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The Continuing Practice and Impact of Discrimination

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  • Stephen L. Ross

    (University of Connecticut)

Abstract

This chapter provides a detailed discussion of the evidence on housing and mortgage lending discrimination, as well as the potential impacts of such discrimination on minority outcomes like homeownership and neighborhood environment. The paper begins by discussing conceptual issues surrounding empirical analyses of discrimination including explanations for why discrimination takes place, defining different forms of discrimination, and the appropriate interpretation of observed racial and ethnic differences in treatment or outcomes. Next, the paper reviews evidence on housing market discrimination starting with evidence of segregation and price differences in the housing market and followed by direct evidence of discrimination by real estate agents in paired testing studies. Finally, mortgage market discrimination and barriers in access to mortgage credit are discussed. This discussion begins with an assessment of the role credit barriers play in explaining racial and ethnic differences in homeownership and follows with discussions of analyses of underwriting and the price of credit based on administrative and private sector data sources including analyses of the subprime market. The paper concludes that housing discrimination has declined especially in the market for owner-occupied housing and does not appear to play a large role in limiting the neighborhood choices of minority households or the concentration of minorities into central cities. On the other hand, the patterns of racial centralization and lower home ownership rates of African-Americans appear to be related to each other, and lower minority homeownership rates are in part attributable to barriers in the market for mortgage credit. The paper presents considerable evidence of racial and ethnic differences in mortgage underwriting, as well as additional evidence suggesting these differences may be attributable to differential provision of coaching, assistance, and support by loan officers. At this point, innovation in loan products, the shift towards risk based pricing, and growth of the subprime market have not mitigated the role credit barriers play in explaining racial and ethnic differences in homeownership. Further, the growth of the subprime lending industry appears to have segmented the mortgage market in terms of geography leading to increased costs of relying on local/neighborhood sources of mortgage credit and affecting the integrity of many low-income minority neighborhoods through increased foreclosure rates.

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Bibliographic Info

Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2005-19.

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Length: 63 pages
Date of creation: Jun 2005
Date of revision: Jul 2006
Handle: RePEc:uct:uconnp:2005-19

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Web page: http://www.econ.uconn.edu/
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Keywords: Homeownership; Housing Discrimination; Mortgage Lending Discrimination; Segregation; subprime lending.;

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References

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Citations

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Cited by:
  1. Marc Labie & Pierre-Guillaume Méon & Roy Mersland & Ariane Szafarz, 2010. "Discrimination by Microcredit Officers: Theory and Evidence on Disability in Uganda," Working Papers CEB, ULB -- Universite Libre de Bruxelles 10-007.RS, ULB -- Universite Libre de Bruxelles.
  2. Robert Bifulco & Helen F. Ladd & Stephen Ross, 2008. "Public School Choice and Integration: Evidence from Durham, North Carolina," Center for Policy Research Working Papers, Center for Policy Research, Maxwell School, Syracuse University 109, Center for Policy Research, Maxwell School, Syracuse University.
  3. James Kau & Donald Keenan & Henry Munneke, 2012. "Racial Discrimination and Mortgage Lending," The Journal of Real Estate Finance and Economics, Springer, Springer, vol. 45(2), pages 289-304, August.
  4. Fu, Shihe, 2008. "Sexual orientation and neighborhood quality: Do same-sex couples make better communities?," MPRA Paper 7678, University Library of Munich, Germany.
  5. Christian Weller, 2009. "Credit Access, the Costs of Credit and Credit Market Discrimination," The Review of Black Political Economy, Springer, Springer, vol. 36(1), pages 7-28, March.

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