untapped because developers and 

lenders concerned about liability for cleanup costs 

have opted instead for suburban “greenfields” and 

thus contributed to costly sprawl. Meanwhile, 

urban brownfields stand vacant—a blight on the 

surrounding neighborhood. 

Closing the Job Gap: Administration 

Response 

The President’s FY 1999 budget request 

includes several important initiatives to close 

the low-skilled jobs gap. The first element of any 

job creation strategy is to restore local economies 

as thriving places for retail, commercial, and 

industrial activity that puts community residents 

to work. That can only be achieved through 

private-sector business investment in distressed 

communities, and the availability of competitively 

priced business financing. 

To stimulate job development, the President 

proposed a $400 million Community Empowerment Fund, continued funding for the Treasury 

Department’s Community Development Financial 

Institutions; a second round of Empowerment 

Zones that will be implemented in 15 new communities; and a new Brownfields Initiative that will 

combine cleanup funds through the Environmental 

Protection Agency with $50 million in HUD economic development grants to redevelop and 

rebuild contaminated sites. Included in those 

initiatives are the already enacted Tax Incentives 

for EZs and an extension of the Brownfields Tax 

Incentives. 

The second key element of the Administration’s jobs strategy is to connect former welfare 

recipients to jobs in employment centers wherever 

they are located in metropolitan regions. The 

Administration fought for and is now implementing 

the $3 billion Welfare-to-Work Grant program, 

which targets long-term welfare recipients in highpoverty areas. A substantial portion of these funds 

will be administered by local communities. The FY 

1999 budget proposes HUD’s 50,000 new Welfare-toWork housing vouchers for families that need 

housing assistance to get or keep a job. In addition, 

the TEA21 transportation bill recently signed by 

the President authorized up to $150 million annually for Access to Jobs grants that will help close 

the transportation gap for inner-city job seekers. 

Each of these proposals is further described in Part 

Two of this report. If enacted by Congress, these 

initiatives will significantly improve cities’ chances 

of success in meeting the challenges of welfare 

reform. 

Cities Face an Education Gap 

Many city schools are failing to prepare 

America’s youth—the Nation’s workers, parents, 

and citizens for the 21st century. Failing schools 

not only frustrate the aspirations of young people 

but the competitiveness of cities in a fast-changing 

global economy. 

15

Part One: The State of America’s Cities 

Urban Schools Face Extraordinary 

Challenges 

The larger social needs bearing down on cities 

continue to converge on their public schools—and 

some are collapsing under the weight. City schools 

serve much greater concentrations of poor and 

minority children—who face countless disadvantages—than do suburban schools. In four out 

of every five large central city schools, at least 

70 percent of students are poor and more than 

half are members of minority groups.27 Inner-city 

students are also more likely to come from singleparent families and to need instruction in English 

as a second language. 

Urban youth face extra hurdles—and 

fewer resources. Children from low-income urban 

neighborhoods often start with educational and 

social deficits that their schools are ill-equipped to 

remedy. Although many big-city schools spend 

about as much per student as the average district 

in their State, a weak tax base prevents them from 

finding the extra resources they need to help their 

students overcome these disadvantages. 

Many urban schools confront management 

and staffing problems—along with weak standards. Some urban schools are burdened with 

bloated, unresponsive bureaucracies. Recruiting 

highly qualified teachers is very hard for schools 

where morale is low, setbacks are many, and the 

violence of the streets—or literally on school 

grounds—is never far away. A shortage of teachers, 

in turn, keeps class sizes large, making urban 

classrooms more disruptive and making it difficult 

for students to get the attention and mentoring 

they need to learn and grow. Finally, educational 

standards have eroded in too many districts, with a 

system of “social promotion” that graduates young 

people who lack even the most basic reading and 

math skills needed to function in the world of work. 

School violence is concentrated in large 

urban schools. Though news reports confirm that 

school violence is not just an urban problem by 

any means, violent fights and attacks are more 

common in city schools, especially big ones, than 

they are in suburban schools. In a national survey, 

1,800 city schools reported over 5,400 fights in 

which weapons were used during the 1996–97 

school year—and those data only include crimes 

serious enough to be reported to the police.28 

Many Urban Schools Are Crumbling 

One of the most serious problems facing 

central city students and educators alike is that 

their schools are literally crumbling around them. 

Attempting to meet crushing needs with meager 

resources has forced many schools to spend more 

of their limited funds on instruction and less on 

maintaining an already aged building stock. Many 

inner-city schools must spend sizable portions of 

their facilities budgets on emergency repairs. The 

result is deferred maintenance and escalating 

capital costs. The need to repair and replace innercity school buildings is reaching crisis proportions: 

A recent study by the General Accounting Office 

found that 38 percent of central city schools, 

serving more than 5.5 million students, had at least 

one inadequate building. Two-thirds (with more 

Seattle Helps Children Make the MOST of Time Out of School 

Every child needs a safe, fun, educational place to go after school, and Seattle’s MOST (Making the Most of Out-of-School 

Time) initiative is dedicated to ensuring that every child ages 5 to 14 has access to such places—regardless of family 

income, cultural or linguistic background, or special needs. 

Established with a $1.2 million grant from the DeWitt Wallace–Reader’s Digest Fund and funded in part by a voter-approved 

local tax levy, MOST activities are coordinated by the School’s Out Consortium/YWCA, Child Care Resources, Seattle 

Central Community College, and the City of Seattle. But its design and dynamism reflect the ideas and commitment of 

hundreds of people, from children and parents to educators and social service providers, who are working together to create 

a rich, interconnected system of high-quality out-of-school activities and resources. Its print and online directory includes 

information on more than 400 programs available throughout Seattle. 

Not only does MOST fill critical gaps in availability, affordability, and access—for example, providing free summer 

programming to more than 500 immigrant and refugee children—it has also helped develop quality standards for local 

out-of-school programs, as well as a community college curriculum on school-age care to ensure that current and future staff 

are adequately trained. 

16

The State of the Cities 1998 

than 10 million students) had at least one inadequate building feature, such as a leaky roof or 

inadequate plumbing. 

Achievement and School Completion Are 

Lagging in Inner-City Schools 

Basic achievement—especially in highpoverty urban schools—lags behind that in 

suburban schools. Like the physical plant, the 

quality of education being offered in many urban 

schools is poor. In both 1994 and 1996, 60 percent 

of the children in urban school districts failed to 

achieve basic levels of competency in reading and 

math on the National Assessment of Educational 

Progress. For children in high-poverty urban 

schools, outcomes were even worse: 77 percent 

failed to achieve basic competency levels in reading, and 67 percent failed to achieve basic levels of 

competency in math. The Nation cannot afford for 

its students to fail these basic tests. As America’s 

mayors agreed in the White House Education 

Summit in May 1998; however, it is the lowestperforming schools that represent our greatest 

and most urgent challenge. 

School completion is low in urban high 

schools. Too many students simply are not getting 

the help they need at school, at home, or in the 

community to keep up. In an age in which dropping 

Student Population at Least 

70% Poor and 50% Minority Inadequate Building(s) Inadequate Building Features(s) 

Source: School Facilities: School Conditions Vary, U.S. General Accounting Office, June 1996 

19% 

81% 

38% 

62% 

33% 

Percentage of Schools with Condition 

67% 

Exhibit 12: Many Disadvantaged Urban Students Attend Deteriorating Schools 

Share of Central City Schools With Student Population At Least 70 Percent Poor and 50 Percent Minority; Inadequate Building(s); 

Inadequate Building Feature(s) 

Exhibit 13 : “Basic” Achievement in Inner-City Schools Lags 

Percent Students Testing at “Basic” Levels, Urban and Non-Urban 

Schools 

out of school—and not securing some postsecondary education—is costlier than ever, graduating from high school and attending college seem 

an impossible dream to millions of urban youth. 

Although dropout rates have been falling and test 

scores rising in key large urban districts, including 

Los Angeles, approximately half of the high school 

class of 1994 did not graduate on time. Indeed, 

about half of all students in big-city school districts 

fail to graduate in four years.29 

Percent 

Reading Math Science 

Source: National Association of Educational Progress (NAEP), 1994 and 1996 

High-poverty urban schools Urban schools Non-urban schools

63 

33 

42 

66 

31 

38 

65 

43 

23 

0 

10 

20 

30 

40 

50 

60 

70 

80 

17

Part One: The State of America’s Cities 

Closing the Education Gap: 

Administration Response 

Urban education is a major priority in the 

President’s budget submission to Congress. Education is primarily the responsibility of State and 

local governments, families and individuals, and 

the private sector. Nevertheless, the Federal 

Government has a crucial stake in supporting 

education, from 

preschool through 

adulthood. And because it is in big-city 

districts that unequal 

educational resources 

have hit hardest and 

schools have most often 

failed their students, 

responding to the 

challenges of urban 

education is at the heart 

of the President’s education policies. 

The FY 1999 budget 

includes $1.5 billion over 

5 years for 50 high-poverty, 

low-achieving, urban and 

rural school districts, to be 

designated as Education 

Opportunity Zones if they 

adopt tough reforms to 

hold schools accountable 

“We ar 

information industries of all 

sorts for skilled, literate, 

knowledge workers. The 

distinction between those 

prepared to do this kind of 

knowledge work and those who 

, as we approach the 21st 

for improving quality, expanding public school 

choice, ending social promotion, and showing real 

improvements in school achievement. In addition, 

the budget request funds for an America Reads 

Campaign to increase literacy in the inner city; 

and High Hopes for America’s Youth to help 

middle school students learn what it takes to go to 

college—and prepare to get there. Educational 

Zone Academy Bonds will help school districts 

in distressed areas leverage private-sector involvement in—and private-sector capital for—serious 

educational reform. Two kinds of School Modernization Bonds will help countless schools to 

restore the physical foundations that schools 

must provide our young people to make learning 

Exhibit 14: In Many Urban Districts, Most Students Do Not 

Graduate on Time 

Dropout and Attrition Rates for Selected Urban School Districts 

(in Percent), 1993–94 

City Dropout Rate Attrition Rate* 

Atlanta 3.7 52 

Baltimore NA 74 

Boston 7.5 46 

Chicago NA 54 

Cleveland NA 70 

Dallas 4.0 63 

Detroit NA 72 

Hartford 10.5 60 

Houston 10.2 63 

Kansas City, MO 13.7 76 

Los Angeles 12.0 47 

Minneapolis 18.1 60 

New Orleans 8.5 60 

New York City NA 69 

Philadelphia 10.2 70 

Phoenix NA 54 

San Diego 4.4 34 

San Francisco 4.3 32 

Seattle NA 45 

Washington, D.C. 20.9 36 

Source: Education Week on the Web, January 1998 

* The attrition rate is the percent of an entering freshman class that 

fails to graduate at the end of 4 years. It includes permanent dropouts, temporary dropouts who fail to graduate on time, and students 

who repeat one or more grades. For this analysis, “attrition” is 

measured as the percent decline in the size of the class of 1994 from 

enrollment in the fall of 1990 to graduation in the spring of 1994 

minus any decline in the district’s high school enrollment during the 

same period. An adjustment is made for decline in enrollment to 

reduce the effect of population changes in the district. 

possible. Funding for 100,000 new public school 

teachers will reduce class sizes in the early grades 

(1–3), where it matters most. Each of these initiatives is discussed further in Part Two of this report. 

