The new segregation: it's class, not race. And we know how to solve it.

• Author: Chancellor, Carl
• Position: AMERICAN LIFE: AN INVESTOR'S GUIDE

Three years ago, Kelly Williams-Bolar, a poor, single mother, stood in a Summit County, Ohio, courtroom facing a number of felony charges, including one count of grand theft. Her crime: stealing an education--estimated to be worth $30,000--for her two daughters.

According to prosecutors, Williams-Bolar, who lives in public housing in Akron, a once-booming industrial city that has fallen on hard times, illegally enrolled her two daughters in the affluent Copley-Fairlawn school district, a neighboring community in Summit County.

Williams-Bolar, desperate to get her girls out of Akron's failing schools--on its 2013 state report card, the district had an overall grade of F on academic indicators--enrolled them in Copley-Fairlawn using her father's address. Her father, whose home is in Copley and who pays taxes to the district, was also charged by prosecutors. The facts in the case came to light after the Copley-Fairlawn district spent more than $6,000 on a private detective to track the comings and goings of Williams-Bolar and her daughters.

While Copley-Fairlawn was trying to exclude low-income and disadvantaged students, however, the public school district in Montgomery County, Maryland, is doing just the opposite. The jurisdiction, which sits just north of Washington, D.C., is considered affluent, and indeed was listed by Forbes as the tenth-richest county in the United States, with a median household income of $92,213. But it also has growing pockets of poverty, particularly in the eastern regions that border neighboring Prince George's County. Montgomery County, famous for its progressive politics, tried not one, but two approaches to lift up low-income students. The most recent progressive approach involved the allocation of school resources. In 2000, the district superintendent, Jerry Weast, decided to spend a boatload of extra money--$2,000 per pupil--to help students attending the district's high-poverty schools. The system provided all-day kindergarten, reduced class sizes, and investment in teacher development, among other improvements. These interventions are all backed by considerable research.

At the same time, Montgomery County maintained its long-term commitment to another, very different experiment, one dating back to 1974. Concerned that poor and working-class families were being priced out of the county, officials pioneered "inclusionary zoning," which allows for so-called scattered-site public housing--meaning that poor residents live throughout the county, including fairly affluent areas. Under the policy, 12.5 percent to 15 percent of developers' new housing stock is required to be affordable to low-income and working-class families. Between 1976 and 2010, the program produced more than 12,000 moderately priced homes. The housing authority has the right to purchase one-third of moderately priced units for public housing.

Unlike the compensatory school spending approach, the housing model imposes few costs, either private or public. David Rusk, a national expert on such policies, says that inclusionary zoning results in "no overall cost to the developer." Each development must set aside units for low- and moderate-income tenants, but at the same time, the county gives the developer a "density bonus"--meaning that a larger number of high-profit units can be built. Taxpayers, too, come out fine. While building new public housing units in high-poverty neighborhoods is typically cheaper because land prices are lower, under inclusionary zoning laws the housing authority buys the units at the reduced price charged for modest-income families--an amount linked to what is affordable to families making about half the area median income. According to the Center for Housing Policy, a nonprofit organization dedicated to increasing afford able housing options, inclusionary zoning expands housing at "little or no direct cost to taxpayers."

By simultaneously taking these two separate approaches--integration and compensatory spending--Montgomery County created, without necessarily meaning to, a natural social experiment to test a question that had long perplexed education researchers. To wit: If you are a low-income student, are you better off in a lower-poverty school that spends less per pupil or a higher-poverty school that spends more?

In normal circumstances that question is hard to answer because the kinds of poor families who find themselves living in more-affluent neighborhoods or going to more-affluent schools tend to have characteristics--more education, better connections, and so on--that make them not representative of low-income families generally. But that problem all but disappeared in Montgomery County, because residents there who apply for public housing are assigned homes on a random basis while most students in the county are assigned to schools in their neighborhoods.

Heather Schwartz, a researcher now at the RAND Corporation, was given access to student-level data in order to capitalize on this rare natural experiment. According to her groundbreaking 2010 study, Housing Policy Is School Policy, published by the Century Foundation, the spending programs did help boost achievement for some students, but the integration program provided far greater academic...