Neighbor Discrimination: Theory and evidence from the French rental market

This paper describes a novel concept of customer discrimination in the housing market, neighbor discrimination. We build up a matching model with ethnic externalities where landlords differ in the number of apartments they own within the same building. Larger landlords discriminate more often only if some tenants are prejudiced against the minority group. Testing the null hypothesis whereby minority tenants are equally likely to have a large landlord provides a natural test for the existence of neighbor discrimination. In an empirical application, we show that this null hypothesis is rejected for African immigrants in the French private rental market. We then show that the local proportion of large landlords is positively correlated with African tenants’ probability of living in public housing, whereas this is not the case of other demographic groups.