Cities Face a Housing Gap 

The Nation’s affordable housing crisis has 

reached record levels, especially in central cities. 

While homeownership is at its highest level ever, 

the central city homeownership rate continues to 

lag significantly behind the suburbs. 

18

The State of the Cities 1998 

Urban Homeownership, Including MiddleClass Homeownership, Lags Behind the 

Suburbs 

Despite record growth in homeownership, in 

large measure the homeownership boom has not 

closed gaps between cities and suburbs. According 

to data from the 1995 American Housing Survey 

presented in the Harvard University Joint Center 

for Housing Studies’ annual report The State of the 

Nation’s Housing 1997, central city residents of all 

income levels are less likely to own a home than 

suburban residents with similar incomes. For 

example, among moderate-income households 

(those with incomes between 80 and 120 percent of 

area median), 71.3 percent of suburban residents 

own a home, but only 51.8 percent of central city 

residents are homeowners. 

Percent 

Income Group 

Source: The State of the Nation's Housing 1997, Harvard University 

Joint Center for Housing Studies based on the Joint Center 

tabulations of the 1995 American Housing Surveys 

Suburbs 

Central Cities 

Very Low Low Moderate High Very High Total 

0 

20 

40 

60 

80 

100 

52.6 

45.6 

63.8 

51.8 

71.3 

65.5 

79.6 75.9 

88.3 

49.0

71.5 

29.3 

Exhibit 15: Homeownership Is Lower in Cities 

Regardless of Income Level 

Percent of Households in Each Category 

Discrimination Adds to the Homeownership 

Gap 

The spatial gap in homeownership reflects, in 

part, the persistent gap in homebuying opportunities for racial and ethnic minorities. The Harvard 

University Joint Center data document that AfricanAmerican and Hispanic households of all income 

levels are less likely to own a home than white 

households of the same income group. This racial 

gap persists, even among households with incomes 

that are 20 to 50 percent higher than area median. 

While 78.3 percent of white households in this 

income group owned homes, the share for AfricanAmericans is only 62.7 and for Hispanics only 

64.5 percent. 

While the spatial 

and racial gaps in 

homeownership reflect 

many factors, the Joint 

Center report concludes that they are the 

legacy of “decades of 

discriminatory practices.” Worse yet, the 

Harvard study concludes, “Prejudicial 

lending and housing 

market practices still 

plague some areas of the 

country.” Mortgage 

lending information 

gathered by the Federal 

Reserve Board under the 

Home Mortgage Disclosure Act (HMDA) shows 

that minority households 

applying for mortgage 

credit were much more 

likely to be rejected than 

white households with 

“If we are going to build communi­


ties that are truly equal, communi­


ties where ever


chance; there are several things


that we need to do and we need to


do them together as a policy.


Creating jobs in a robust, growing


laws, strengthening affirmative


action, offering more and better


—Linda Chavez-Thompson 

AFL-CIO 

Community 2020 

Seminar Series, 

similar income. Similarly, denial rates—for whites 

as well as minorities—were highest in central city 

and in minority neighborhoods. 

Housing Needs Are at Record Levels 

Despite strong economic growth, the number 

of very low-income renter households with worst 

case needs (paying at least half their income in rent 

or living in inadequate housing) remained at its 

record-high level of 5.3 million in 1995.30 

Central cities are hardest hit. The housing 

affordability crisis remains most acute in America’s 

cities, where half of all very low-income renters 

(almost 7.3 million households with incomes less 

than half of the area median) live. Twenty-eight 

percent of these households receive some type of 

rental assistance.31 The majority of the 5 million 

unassisted very low-income urban renters, however, experienced severe housing problems in 

1995.32 Over the period 1991 to 1995, the number 

19

Part One: The State of America’s Cities 

of renter households with worst case needs in 

central cities grew by 219,000 to 2.8 million, with 

particularly sharp increases occurring in the 

Northeast and West. 

Worst case needs increasingly affect the 

working poor. According to HUD’s April 1998 

report, Rental Housing Assistance—The Crisis 

Continues, worst case housing needs grew fastest 

among the working poor. Between 1991 and 1995, 

worst case needs for families with at least one 

person earning a full-time paycheck rose by 

265,000—an increase of 24 percent. 

Exhibit 16: Millions of Urban Renters Have 

“Worst Case” Needs 

Housing Needs and Assistance Among Very Low-Income 

Central City Renters, 1995 

Source: Rental Housing Assistance—The Crisis Continues, HUD, 1998 

Renter Households With 

Incomes <50% Median 

2.49 million 

(34%) 

2.03 million 

(28%) 

2.76 million 

(38%) 

Other Problems 

or None 

Priority Housing 

Problems 

Assisted 

Worst case needs are particularly concentrated among city households with incomes at or 

below 30 percent of the area median—a level that 

roughly corresponds to the Federal poverty threshold.33 An analysis by the Harvard University Joint 

Center for Housing Studies found that five out of 

every six unassisted renter households with such 

extremely low incomes paid half their income in 

rent or lived in structurally inadequate housing. 

The number of elderly households with worst 

case needs remained above 1 million in 1995, while 

more than 2 million families with children had 

worst case housing needs. Among households with 

very low incomes, both families with children and 

households with an elderly head but no children 

had almost a one-in-three chance of having worst 

case needs. Families with children represent the 

largest group of households with worst case 

needs—more than 2.1 million households of the 

total 5.3 million worst case households. Just over 

1 million elderly individuals or heads of households 

without children have worst case housing needs. 

This situation occurs despite the fact that housing 

assistance has been heavily directed toward these 

two groups—37 percent of very low-income elderly 

and 29 percent of very low-income families with 

children receive housing assistance. 

There has been a sharp decline in affordable housing. The private rental housing stock 

affordable to these households has been shrinking 

rapidly: Between 1993 and 1995, there was a loss of 

900,000 rental units affordable to very low-income 

families—a reduction of 9 percent. The largest 

losses of private rental stock, in percentage terms, 

were for units affordable to extremely low-income 

renters (households with incomes less than 30 percent of area median)—a 16-percent reduction. 

There have been no new housing vouchers 

for families on the waiting list for housing 

assistance since 1994. The ongoing housing 

affordability crisis has been aggravated by Congress’ refusal to approve new rental assistance to 

families on the waiting list. Since 1995, Congress 

has denied the Administration’s request for new 

rental assistance to mitigate worst case needs. 

Indeed, Congress rescinded funding for vouchers 

that had been appropriated in 1994. This represents a historic reversal of Federal housing policy. 

From the Great Depression until 1994—under both 

Democratic and Republican Administrations and in 

periods of economic boom and recession—Congress has always expanded the availability of rental 

assistance. In light of the substantial reduction in 

affordable rental housing, the failure to increase 

housing assistance further exacerbates the housing 

crisis in the Nation’s cities. 

The need for homeless assistance remains 

acute. Beginning in the 1980s, the number of 

homeless people in America increased to its highest level in 50 years. Research found that as many 

as 7 million Americans experienced homelessness 

at least once in the latter half of the 1980s. Of the 

total homeless population—some 600,000 are 

literally homeless on any given night—some 

suggest that the number of families with children 

now exceeds 30 percent of the homeless population, increasing the need for stable, long-term 

20

The State of the Cities 1998 

housing with access to day care, decent education, 

and other family support. Others are single adults. 

Some homeless persons who suffer from mental 

illness or substance abuse need a variety of services beyond immediate shelter. As a result of 

HUD’s Continuum of Care program, which coordinates Federal, State, and local resources and 

services for homeless people, an increasing number of formerly homeless families and individuals 

are moving into transitional or permanent housing. 

Nevertheless, there remains a shortfall between the 

scope of the homeless population’s need for 

assistance and the level of resources that are 

available. 

The consequences of the lack of affordable 

rental housing spill over into other areas of concern. Each day families with worst case needs must 

make the difficult choice between paying for 

housing and buying other necessities such as food, 

medicine, transportation, and child care. A recent 

report from the Doc4Kids Project at Boston Medical 

Center estimates, for example, that almost 18,000 

inner-city children are hospitalized each year for 

asthma often caused by infestations of roaches.34 

Other problems reported include slow mental 

development from lead poisoning, stunted growth 

and anemia from malnutrition, and injuries from 

living in unsafe housing. And the consequences 

show up in the damaged lives of untold numbers of 

the Nation’s children who are at increased risk of 

violence, psychological disturbances, infections, 

and poor school performance. 

Closing the Housing Gap: 

Administration Response 

The President’s budget includes a range of 

proposals to increase homeownership, promote 

fair housing and fair lending, expand rental housing 

assistance, and reduce homelessness. To help 

thousands of hard-working middle-class American 

families qualify to become homeowners and 

expand homeownership opportunities in higher 

cost central city neighborhoods, the FY 1999 

budget proposed raising the FHA home mortgage 

insurance loan limits used by the Federal Housing 

Administration to a single national standard of 

$227,150. The budget also proposes an additional 

100,000 Section 8 rental assistance vouchers; a 

$1.6 billion expansion 

of the Low-Income 

Housing Tax Credit; 

and a doubling of 

funding for fair housing enforcement. 

Together, these proposals will help central 

cities expand homeownership opportunities for middle-class 

families, while providing 

needed resources to 

address the critical 

shortage of affordable 

housing that undermines 

the well-being of lowincome, central city 

families. Last year, the 

new HOME Bank that will expand the use of HUD’s 

successful HOME housing block grant funds; 

another round of Homeownership Zones; record 

funding for homeless assistance programs; a 

“While Denver’s


of life has been uplifted in recent


years due to a strong economy,


we must also consider the


effects our success has had on


access to housing. Housing


economic investment. Initiatives


like the HOME Program and the


Administration and Congress worked together to 

pass historic legislation to ensure that families 

currently using housing vouchers are able to 

remain in the program. This year, working with 

the same bipartisan spirit, Congress can pass the 

legislation providing the resources needed to 

address the housing gap that confronts our 

Nation’s cities. 

Conclusion 

The problems discussed here reveal another 

fundamental mismatch that further widens the 

opportunity gap that central cities and their 

residents face: While economic markets and social 

maladies transcend the boundaries of individual 

jurisdictions, the public policies and public resources needed to manage them effectively too 

often do not. Whether one lives in the city, suburb, 

small town, or rural county—each of us has a stake 

in ensuring that the challenges confronting cities 

are met. The regional economies that are the 

source of our Nation’s economic vitality cannot 

remain strong with decaying cities at their core. 

However, healing the heart of our metropolitan 

systems demands that every segment of our 

society—business, community groups, individual 

21

Part One: The State of America’s Cities 

citizens, government at every level—work together outlines the Administration’s commitment to 

to overcome the obstacles that prevent cities from serving as a catalyst in this effort, removing barriachieving their potential. Part Two of this report ers to opportunity and equipping people and 

further describes the Clinton-Gore Administration’s communities with the tools and incentives they will 

response to each of the three opportunity gaps and need to succeed. 

22

Only a few years ago it seemed as if the 

Federal Government, hamstrung by exploding 

deficits and paralyzed by a crisis of public confidence in government 

itself, might withdraw 

completely and leave 

cities to fend for 

themselves. President 

Clinton has offered a 

new approach, one 

that is firmly committed to cities, but charts 

a smarter, more 

effective role for the 

Federal Government. 

This Administration recognizes that 

Washington cannot pay 

for everything, should 

not regulate everything, 

and must not hand down 

mandates. Rather, the 

Federal role is more 

appropriately defined 

first as establishing 

broad national goals and 

priorities, and second as 

effectively providing the 

resources that States and 

local governments need 

“Vice President Gore and I have 

worked hard the past 5 years 

to create a government that 

works better and costs less, 

to address the urgent challenges facing our cities. 

Discarding top-down approaches to urban policy, 

the Clinton-Gore Administration has adopted the 

ideas of mayors, faith and community leaders, 

businesses, and others in forging a genuine partnership between Washington and our Nation’s cities 

and metropolitan areas. A strategy of community 

empowerment focuses on creating opportunity, 

demanding responsibility, and promoting a sense 

of community. 

Part Two: Closing the Opportunity Gaps 

Accordingly, the Administration has worked 

within the Executive branch and with Congress to 

reinvent the way the Federal Government does 

business in cities, creating a new generation of 

programs and streamlined regulations that tear 

down barriers to opportunity. Vice President Gore’s 

Partnership for Reinventing Government is helping 

to ensure that these programs work as they were 

intended and provide a level of service, efficiency, 

accountability, and competence that the American 

people have a right to expect. 

President Clinton’s urban agenda reflects a 

new consensus around some old ideas about how 

to build stronger communities. It involves moving 

beyond “business as usual” to provide important 

new types of assistance to cities, with particular 

emphasis on helping communities weave together 

disparate Federal programs, as well as regional 

problem solving that responds to the way we live 

and the way our economy functions. 

Key Components 

The Administration’s urban agenda is built 

around the following components: 

Closing the Jobs Gap 

✦ Boost business investment and job creation in 

central cities and connect people to work 

opportunities, improve workforce preparedness 

and job skills, and increase access to child care. 

Closing the Education Gap 

✦ Encourage school reform through education 

opportunity zones and other initiatives, repair 

and modernize school facilities, and reduce 

class sizes with 100,000 new teachers. 

23

Part Two: Closing the Opportunity Gaps 

Closing the Housing Gap 

✦	 Expand homeownership, reduce worst case 

housing needs by increasing the supply of 

affordable housing, fight housing discrimination, expand assistance to homeless people, 

and restore and rebuild public housing. 

Building Safe, Healthy, and Sustainable 

Communities 

✦	 Strengthen the environment, continue crimeprevention efforts, improve access to health 

care, and ensure a fair deal for immigrants. 

Moving Beyond Business as Usual 

✦	 Streamline Federal programs, encourage cooperation among urban and suburban communities to address regional concerns, and promote 

the development and wide application of 

technology in cities. 

These initiatives are described in more detail 

below. 

A. Closing the Jobs Gap 

People in cities need jobs—but not just any 

jobs. They need jobs that will keep them on the 

cutting edge of their region’s economy; they need 

jobs that serve the 

needs of their neighborhoods; and they 

need well-paying jobs 

that enable them to 

care for themselves 

and their families and 

expand their creative 

potential and their 

skills. 

The Administration is committed to 

supporting the efforts of 

cities to promote jobs 

and economic opportunity. The Federal Government currently spends 

over $10 billion per year, 

and offers another $1.7 

billion in support of local 

“The Community Empowerment 

Fund is a powerful financing tool 

for building private enterprise and 

stemming the loss of good-paying 

community revitalization strategies. These strategies include: 

✦	 helping communities retain existing businesses 

and encourage new ones; 

✦	 providing seed money and infrastructure for 

economic development projects; 

✦	 channeling targeted economic opportunities to 

distressed neighborhoods; and 

✦	 ensuring that economic development occurs in 

ways that enhance rather than undermine 

environmental quality. 

Progress Made 

Over the past 5 years, the Administration’s 

efforts to help cities improve the economic climate 

for attracting business investment and creating 

jobs have begun to pay off. The first round of 

Empowerment Zones (EZs) and Enterprise Communities (ECs) has attracted billions of dollars in 

private-sector capital commitments, and is proving 

to be a success in building private-sector, community, and government partnerships. Two rounds of 

funding for Community Development Financial 

Institutions have begun to strengthen communitybased financial institutions that specifically focus 

on the needs of their local communities. HUD’s 

Section 108 Economic Development Loan Fund is 

an important tool for cities to support business 

expansion or startups. The program has enabled 

cities to partner with companies in making business investments in distressed communities, using 

Federal loan guarantees. Over the past 5 years, 

HUD has committed $3 billion in federally guaranteed loans to such ventures as the Cessna Aircraft 

Work and Learning Center in Wichita, Kansas, with 

zero defaults by participating communities. 

Boost Business Investment and Job Creation 

in Central Cities 

The President’s FY 1999 budget includes the 

following initiatives that will help communities 

create jobs where they are needed most—close to 

where people live. 

24

The State of the Cities 1998 

Enact a $400 million Community Empowerment Fund to help create or retain jobs in 

distressed communities. The FY 1999 budget 

includes a proposal for $400 million to support 

the Community Empowerment Fund. This initiative 

will enhance and expand the existing Section 108 

Economic Development Loan Fund and Economic 

Development Initiative (EDI) grant program. HUD 

estimates that this request will enable communities 

to leverage at least $2 billion in private investment 

for business startup or expansion loans, financing 

for industrial facilities, neighborhood-based commercial revitalization efforts, and other economic 

development activities. These projects may 

support as many as 280,000 jobs when fully 

implemented. 

Build on the success of Empowerment 

Zones (EZ) and Enterprise Communities (EC)— 

expand to 15 new Zones. Since 1994, when the 

first 6 urban Empowerment Zones, 2 Supplemental 

Empowerment Zones, and 60 Enterprise Communities were designated, EZs and ECs have generated 

commitments of billions of dollars in public and 

private investment. A recent report by Standard 

& Poor’s DRI concluded that urban EZs have led 

to significant improvements in the bond ratings 

of those cities.35 The Community Empowerment 

Board, led by Vice President Gore, oversees the 

Administration’s community empowerment efforts 

and is committed to building upon this initial 

success. Later this year, contingent upon Congressional action, HUD will make similar resources 

available to more cities when it designates 

15 additional urban EZs. In addition to the tax 

incentives that are already in place, the Administration has requested $1.5 billion over 10 years in 

Title XX grants to support these new initiatives. 

Increase support for Community Development Financial Institutions (CDFIs). The 

Administration’s FY 1999 budget calls for increasing 

the appropriation for the CDFI Fund to $125 million. 

The President is also seeking to reauthorize the 

Fund this year. CDFIs expand the availability of 

credit, investment capital, and financial services in 

underserved urban and rural communities. CDFIs 

include many types of financial institutions, such 

as community development banks, low-income 

credit unions, community development loan and 

Exhibit 17: Empowerment Zones Are Stimulating 

Redevelopment in Cities Throughout America 

First-Round Empowerment Zones/Enterprise Communities 

Empowerment Zone (EZ) 

Enhanced Enterprise Community (EEC) 

Enterprise Community (EC) 

venture capital funds, and microenterprise loan 

funds. They provide their customers with a full 

range of products and services not available 

through the conventional commercial banking 

sector—from basic financial services to small 

business loans and from home mortgages for firsttime homebuyers to rental housing rehabilitation 

loans for local nonprofit groups. 

Continue successful economic development 

and business lending programs. The President’s 

budget includes a streamlined and enhanced 

Community Development Block Grant (CDBG) 

program, one of the first tools cities have turned 

to when trying to revive low-income neighborhoods 

and an important resource for job creation and 

business development. HUD’s FY 1999 proposal of 

$4.7 billion includes a significant reduction in setasides that have in the past reduced the program’s 

effectiveness. The proposed changes will result in 

a $281 million increase in formula grants for cities 

and States. Approximately 10 percent of the CDBG 

funds ($480 million in FY 1999) are used for assistance to businesses and other economic development initiatives. 

The Economic Development Administration 

(EDA) has provided initial capital for over 

480 local revolving loan funds that funnel capital 

to such enterprises.36 These locally administered 

funds have made more than 7,200 loans to new 

and existing businesses. EDA also aids community 

25

Part Two: Closing the Opportunity Gaps 

economic development by investing in the infrastructure needed to attract and support private 

businesses. In FY 1999, EDA-funded projects will 

create or retain some 30,000 jobs for economically 

distressed communities. 

The largest single Federal catalyst for small 

business capital is the U.S. Small Business Administration (SBA), which guaranteed over $10.8 billion 

in long-term, low-interest, private loans to small 

firms in 1997. Most of these loans were guaranteed 

through SBA’s Section 7(a) program. SBA expects 

to assist 52,500 businesses through Section 7(a) 

and Section 504 loan guarantees in 1998, and 

another 56,400 in 1999. These loans finance small 

business startup and expansion and may be used 

for virtually every business purpose from acquisition of real estate or equipment to export transaction financing to working capital. SBA also helps 

to empower some of America’s smallest businesses 

by providing financing for microloans in amounts 

up to $25,000. SBA’s loans are made to nonprofit 

intermediaries that, in turn, re-lend to small businesses. SBA’s technical assistance programs provide information, education, and training to help 

small businesses start, run, and grow. Finally, while 

all of SBA’s programs provide assistance to entrepreneurs in cities, the One Stop Capital Shops 

(OSCSs), as SBA’s contribution to the EZ/EC, are 

crucial to the delivery of SBA programs in 

America’s cities. 

Increase Mobility and Connect People 

to Work 

The Federal Government offers a wide range 

of programs that help communities connect their 

residents to training and employment opportunities within the regional job market. 

Welfare to Work 

Welfare-to-Work Grants. The President 

fought for $3 billion in targeted grants for welfare 

to work in the Balanced Budget Act. Three-fourths 

of the $3 billion appropriated for 1998 and 1999 will 

be allocated to States as formula grants of which 

the majority will be placed, through the Private 

Industry Councils, in the hands of the localities 

that are on the front lines of the welfare reform 

effort. The remaining 25 percent will be awarded 

competitively to local entities. With these funds, 

local governments, private industry councils, and 

other community-based organizations are able to 

design and implement employment strategies for 

long-term and “hard-to-place” welfare recipients. 

These include job creation, job placement, and job 

retention, including wage subsidies to employers, 

community service work, on-the-job training 

programs, and other critical post-employment 

supportive services. 

Welfare-to-Work Housing Vouchers. The 

President’s FY 1999 budget proposes $283 million 

for 50,000 welfare-to-work housing vouchers— 

one-half of the overall request for 100,000 new 

vouchers requested by HUD to help low- and 

moderate-income families keep pace with rising 

housing costs. These will provide Section 8 tenantbased rental assistance to enable families leaving 

welfare to obtain affordable housing near a new 

job, and thereby get or keep a job. It would eliminate difficult and sometimes relatively costly 

multi-hour commutes that are often unreliable 

and pose another hurdle to obtaining and retaining 

employment. This proposal goes beyond solving 

the transportation problem. It allows recipients 

to choose neighborhoods, both in the city and 

beyond, that offer the amenities and opportunities 

Oakland Wins Competitive Welfare-to-Work Grant 

The EASTBAY Works Regional One-Stop Center in Oakland, California, a project of the Oakland Private Industry Council, is 

a partnership designed to coordinate employment activities throughout the Bay Area counties of Alameda and Contra Costa. 

Like other winners in the U.S. Department of Labor’s (DOL) Welfare-to-Work competitive grant program, EASTBAY services 

will be targeted to hard-to-employ welfare recipients, emphasizing long-term independence. 

On May 27th, President Clinton announced 49 winners of the DOL competitive grants in 34 States—approximately three 

fourths of which operate in urban areas with concentrations of poverty and all of which depend on intensive collaboration at 

the community level. The grants are part of a $3 billion national effort to reduce dependency among welfare recipients who 

face the most difficult barriers to employment. 

26

The State of the Cities 1998 

that are necessary for them to move from welfare 

to work. 

Welfare-to-Work Tax Credits. To give employers an additional incentive to hire those entering 

the workforce, the welfare-to-work tax credit 

enacted in the 1997 Balanced Budget Act allows 

employers to take a credit of as much as $3,500 

per year for each long-term welfare recipient they 

employ, and an additional $5,000 for the second 

year they stay on the job. This credit complements 

the Work Opportunity Tax Credit of up to $2,400 

for the first year of wages for certain job seekers. 

The FY 1999 budget extends these two important 

credits for an additional year. 

Increase Access to Transportation 

Access to Jobs. In 1996 HUD began testing 

approaches to helping low-income families through 

its five-city Bridges to Work demonstration, which 

links inner-city job seekers with job placement, 

transportation, child care, and other supportive 

services that increase the likelihood that they will 

be able to find, obtain, and keep jobs. The Administration will expand this strategy in FY 1999 through 

the Access to Jobs initiative which was included in 

the TEA21 transportation reauthorization bill the 

President signed on June 9, 1998. This competitive 

grant program, authorized at $150 million annually 

beginning in FY 1999, will help communities develop 

flexible transportation services to connect lowincome workers and those moving from welfare to 

work to area jobs at critical job-related services. 

Access to Child Care 

In 27 million families, both parents—or the 

only parent in the family—work.37 Many of them 

who want safe, quality child care cannot find it 

or afford it. This is particularly true for low- and 

moderate-income working families, and for those 

on welfare who are trying to join their ranks. 

President Clinton has proposed investing 

more than $20 billion over 5 years in an historic 

new initiative to improve the availability, affordability, and quality of child care in America’s cities 

and throughout the country. His Child Care Initiative starts by expanding existing assistance vehicles 

such as the Child and 

Dependent Care Tax 

Credit, which already 

helps about 6 million 

families cover child 

care costs each year. 

The budget proposes 

liberalizing this credit 

so that it aids an additional 3 million families 

—President Bill Clinton 

with incomes below $59,000. 

To make child care services more widely 

available, the budget proposes a new tax credit 

for private employers that expand or operate child 

care facilities, train child care workers, contract 

with a child care facility to provide child care 

services to employees, or provide child care 

resource and referral services to employees. 

The President’s Child Care Initiative also calls 

for dramatically increasing funding for Child Care 

and Development Block Grants, the mainstay of 

Federal assistance for low-income working families 

and those moving from welfare to work. A recent 

survey by the U.S. Conference of Mayors indicates 

that many States are trying to help more families, 

but provide subsidies at levels too shallow to cover 

the cost of child care in urban markets.38 President 

Clinton has asked Congress to increase funding for 

these subsidies by $1.2 billion next year. 

The President’s initiative also includes several measures intended to improve the safety 

and quality of child care. In addition to providing 

additional funds for the local enforcement of 

health and safety standards in child care settings, 

the budget proposes $50 million in FY 1999 for 

a new Child Care Provider Scholarship Fund, 

which, with State and local matching funds, will 

support training for up to 250,000 child care 

providers, as well as boosting their pay. It will 

also reduce rapid turnover in the industry by 

requiring that those who receive training stay in 

the field for at least a year. 

27

Part Two: Closing the Opportunity Gaps 

Sante Fe Collaboration Develops High-Tech 

Training Capacity 

Santa Fe is preparing its workforce for jobs in the 

booming high technology field at New Mexico Northern Community College’s 4,000-square-foot High 

Technology Manufacturing Training Facility, developed 

with funding assistance from Intel Corporation and the 

U.S. Departments of Commerce, Energy, and HUD. The 

facility, designed to train its mostly adult students for 

employment in the region’s emerging semiconductor 

and high-technology industries, features a clean room, 

robotics laboratory, semiconductor manufacturing 

facility, and telecommunications classroom—which also 

will help the school provide distance learning opportunities to rural communities. 

Eighty-five students are currently enrolled in the community college’s microelectronics program, which is based 

in the new facility. Its first graduates have already been 

placed in jobs at Intel and Los Alamos National 

Laboratories. The program expects to place students in 

jobs at salaries averaging $35,000 per year. 

Improve Job Skills and Workforce 

Preparedness 

The Administration is committed to helping 

residents adapt to economic change through 

investments in a wide range of workforce development programs and services that help people gain 

the skills needed to find stable, well-paying jobs. 

These include: 

Job Training 

The President has proposed a G.I. Bill for 

America’s Workers to consolidate and streamline 

activities in the Job Training Partnership Act and 

empower adults to make better choices for job 

training services. 

Adult Training Grants, administered by 

the U.S. Department of Labor, would allocate 

$1 billion in FY 1999 to local communities. Through 

employer-led Private Industry Councils, the communities direct targeted job training, placement 

assistance, and support services to serve over 

400,000 low-income individuals, including many 

welfare recipients. About 60 percent of those 

receiving services have a job within 3 months of 

leaving the program. 

In addition, President Clinton has overseen 

a dramatic increase in job training funds to help 

workers displaced by plant closings or mass layoffs through early intervention programs, new 

skills training, job search assistance, and other 

support services. The FY 1999 budget requests 

$1.5 billion for dislocated worker assistance— 

nearly three times the amount available 5 years 

ago. The services provided by these funds will 

help about 685,000 displaced workers find good 

jobs. More than three-fourths of workers assisted 

will be working within 3 months of leaving the 

program, earning an average of 97 percent of the 

wages they received in their previous jobs. 

Youth Training 

The President’s FY 1999 budget includes 

several initiatives aimed at training and placing 

youth in jobs. These include: 

✦	 School-to-Work Venture Capital Grants. Since 

1994, school-to-work projects have fostered 

stronger ties between schools and local employers, paving the way for urban youths to receive 

top-quality academic and occupational training, 

as well as to pursue post-secondary education 

or skills development. By 1999, school-to-work 

components will be up and running in one-fourth 

of the Nation’s high schools, engaging 1.5 million 

youth in career development activities. 

✦	 Youth Opportunity Areas. In severely depressed urban areas, the President has proposed designating selected high-poverty 

neighborhoods with high rates of youth unemployment as Youth Opportunity Areas. The 

President’s budget calls for $250 million to be 

made available to help these communities 

secure State, local, and private resources for 

initiatives that will employ youth in privatesector jobs with good career opportunities. 

✦	 Job Corps. The Job Corps represents another 

model for helping the most seriously at-risk 

youth find and follow the path to work and 

responsibility. It offers a full-time, year-round 

program in a structured residential setting, 

where 70,000 young people a year can explore 

different occupations, learn about the demands 

of the world of work, hone their workplace 

28

The State of the Cities 1998 

social skills, gain basic educational competency, 

and receive vocational training. 

✦	 Youthbuild. Over 5,000 youths participate in 

Youthbuild each year, receiving a combination 

of classroom academic and job skills development and on-site training in a construction trade. 

With support from HUD, Youthbuild participants 

are able to put their newly acquired skills to 

good use rehabilitating and building housing 

for low-income and homeless people in their 

communities. 

✦	 AmeriCorps. Through the AmeriCorps service 

program, almost 100,000 Americans of all 

ages and backgrounds have engaged in public 

service over the last 4 years, working in the 

areas of education, health and human service needs, environment, and public safety. 

AmeriCorps members tackle many of the 

vital challenges facing our Nation’s cities— 

cleaning up rivers and streams, tutoring 

children at risk, fighting crime with police 

departments, and building affordable housing, among many other endeavors. 

B. Closing the Education Gap 

Education is primarily the responsibility of 

States, local school boards, families, and individuals. In a few places, local governments are being 

given the authority to operate schools. Nevertheless, the Federal Government has a crucial stake 

in supporting education, from preschool through 

adulthood. And because it is in big-city districts 

that unequal educational resources have hit hardest, responding to the challenges of urban education is at the heart of the President’s education 

policies. As the Nation’s mayors agreed at last 

month’s Education Summit, turning around lowperforming schools is perhaps the most important 

task ahead. Over the last 5 years, the President has 

worked hard to expand Federal support for education in ways that reinforce these national interests. 

Encouraging school reform. The President 

has proposed designating about 50 high-poverty, 

low-achieving urban and rural school districts as 

Education Opportunity Zones if they adopt reforms that hold schools accountable for improving 

quality, expanding public school choice, ending 

social promotion, and showing real improvements 

in school achievement. The $1.5 billion proposed 

for Zones over the next 

5 years would fund 

reforms in the designated districts for 

3 years. Districts that 

show significant learning gains could get an 

additional 2 years of 

funding. 

Another 3,500 

high-poverty schools 

will adopt effective, 

research-based school 

improvement models 

with help from the 

$175 million requested in 

the U.S. Department of Education’s FY 1999 Comprehensive School Reform 

Demonstration. 

“Washington is the place wher 

ideas get debated. But cities and 

towns are the laboratories where 

ideas are tested and refined. I 

believe that Washington can 

transform education in America 

and get behind the mayors who 

are transforming education at 

Linking schools and universities. President 

Clinton has proposed enlisting America’s colleges 

and universities in partnerships with middle 

schools. High Hopes for America’s Youth will 

fund school/university partnerships involving 

2,500 middle schools nationwide. Over a 5-year 

period, starting as early as 6th grade and running 

through high school, almost 1 million middleschool students would learn what it takes to go to 

college through mentoring, tutoring, after-school 

and summer programs, college visits, access to 

rigorous college prep classes in core subjects, and 

other activities. Unlike similar programs tested 

on a smaller scale, High Hopes would work with all 

students—and not a handpicked few in each grade. 

Improving school facilities through expanded School Modernization Bonds. In order 

for students to learn and to compete in the global 

economy, schools must be well equipped and they 

must be able to accommodate smaller class sizes. 

Almost 40 percent of central city schools need 

major repairs. To address these and other critical 

needs, the FY 1999 budget proposes Federal tax 

credits to pay interest on nearly $22 billion in 

29

Part Two: Closing the Opportunity Gaps 

bonds to build and renovate public schools—more 

than double last year’s level. The new proposal 

provides tax credits for two types of School Modernization Bonds—School Construction Bonds 

and Zone Academy Bonds—that were first created 

through the Taxpayer Relief Act of 1997. 

Accessing the information superhighway. 

The new $2.25 billion E-rate fund administered by 

the Federal Communications Commission will cut 

the cost of Internet and telecommunications 

services for every public, private, and parochial 

school by an average of 60 percent. For the poorest 

schools, access will be almost free. The Technology Literacy Challenge Fund is one of several 

Federal programs that pumped almost $600 million 

in Federal dollars into educational technology— 

computers, software, and the training to ensure 

that teachers can use them effectively. 

Reducing class sizes. President Clinton has 

proposed that the Federal Government help 

schools attract and pay 100,000 public school 

teachers over the next 7 years. These teachers 

would be concentrated in grades 1 through 3, 

allowing children to attend smaller classes with 

fully qualified teachers. This investment in human 

capital can make a real difference in urban areas. 

Research shows that reducing class size to 15 to 

18 students in the early grades improves student 

achievement, particularly among low-income and 

minority students in inner cities. 

Attracting teachers to inner-city schools. 

Some $350 million in funding proposed by President Clinton over the next 5 years would be used 

to alleviate a shortage of inner-city teachers by 

recruiting and training teachers to take up posts in 

high-poverty areas. The Federal money would fund 

scholarships for approximately 35,000 aspiring 

public school teachers and provide seed money 

for innovative partnerships between school districts that need teachers and the colleges and 

universities that train them. 

Expanding before- and after-school opportunities. To ensure that young people learn in a 

safe and drug-free environment, the President has 

asked Congress to authorize a total of $1 billion 

over 5 years to keep schools open before and after 

hours as 21st Century Community Learning 

Centers. These startup funds, combined with 

local matching dollars, will establish or expand 

4,000 after-school programs, providing 500,000 

children with safe havens that offer a wealth of 

positive learning opportunities. 

Expanding lifelong learning. The ClintonGore Administration has developed a number of 

incentives that encourage people to invest in postsecondary academic, professional, and technical 

education. These include HOPE Scholarship Tax 

Credits, which will make the first 2 years of college 

universally available, and Lifetime Learning 

Credits, which would allow students beyond the 

first 2 years of college, as well as those taking 

classes part-time to improve or upgrade their job 

skills, to take a 20-percent tax credit on the first 

$5,000 of tuition and fees incurred each year 

through 2002. 

Rebuilding Communities Through 

Public Housing—Pittsburgh’s Success 

When Mayor Tom Murphy of Pittsburgh first took 

office in 1994, public housing in Pittsburgh appeared 

as intractable a challenge as any he would have to 

face. He inherited a housing authority on the brink of 

receivership, with high vacancies, long waiting lists, 

soaring crime rates, and a history of poor management 

that fostered disinvestment in every city neighborhood 

that touched public housing. “While I certainly hadn’t 

created this mess, I alone am accountable to the voters 

to fix it,” said the mayor. 

The mayor took on the chairmanship of the housing 

authority board—perhaps the first mayor in the country 

to do so—and put a strong management team in place 

that reported directly to him. Murphy also made it clear 

that public housing residents would be both empowered 

to and accountable for transforming their neighborhoods. The turnaround is clear. In the Manchester 

neighborhood, for example, the city is using HUD’s 

HOPE VI funding to demolish 109 poorly designed 

and managed public housing units built in the 1970s. 

In place of those units, HOPE VI is enabling the housing 

authority to develop affordable single-family homes on 

scattered infill sites while addressing the social service 

needs of the projects’ mostly poor residents. Mayor 

Murphy and his staff work on rebuilding neighborhoods 

and they view public housing resources as a means to 

that end. 

30

The State of the Cities 1998 

C. Closing the Housing Gap 

Expand Homeownership to 

Underserved Markets 

Homeownership is the essence of the American dream. In June 1995 President Clinton committed the Nation to increasing the homeownership 

rate to 67.5 percent by the year 2000. He brought 

together a partnership of 58 key public and private 

organizations to forge a National Homeownership 

Strategy. The efforts of these national partners, 

led by HUD Secretary Andrew Cuomo, to reduce 

the financial, information, and systemic barriers to 

homeownership are amplified by local partnerships 

at work in over 100 cities. These efforts are having 

an impact: By the end of 1997, homeownership had 

reached a record-high 66 percent rate.39 

But the job is not done. Homeownership in 

central cities and among women, minorities, and 

lower income Americans continues at or below 50 

percent.40 HUD has proposed a number of steps to 

expand homeownership opportunities for these 

underserved populations: 

✦	 Increase the Federal Housing Administration 

(FHA) loan limit so that more middle-income 

city residents and minorities, who have traditionally tended to rely on FHA mortgage insurance, can enjoy the benefit of FHA single-family 

mortgage insurance, including downpayments 

of less than 5 percent, and more flexible underwriting criteria. Raising the loan limit to a 

single nationwide threshold of $227,150 would 

also provide borrowers more room to finance 

housing rehabilitation costs under FHA’s purchase rehab program—an important consideration in older urban housing markets. 

✦	 Fund a new round of Homeownership Zones. 

This program enables cities to undertake largescale, mixed-income developments of singlefamily homes that can be a catalyst for bringing 

distressed inner-city neighborhoods back to life, 

attracting businesses that typically cluster 

around stable, owner-occupied developments. 

✦	 Play-by-the-Rules Homeownership Initiative. 

The President’s FY 1999 budget for the Neighborhood Reinvestment Corporation includes 

$25 million for a new initiative that would make 

the dream of homeownership more accessible 

to 10,000 families who have been responsible 

and paid their rent on time but are currently 

underserved by the housing market. 

✦	 Expand the use of tenant-based Section 8 

rental assistance so that hard-working families 

that are ready to take on homeownership can 

use their rental assistance to help pay a mortgage instead. 

✦	 Increase funding for the Housing Counseling 

program, which reaches out to help minorities 

and immigrant homebuyers in particular, learn 

more about the process of finding, financing, 

and maintaining a home. 

Expand the Supply of Affordable 

Rental Housing 

The demand for affordable rental housing 

is at an all-time high, but the supply of units for 

low-income families continues to shrink. Housing 

assistance already helps more than 2 million 

very low-income households in central cities, 

but another 2.75 million urban renters still have 

urgent housing assistance needs. 

100,000 Additional Section 8 Vouchers. 

Since FY 1995, Congress has provided virtually 

no new rental assistance to serve the more than 

1 million families on waiting lists for such assistance. The Administration proposes to provide 

100,000 families and individuals with portable 

rental assistance in FY 1999. These vouchers will 

include 50,000 welfare-to-work housing vouchers 

and 34,000 for homeless individuals and families. 

Low-Income Housing Tax Credit. The largest 

single source of development capital for affordable 

rental housing remains the Low-Income Housing 

Tax Credit, which currently helps fund between 

75,000 and 90,000 affordable units each year. The 

Administration’s proposal to restore the value of 

the credit, which has eroded in recent years due 

to rising building costs, is expected to result in the 

production of an additional 150,000 to 180,000 units 

over the next 5 years. 

31

Part Two: Closing the Opportunity Gaps 

HOME Bank. Cities use their annual HOME 

allocations to expand affordable rental housing 

opportunities by building, rehabilitating, and 

buying multifamily rental properties, for tenantbased rental assistance, or to rehabilitate owneroccupied housing or provide assistance to new 

homebuyers. The budget includes $1.55 billion in 

HOME block grants. These funds will help fund 

78,520 units of affordable housing and rental 

assistance for 11,200 families. 

Exhibit 18 

HOME Serves Very Low-Income Households 

Income Distribution of HOME-Assisted Renters 

Source: HUD Note: TBRA=tenant-based rental assistance 

Income as Percent of 

Area Median 

Share of Households in HOME Rental Projects 

60.7 

20.3 

18.9 

Above 30% 

0-30% (w/out TBRA) 

0-30% (w/TBRA) 

HUD’s proposed HOME Bank will allow HOME 

funds to do even more by creating a loan guarantee 

feature similar to the Section 108 provision of the 

Community Development Block Grant (CDBG) 

program. Cities will be able to borrow up to five 

times their current 

HOME allocation 

which will allow them 

to undertake broadbased neighborhood 

revitalization strategies and take advantage of economies of 

scale by producing or 

rehabilitating a large 

number 

of rental or ownership 

units in a single project 

in a relatively short 

period of time. 

“Cities should be assisted in the 

development of fair housing 

initiatives, and ever 

ought to support, whether he or 

she is a Republican or Democrat, 

the efforts to increase the 

enforcement of fair housing.” 

—Emanuel Cleaver 

Mayor of Kansas City 

Community 2020 

Enforce Fair Housing Laws 

In April 1998, the United States celebrated the 

30th anniversary of the Fair Housing Act, which 

codified our Nation’s commitment to ensuring fair 

housing for every American. We are closer to 

attaining this goal than we were in 1968. Nonetheless, prejudice persists. Overt discrimination has 

been driven underground and become much more 

subtle, but minority Americans, persons living with 

disabilities, families with children, religious minorities, and other groups continue to suffer when 

denied housing opportunities as a result of discrimination. As a result, the 1999 budget proposes 

increasing funding by more than two-thirds over 

FY 1998 levels, to $52 million. 

Number of Complaints 

Source: 1996 Annual Report to Congress on the State of Fair Housing in America 

Other 285 

122 

170 

159 

254 

844 

2,292 

Finance 

False Representation 

Refusal to Sell 

Advertising 

Coercion 

Refusal to Rent 

Terms and Conditions 

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 

3,960 

Exhibit 19: Housing Discrimination Can Take Many Forms 

Issues in Fair Housing Act Complaints Processed in FY 1996 

HUD is committed to cracking down on all 

forms of housing discrimination. HUD has pledged 

to double the number of fair housing enforcement 

actions taken during the President’s second term. 

It has entered into voluntary best practice agreements with more than 100 key home mortgage 

lenders nationwide, as well as with major housing 

industry groups. 

HUD also supports and works closely with 

a nationwide network of public agencies and 

nonprofit fair housing organizations to enforce the 

Fair Housing Act. HUD’s Fair Housing Assistance 

Program helps ensure that States and cities have 

the financial resources to process fair housing 

32

The State of the Cities 1998 

businesses in these communities accelerated their 

physical deterioration and decline into poverty and 

played a key role in ending this practice in most 

communities. 

The Community Reinvestment Act (CRA) 

requires lenders to provide services to all segments of the areas in which they are located. The 

Act has made a real difference in hard-pressed 

urban neighborhoods. The Administration’s recent 

reforms of CRA regulations have shifted the focus 

of lender compliance firmly to performance— 

actual lending, investment, and services—instead 

of paperwork. From 1992 to 1997, nonprofit groups 

estimate that the private sector has pledged nearly 

$400 billion in loan commitments—90 percent of all 

such commitments made since CRA was passed 

in 1977. In 1996 alone, large banks made $18 billion 

in community development loans under CRA.41 

However, much remains to be done. 

Reduce Homelessness 

HUD’s homeless assistance grants help local 

governments and nonprofits transform emergency 

shelter and human services systems for homeless 

persons into a seamless continuum of care. The 

continuum strategy assembles a coordinated array 

of housing and supportive service options that can 

respond to the needs of all homeless people in the 

community—including those living with substance 

abuse problems or mental illness—at every step 

of their individual journeys from homelessness to 

permanent housing and self-sufficiency. 

complaints. In addition, the Fair Housing Initiatives Program (FHIP) provides competitive grants 

to dozens of local, regional, and national nonprofit 

fair housing groups. FHIP helps fund their testing 

and enforcement activities. 

Record Lending Agreement Another Step Toward 

“One America” 

Vigorous enforcement of the Fair Housing Act by 

HUD and local fair housing agencies in Dallas and 

Fort Worth will create homeownership opportunities 

for more than 15,000 families over the next 3 years. 

In settling two mortgage lending discrimination complaints, AccuBanc Mortgage Corporation agreed to 

target some $2.1 billion in increased mortgage credit 

to minorities and low- and moderate-income borrowers. 

HUD Secretary Andrew Cuomo called the settlement— 

the largest conciliation agreement ever negotiated 

under the Fair Housing Act—“a victory for everyone 

involved. More minority families will get the opportunity 

to become homeowners, and AccuBanc will do increased business.” Even before the AccuBanc agreement, HUD’s stepped-up fair housing enforcement 

activity, undertaken at President Clinton’s direction 

as part of the One America initiative, had more than 

doubled the monetary relief obtained for victims of 

alleged housing discrimination. 

Increase Access to Credit 

Discriminatory treatment can affect entire 

neighborhoods. In the past, it was not uncommon 

for lenders and insurance companies to “redline” 

urban communities that were regarded as inherently risky because they were poor or predominately minority. The consequences of this practice 

were predictable: Choking off credit for homes and 

Miami’s Homeless Served by an Innovative Continuum of Care 

In the early 1990s, Miami was widely criticized for its treatment of homeless people and lack of appropriate housing and 

services. Not anymore. Today, mobile outreach teams are on the streets, in the encampments, and all over Dade County 

where homeless people can be found—engaging people, assessing their needs, and making referrals to available housing 

and services. 

Outreach teams are just the vanguard of what is now an increasingly seamless array of supportive housing options, multidisciplinary health and social service resources, and training/employment opportunities available to help homeless families 

and individuals build more stable, secure lives. This remarkable turnaround has been the product of a comprehensive publicprivate partnership—the Metro-Dade Homeless Trust, initially chaired by then County Commissioner, now Miami-Dade 

County Mayor Alex Penelas and backed by a grant from HUD’s competitive Continuum of Care program, as well 

as a dedicated sales tax—the first of its kind in the Nation—and significant private-sector and nonprofit involvement. The 

Trust aims at nothing less than eliminating homelessness in the Miami community. 

By providing a roadmap for local collaboration and rewarding performance in concrete ways, HUD’s Continuum of Care 

has made a difference for thousands of homeless people across America. The program focuses on long-term solutions to 

homelessness, not “Band-Aid” fixes. 

33

Part Two: Closing the Opportunity Gaps 

The President’s budget requests $1.15 billion 

to strengthen the continuum of care nationwide 

in FY 1999, an increase of almost 40 percent over 

FY 1998 which, if enacted, would be the highest 

homeless assistance budget ever. With these funds, 

HUD provides flexible support that cities can use 

to fill gaps in their own continuum of resources. 

For example, the Department plans to fund an 

additional 15,000 transitional beds and 3,500 

permanent beds linked, as appropriate, to services 

such as health and mental health care, job training, 

child care, and substance abuse treatment. HUD 

also proposes to use 34,000 Section 8 incremental 

vouchers to allow local communities to help 

homeless individuals and families secure permanent housing. 

D. Creating Safe, Healthy, and 

Sustainable Communities 

In addition to closing the three opportunity 

gaps discussed in the above sections, improving 

the quality of life in 

urban communities is 

essential to keeping 

the middle class and 

ensuring the long-term 

viability of our cities. 

This must be achieved 

through a number of 

strategies: improving 

environmental quality 

“Our most economically 

competitive communities thrive 

on change, but also value the 

(cleaner air and cleaner 

water), crime prevention, and other initiatives. 

Strengthen the Environment 

The Administration is committed to encouraging development strategies that foster truly sustainable communities. This commitment is exemplified 

by the President’s Council on Sustainable Development, which works within the Federal Government and with public and private partners to 

explore paths to sustainability. 

Clean up and redevelop brownfields. The 

Brownfields National Partnership brings together 

the resources of 15 Federal agencies to clean up 

and redevelop contaminated brownfields. The 

Partnership represents a $300 million Federal 

investment over 2 years in mostly urban land. It 

is expected to leverage between $5 billion and 

$28 billion in private investment, support up to 

196,000 jobs, and protect up to 34,000 acres of 

undeveloped greenfield areas outside of cities. 

Under the proposed FY 1999 extension of the 

President’s Brownfields Initiative, the U.S. Environmental Protection Agency (EPA) would receive 

$91 million to make grants to approximately 

100 communities for site assessment and redevelopment planning, as well as for capitalizing revolving loan funds to finance cleanup efforts at the 

local level. 

HUD resources will, in turn, focus on stimulating reinvestment by restoring brownfields sites. 

The FY 1999 budget proposes to double funding 

for the Brownfields Redevelopment Program to 

$50 million, leveraging $200 million in loans and 

loan guarantees and helping to generate 280,000 

jobs precisely where employment opportunities 

are most urgently needed. 

The U.S. Department of Transportation has 

instituted a new policy giving States, localities, and 

transit agencies the flexibility to participate in 

transportation projects that include the careful 

reuse of brownfield sites. This represents a major 

shift in prior policy, which called for avoiding 

contaminated sites wherever possible. 

Finally, the Administration proposal for a 

brownfields tax incentive was signed into law by 

President Clinton in 1997. It allows cleanup costs to 

be expensed in the years those costs are incurred, 

rather than capitalized into the cost of the property. This $1.6 billion incentive is expected to 

leverage $6 billion in private-sector cleanup of 

11,000 brownfields sites over the next 3 years. 

Support Sustainable Development. EPA’s 

Sustainable Development Challenge Grants are 

one catalyst for community-based projects that 

recognize the essential link between environmental 

quality and economic prosperity. These grants 

provide seed money for a wide array of projects— 

such as an ecological park in an inner-city neighborhood in Omaha and a building materials 

34

The State of the Cities 1998 

exchange for New Orleans—that protect the 

environment while facilitating economic growth. 

Similar objectives underlie projects funded 

through the Federal Transit Administration’s 

Livable Communities Initiative, which focuses on 

enhancing the impact of transportation investments by leveraging State and local funds, and 

using flexible highway funds and other resources. 

One successful Livable Communities initiative in 

Atlanta led to better pedestrian access to transit 

stations and the construction of three new gateways to the Atlanta University Center, improving 

public safety and access to jobs and educational 

opportunities. 

A Fair Deal for Immigrants 

The influx of new immigrants is felt most 

strongly in America’s cities, particularly the traditional ports of entry—Boston, Chicago, New York, 

and San Francisco—and the newer “gateway” cities 

of the South and West. Today’s immigrants benefit 

our economy and our Nation as clearly as they did 

a century ago.42 

President Clinton is working to help cities 

minimize the pressures caused by the current surge 

of immigration and quickly tap the knowledge, 

industry, and creativity that immigrants bring to 

their adopted land. 

President Clinton made a commitment to fix 

several provisions in the welfare reform law that 

had nothing to do with moving people from welfare 

to work. In 1997, the President fought for and 

ultimately was successful in ensuring that the 

Balanced Budget Act protects the most vulnerable. 

The Act protects immigrants who become disabled 

and those currently receiving benefits. The Act 

restored $11.5 billion in SSI and Medicaid benefits 

for legal immigrants. The new law protects those 

immigrants now receiving assistance, ensuring that 

they will not be turned out of their apartments or 

nursing homes or otherwise left destitute. And for 

immigrants already here but not receiving benefits, 

the Act does not change the rules retroactively. 

Immigrants in the country as of August 22, 1996, 

but not receiving benefits at that time, who subsequently become disabled will also be fully eligible 

for SSI and Medicaid benefits. 

The Administration is also aiding cities’ 

efforts to acclimate and educate recent immigrants 

by requesting increased funding for Bilingual 

Education Professional Development, which gives 

teachers the skills they need to help their students 

learn English; for Adult Education to expand 

services and improve instruction in English as a 

Second Language; for programs that encourage 

low-income students to complete high school and 

attend college; and for a variety of other education 

and vocational training programs. 

Fighting Crime 

Although crime is mainly a local and State 

responsibility, the last 5 years show that the 

Federal Government can play an important role 

New Assets from Old Cloth—The Brownfields Showcase Communities 

The 16 Brownfields Showcase Communities designated earlier this year to share $28 million in coordinated Federal assistance understand that even the most despised eyesores can be important community assets. “By working to transform brownfields into hubs of economic activity, we will create new jobs, new revenue, and new opportunity,” Vice President Al Gore 

said in naming the Showcase Communities. 

Brownfields redevelopment activities link the unique past, present concerns, and future aspirations of the Showcase 

Communities. For example: 

• The job-poor and economically isolated community of East Palo Alto in California’s prosperous Silicon Valley region 

is cleaning up and redeveloping its brownfields as part of a strategic effort to broaden its economic base. 

• Kansas City, Missouri, and Kansas City, Kansas, are working together to revitalize the bistate Central Industrial District, 

once famous for its vast stockyards and as a rail and manufacturing center. 

• Southeast Florida’s Eastward Ho! Brownfields Partnership, a coalition of public, private, and nonprofit entities, is one 

arm of a larger strategic plan to direct future growth toward the region’s already urbanized areas and away from the 

threatened Everglades. 

35

Part Two: Closing the Opportunity Gaps 

in reducing crime. The Administration’s aggressive 

approach to empowering cities’ anticrime efforts 

reflects a thoughtful balance between law enforcement and crime prevention, with special attention 

to the challenge of juvenile crime and violence. 

The cornerstone of the President’s agenda for 

fighting urban crime is the Community Oriented 

Policing Services (COPS) program, putting 

100,000 police officers on the streets of our cities 

and towns, and employing proven, effective community policing strategies that involve citizens in 

partnership with law enforcement authorities. This 

year the Administration is extending this approach 

through a Community Prosecutors Initiative that 

will provide competitive grants for local prosecutors’ offices to work directly with neighborhood 

residents, forge strategic partnerships with police 

and other agencies to solve local crime problems, 

and shift their emphasis from simply processing 

cases to preventing crimes from occurring in the 

first place. 

Boston Collaboration Cuts Youth Crime 

By the early 1990s, Boston police had begun to realize 

that simply “getting tough” wasn’t enough to curb youth 

violence. “We finally saw that we couldn’t simply arrest 

our way out of the escalating bloodshed,” according 

to police commissioner Paul F. Evans. Instead, a 

more innovative, communitywide response emerged, 

featuring innovative partnerships among police, 

those who work directly with at-risk youth—such as the 

Reverend Eugene Rivers, founder of Boston’s nationally 

known, faith-based Ten Point Coalition—and Harvard 

researchers. 

With backing from the U.S. Department of Justice and 

the U.S. Treasury Department’s Bureau of Alcohol, 

Tobacco and Firearms (ATF), Boston’s efforts focused 

first on youth gangs—and gun buying by their most 

aggressive members, who accounted for three-fourths 

of Boston’s juvenile homicides. School principals and 

social workers meet regularly with police to share 

information. And local nonprofit groups and churches 

work to provide neighborhood youth with positive 

alternatives to crime and gangs. 

Results have been immediate and dramatic. Boston’s 

crime rate has tumbled—the murder rate fell 27 percent 

to its lowest point since 1961, and the city went for 

more than 2 years without a single youth homicide. 

Treasury’s Youth Crime Gun Interdiction Initiative 

is helping 16 other cities match Boston’s success, 

providing local law enforcement with the tools they need 

to go after gun dealers who push guns to children. 

The Administration’s anticrime agenda also 

calls for expanding programs to combat drug abuse 

through treatment and prevention programs 

totaling $2.4 billion in FY 1999. These include the 

innovative Drug Courts Initiative and the Safe and 

Drug-Free Schools and Communities Program, 

which helps nearly every school district in America 

conduct anti-drug and anti-violence programs and 

offers competitive grants to high-need areas with 

proven programs. 

HUD empowers public housing authorities 

(PHAs) and their local partners with tools to target 

crime and drugs in public housing. Operation Safe 

Home brings together residents, managers, and 

various Federal and local law enforcement agencies 

to rid public housing communities of crime. President Clinton’s “One Strike and You’re Out” initiative encourages public housing authorities to evict 

those who abuse the privilege of living in public 

housing by committing crimes, peddling drugs, 

or preying on their neighbors. Public and Indian 

Housing Drug Elimination Program grants fund a 

wide range of security improvements and crime 

control activities in public housing developments, 

as well as community-based drug prevention, 

intervention, and treatment programs. 

Urban Health Care 

While there are hopeful trends in basic public 

health indicators such as life expectancy and infant 

mortality for the Nation as a whole, there are 

troubling disparities in public heath: Central city 

residents are less healthy than other Americans 

and they are less likely to have health insurance. 

The Clinton-Gore Administration is committed to 

helping cities close this health gap. 

Ten million American children lack health 

insurance. The new Children’s Health Insurance 

Program should help reduce this number significantly over the next 5 years, as it sends $24 billion 

to the States to expand health insurance coverage 

for uninsured low-income children. 

The President’s budget includes $80 million 

for health education, prevention, and treatment 

services for minority populations. Under this 

proposal, the Centers for Disease Control and 

Prevention (CDC) would launch a $30 million 

36

The State of the Cities 1998 

Exhibit 20: City Residents Are More Likely To Lack 

Health Insurance 

U.S. 

Suburbs 

Central 

Cities 

Percent 

Source: Current Population Survey, 1997, March supplement 

No Medical Insurance Medical Insurance

0 10 20 0 0 0 0 70 80 90 100 

23.6 76.4

15.0 

18.4 

85.0 

81.6 

3 4 5 6

demonstration program through which selected 

communities would develop innovative and effective approaches to reduce racial and ethnic disparities in health status—for example, in diabetes, 

heart disease, and child and adult immunizations. 

Another $50 million would go to various public 

health programs that serve mostly minority and 

low-income populations. 

E. Moving Beyond Business 

as Usual 

The devolution of responsibility to States 

and communities in almost every sphere of public 

policy in the 1980s and 1990s is transforming the 

relationship among all levels of government. Cities 

and States face a sometimes bewildering array of 

decisions to be weighed and relationships to be 

built, where before there were only Federal rules 

to be followed. The challenge for Washington has 

been to rediscover a meaningful but more modest 

role for itself in ensuring the success of locally 

designed initiatives—a role that is supportive and 

not preemptive, one that breaks down barriers 

to local and regional cooperation instead of 

raising them. Three HUD initiatives exemplify this 

approach: 

Community Builders 

One of the aggravations of working with the 

Federal Government has always been getting—or 

even learning about—the particular tool or resource you need. Knowledge and responsibility 

within a Federal bureaucracy can be so fragmented 

that finding the right information can be almost 

impossible—like trying to use a vast catalog 

without an index. 

As part of its 

new focus on outreach 

and customer service, 

HUD is recruiting a 

cadre of committed 

professionals from 

various fields to sup­

“I applaud HUD’s work to make 

vices more accessible to all 

Americans. These common-sense 

port urban revitalization


efforts. Called Commu­


nity Builders, they will


serve as the first point of


contact with the agency for the thousands of


people who need HUD’s help, from homebuyers


to mayors, from community groups to bankers.


Over 8,000 people have applied to be community


builders. After initial training at HUD and Harvard


University, Community Builders will work out of


HUD’s 81 field offices for 2 to 4 years as problem


solvers and team builders, helping local customers


find the resources they need, the strategies that


can work, and the partners who can help.


Community Builders will empower communities by providing technical expertise in finance 

and economic development programs. State-of-theart Communities 2020 computer mapping software 

will help facilitate comprehensive communitywide 

planning. They will share information on best 

practices from communities throughout America. 

They will break down bureaucratic barriers within 

HUD. 

Center for Community and Interfaith 

Partnerships 

More and better partnerships with our 

Nation’s grassroots organizations are crucial to 

the new HUD. Community and faith-based groups 

are closest to the poor and disadvantaged. They 

are much better positioned than any government 

agency to understand community assets and 

needs and to respond effectively. HUD has therefore 

created the Center for Community and Interfaith 

37

Part Two: Closing the Opportunity Gaps 

Partnerships to ensure that grassroots groups 

have a place at HUD’s table. 

While it is not a new source of HUD funding, 

the Center is working to strengthen HUD’s link with 

a broad range of community and faith-based 

organizations by providing information and expertise on HUD’s programs and ways to best utilize 

them, seeking input on policies and programs and 

ways to better assist communities, acting as 

a problem solver to help overcome barriers and 

find common ground, 

and forging new and deeper partnerships. The 

Center is working from the bottom up to collaborate with those committed to empowering the poor 

and vested in building stronger, safer communities 

across America. 

Regional Connections 

The greatest challenges facing metropolitan 

communities—from job mismatches to crumbling 

infrastructure and from disinvestment to sprawl— 

are regional in nature. Unfortunately, the incentives 

for cooperation between cities and suburbs— 

and the institutions for putting that cooperation 

into practice—are weak. HUD has proposed a $100 

million Regional Connections Initiative that will 

spur the search for regional solutions to regional 

issues, encouraging communities to begin to work 

together and develop 

strategic plans that 

emphasize coordinated 

metropolitan economic 

growth and action on a 

range of environmental 

and social equity issues. 

Regional Connections will be carried out 

in collaboration with the 

Joint Center for Sustainable Communities, a 

partnership of the National Association of 

County Officials and the 

U.S. Conference of Mayors, 

“The Joint Center for Sustainable 

Communities of the U.S. Conference of Mayors and the National 

Association of Counties will be a 

which grew out of the President’s Council on 

Sustainable Development. 

PATH 

HUD is also working to ensure that all the 

housing stock in cities and throughout the United 

States benefits from the best practices and the 

best technology that our Nation has to offer. 

Technological innovations are notoriously slow to 

be adopted in the housing industry—but a new 

initiative known as the Partnership for Advancing 

Technology in Housing (PATH) is being launched 

to collect and disseminate information on the most 

promising ideas for reducing housing utility costs, 

carbon emissions, housing construction injuries, 

and losses due to fire and disasters. 

Conclusion 

Americans have reason to look optimistically 

toward the 21st century. The familiar villains of 

our national economic drama—inflation, unemployment, high interest rates, the Federal budget 

deficit—have largely been routed for the moment. 

Confidence is returning to America’s cities as well. 

Battered by decades of sharp decline, cities are 

now being invigorated by a strong national 

economy—and President Clinton’s opportunity 

agenda—to an extent unseen during the 1970s 

and 1980s. 

In many cities, thousands of residents are 

moving from welfare rolls to payrolls. A number 

of downtowns are experiencing a highly visible 

renaissance as destinations for tourism, sports, 

the arts, and entertainment. Violent crime is down 

and homeownership is up. City balance sheets are 

getting healthier. 

However, serious challenges remain, for this 

good news and the confidence it inspires does not 

extend to all cities—nor to all parts of even the 

most prosperous ones. Central cities host only a 

relatively small share of the jobs being produced 

by metropolitan economies. Too many inner-city 

schools are failing in their educational mission, 

creating a workforce that is ill-prepared to compete 

for the economic opportunities created by today’s 

economy. 

38

The State of the Cities 1998 

Cities find themselves on the losing side of 

fundamental structural and demographic trends 

that are changing the face of metropolitan America, 

dispersing jobs and people while they concentrate 

poverty and social problems. A spatial and skills 

mismatch—between the knowledge-intensive, 

predominately suburban jobs our economy is 

creating and the disproportionately poor and 

relatively low-skilled urban workers who urgently 

need them—complicates a basic mission of any 

viable community: equipping residents of all 

backgrounds with the tools to learn, grow, and 

succeed throughout a lifetime. It also complicates 

the challenge for cities of moving thousands of 

their residents from welfare to work. 

The overarching challenge confronting cities 

is to grow in sustainable ways, while closing the 

opportunity gaps formed by these and other 

deficits in areas such as economic development, 

education, public safety, housing, transportation, 

health, finance, and human services. The previous 

pages have outlined a few of the many ways the 

Federal Government can help—by making strategic 

investments in people and communities, by creating incentives for others to do the same, by finding 

and highlighting best practices, and by helping 

to ensure that the playing field is level for everyone. But Washington is not the lead player in this 

drama—it is, instead, a supporting actor, a catalyst. 

The fate of cities—and of the metropolitan 

regions to which they are inextricably linked— 

will be shaped by the people who live there. Each 

person, acting individually and through the institutions that serve and represent them, can contribute 

to the health and vitality of urban America. 

Individuals contribute by taking responsibility 

for their lives and their families, and by working 

together with their neighbors to respond to shared 

concerns. 

Businesses contribute by investing in urban 

communities and in their people, as well as by 

being advocates for solutions that recognize 

markets instead of political boundaries. 

Nonprofits, including faith-and communitybased organizations, contribute by serving, increasingly, as the agents of urban revitalization, turning 

resources from the community and beyond into the 

tools of social and economic rebirth. 

Colleges and universities are especially important community building partners in many places— 

and should be in more. 

States contribute by truly being the “laboratories of democracy,” delivering public resources 

and establishing rules for using them in ways that 

encourage innovation and collaboration instead of 

stifling them. 

And local and county governments contribute 

by involving people at the level of grassroots 

problem solving, managing the basic functions— 

safe streets, sound infrastructure, responsive social 

services—that enable desirable places to live and 

do business. 

With all of these actors working together, 

America’s cities can build a bright future that is 

worthy of their past and of their people. 

39

Appendix: The President’s FY 1999 

Budget—Highlights for Cities 

✦ Brownfields. $50 million to redevelop brownfields in partnership with the U.S. Environmental Protection Agency. 

✦ Homeownership Zones. $25 million for additional Homeownership Zones. 

✦ Neighborhood Reinvestment Corporation. 

$30 million for a program to help renters with 

solid payment track records own their own 

homes. 

✦ 100,000 Additional Section 8 Vouchers. 

Includes 50,000 for efforts to promote welfareto-work vouchers, and 34,000 for homeless 

individuals and families. 

✦ Increase Funding for Homeless Assistance 

Programs. Increase to $1.15 billion, including 

$958 million for local continuum of care strategies and $192 million for new housing vouchers 

to help homeless families and individuals leave 

the shelter system. 

✦ Fighting Discrimination in Housing Markets. 

73-percent increase in funding for fair housing 

activities. 

U.S. Department of the Treasury 

✦ Community Development Financial Institutions. $125 million to expand the breadth of the 

Treasury Department Community Development 

Financial Institutions program. 

✦ Expanding the Low-Income Housing Tax 

Credit. Increase the per capita allocation for 

each State from $1.25 to $1.75, estimated to 

produce an additional 150,000 to 180,000 

affordable housing units over the next 5 years. 

✦ Extend the Brownfields Tax Incentive, 

Welfare-to-Work Tax Credit, and Work 

Opportunity Tax Credit. 

The President’s FY 1999 budget includes 

substantial initiatives to close the jobs, education, 

and housing opportunity gaps described in this 

report. These include, but are not limited to, the 

following: 

U.S. Department of Housing and 

Urban Development 

✦	 Community Empowerment Fund. $400 million 

for a new Community Empowerment Fund— 

expected to leverage an estimated $2 billion in 

private-sector loans to help create or retain as 

many as 280,000 jobs. 

✦	 Welfare-to-Work Housing Vouchers. $283 

million for 50,000 new housing vouchers for 

welfare recipients who need housing assistance 

to get or keep a job. 

✦	 Empowerment Zones. $150 million in new 

funds next year and a total of $1.5 billion over 

10 years for 15 new urban Empowerment Zones. 

✦	 Federal Housing Administration (FHA) loan 

limits. Raising the home mortgage insurance 

limit to a single, nationwide limit of $227,150. 

✦	 HOME Bank: Leveraging the HOME Program. 

$1.55 billion HOME Investment Partnership 

Program includes a new loan guarantee feature, 

enabling States and localities to leverage 

private investment for large-scale rental 

housing and homeownership developments. 

✦	 Regional Connections. $100 million in Community Development Block Grant funding to 

encourage cooperation among urban and 

suburban communities around problems and 

opportunities of shared concern, such as 

economic development, housing, and sustainable growth. 

41

Appendix: President’s FY 1999 Budget—Highlights for Cities 

✦	 School Modernization Program. Federal 

tax credits to pay interest on an estimated 

$20 billion in critical bond financing of two 

kinds—Qualified Zone Academy Bonds (expanded) and Qualified School Construction 

Bonds (new). 

U.S. Department of Education 

✦	 Education Opportunity Zones. $1.5 billion 

over the next 5 years for Education Opportunity 

Zones in urban and rural school districts. 

✦	 Zone Academy Bonds. Tax credits for lenders 

and investors when they buy State or local 

government bonds issued to finance reforms 

in qualifying schools. 

✦	 100,000 Public School Teachers. Will reduce 

class sizes in grades 1 through 3, allowing 

children to attend smaller classes with fully 

qualified teachers. 

Other 

✦	 Business Credit in Distressed Communities. 

Continued support for the U.S. Small Business 

Administration, Economic Development Administration loans, and infrastructure grants. 

✦	 Access to Jobs. The U.S. Department of 

Transportation’s $150 million a year welfare-towork transportation plan as part of the TEA21 

bill to reauthorize ISTEA.43 

42

List of Exhibits 

Exhibit 1 President Clinton Eliminates the Deficit ..................................................................................................... 2


Exhibit 2 Incomes at the Bottom of the Economic Ladder Are Growing Fastest................................................... 3


Exhibit 3 Metropolitan Economies Drive Nation’s Growth ....................................................................................... 3


Exhibit 4 Jobs Are Up in Cities ..................................................................................................................................... 4


Exhibit 5 Urban Unemployment Has Fallen Substantially ........................................................................................ 5


Exhibit 6 Central City Poverty Has Dropped in Recent Years .................................................................................. 5


Exhibit 7 Violent Crime Has Plummeted in Many Large Cities But Continues To Rise in Some Growth Hubs .. 6


Exhibit 8 Homeownership Among Minorities Is on the Rise in Cities ..................................................................... 7


Exhibit 9 Suburban Population Is Growing Twice as Fast as Cities ......................................................................... 8


Exhibit 10 Minority Americans Are Concentrated in Cities........................................................................................ 9


Exhibit 11 Joblessness Remains Higher in Most Central Cities Than in Suburbs ................................................. 11


Exhibit 12 Many Disadvantaged Urban Students Attend Deteriorating Schools ................................................... 17


Exhibit 13 “Basic” Achievement in Inner-City Schools Lags..................................................................................... 17


Exhibit 14 In Many Urban Districts, Most Students Do Not Graduate on Time ..................................................... 18


Exhibit 15 Homeownership Is Lower in Cities Regardless of Income Level ........................................................... 19


Exhibit 16 Millions of Urban Renters Have “Worst Case” Needs ............................................................................. 20


Exhibit 17 Empowerment Zones Are Stimulating Redevelopment in Cities Throughout America ..................... 25


Exhibit 18 HOME Serves Very Low-Income Households ........................................................................................... 32


Exhibit 19 Housing Discrimination Can Take Many Forms ....................................................................................... 32


Exhibit 20 City Residents Are More Likely To Lack Health Insurance .................................................................... 37


43

Endnotes 

1 Current Population Survey. 

2	 The Intermodal Surface Transportation Efficiency 

Act was reauthorized as TEA21 when President 

Clinton signed it into law last month. 

3	 U.S. Department of Education National Assessment of Educational Progress (NAEP), 1994 and 

1996. 

4	 School Facilities: America’s Schools Report Differing Conditions. U.S. General Accounting Office, 

June 1996. 

5 Economic Report of the President, February 1998. 

6 Economic Report of the President, February 1998. 

7	 Economic Report of the President, February 1998, 

Table B–33. 

8	 Joint Center for Sustainable Communities of 

the United States Conference of Mayors and 

National Association of Counties. The Role of 

Metropolitan Areas in the National Economy. 

March 19, 1998. Pages 2–3. 

9 U.S. Census of Population and Housing. 

10 Bureau of Labor Statistics. 

11 Bureau of Labor Statistics. 

12 Pagano, Michael A. City Fiscal Conditions in 1997. 

National League of Cities, June 1997. 

13 National Institute of Justice. Sourcebook of 

Criminal Justice Statistics, 1992 and 1996. 

14 Bureau of the Census, Department of Commerce, 

1998. 

15 1993–1996, Home Mortgage Disclosure Act 

(HMDA) data. 

16 Current Population Survey, March Supplement, 

1997. 

17 Current Population Survey, March 1997. 

18 Current Population Survey, March 1997. 

19 The State of the Cities. U.S. Department of 

Housing and Urban Development, June 1997. 

20 Paul Kleppner, “Work After Welfare: Is the 

Midwest’s Booming Economy Creating Enough 

Jobs?” Northern Illinois University, January 1998, 

http://www.ospr.niu.edu. 

21 The California Budget Project: Budget Brief, May 

1997, http://www.cbp.org. 

22 Implementing Welfare Reform in American Cities. 

23 Data provided by the Council of Economic 

Advisers and Department of Labor (June 1998), 

based on various studies. On average, a 2-year 

college degree raises earnings by 10 to 30 percent 

per annum, and a 4-year degree by 20 to 60 

percent, over earnings predicted with a high 

school diploma alone. 

24 See LaDonna Pavetti and Greg Acs, Moving Up, 

Moving Out or Going Nowhere? A Study of the 

Employment Patterns of Young Women. A Report 

to the Annie E. Casey Foundation. The Urban 

Institute, Washington, D.C., July 1997. 

25 See Commission on the Skills of the American 

Workforce, America’s Choice: High Skills or Low 

Wages! (1990) and National Center for Education 

and the Economy, Building a Highly Skilled 

Workforce: A Labor Market System for the 21st 

Century (1997). 

26 Superfund: Extent of Nation’s Hazardous Waste 

Problems Still Unknown. U.S. General Accounting 

Office, December 1987. 

45

Endnotes 

27 School Facilities: America’s Schools Report Differing Conditions. U.S. General Accounting Office, 

June 1996. Page 2, note 5. 

28 U.S. Department of Education, Violence and 

Discipline Problems in U.S. Public Schools, 1996– 

97. National Center for Education and Statistics, 

1998. 

29 Quality Counts ’98, Education Week on the 

Web, “The Achievement Gap,” 1998. Education 

Week analysis based on the U.S. Department 

of Education’s Common Core of Data, 

http://www.ed.week.org. 

30 Rental Housing Assistance—The Crisis Continues. 

U.S. Department of Housing and Urban Development, April 1998. 

31 Rental Housing Assistance—The Crisis Continues. 

32 Rental Housing Assistance—The Crisis Continues. 

33 Joint Center for Housing Studies. The State of the 

Nation’s Housing 1998, Harvard University. 

34 Doc4Kids Project. “Not Safe at Home: How 

America’s Housing Crisis Threatens the Health 

of Its Children.” Boston Medical Center, February 

1998. 

35 Standard & Poor’s Public Finance, December 22, 

1997. 

36 Economic Development Administration, Department of Commerce (1998); and Budget of the 

United States Government, Fiscal Year 1999. 

37 Budget of the United States Government, Fiscal 

Year 1999. 

38 Implementing Welfare Reform in American Cities. 

39 Bureau of the Census, Department of Commerce 

(1998). 

40 Census Bureau. 

41 Department of Treasury Memorandum, June 15, 

1998. 

42 National Academy of Sciences, The New Americans. 

Washington, D.C.: National Research Council. 

43 See endnote 2. 

46