More evidence of discrimination in mortgages by race and ethnicity

The Center for Investigate Reporting went through 31 million records created by the Home Mortgage Disclosure Act and found disparities:

The analysis – independently reviewed and confirmed by The Associated Press – showed black applicants were turned away at significantly higher rates than whites in 48 cities, Latinos in 25, Asians in nine and Native Americans in three. In Washington, D.C., the nation’s capital, Reveal found all four groups were significantly more likely to be denied a home loan than whites.

Reveal’s analysis included all records publicly available under the Home Mortgage Disclosure Act, covering nearly every time an American tried to buy a home with a conventional mortgage in 2015 and 2016. It controlled for nine economic and social factors, including an applicant’s income, the amount of the loan, the ratio of the size of the loan to the applicant’s income and the type of lender, as well as the racial makeup and median income of the neighborhood where the person wanted to buy property.

Credit score was not included because that information is not publicly available. That’s because lenders have deflected attempts to force them to report that data to the government, arguing it would not be useful in identifying discrimination. 

This is an ongoing pattern. While I was in graduate school, I had a little experience working with the millions of HMDA records since my advisor, Rich Williams, had published on the topic. For example, see his 2005 article in Social Problems.

And lest we think that this is just about applicants of different races or ethnicities with equal standing receiving different treatment (generally the point of audit studies), it was even worse before the housing bubble burst:

In 2006, at the height of the boom, black and Hispanic families making more than $200,000 a year were more likely on average to be given a subprime loan than a white family making less than $30,000 a year…

Relative to comparable white applicants, and controlling for geographic factors, blacks were 2.8 times more likely to be denied for a loan, and Latinos were two times more likely. When they were approved, blacks and Latinos were 2.4 times more likely to receive a subprime loan than white applicants. The higher up the income ladder you compare white applicants and minorities, the wider this subprime disparity grows.

Or another study:

According to the study’s authors, the economists Patrick Bayer, Fernando Ferreira, and Stephen L. Ross, race and ethnicity were among two of the key factors that determined whether or not a borrower would end up with a high-cost loan, when all other variables were held equal. According to them, even after controlling for general risk considerations, such as credit score, loan-to-value ratio, subordinate liens, and debt-to-income ratios, Hispanic Americans are 78 percent more likely to be given a high-cost mortgage, and black Americans are 105 percent more likely.

Or see the $175 million fine leveled at Wells Fargo for steering minorities to worse loans.

This reminds of the conclusion of American Apartheid where the sociologists Doug Massey and Nancy Denton argue that Americans lack the will to enforce existing laws about housing discrimination. Even with a variety of laws and regulations intended to eliminate discrimination in housing, there is not a completely level playing level field.

Defining a social problem: “transit gaps” or “transit deserts”

One skeptic of the concept of transit gaps explains his concerns:

The Chicago-based nonprofit Center for Neighborhood Technology recently unveiled its AllTransit Gap Finder—an online mapping tool designed to point out areas with “inadequate” transit service. It’s a good effort, and it’s certainly good that we have more tools for understanding transit demand…

A transit gap is some kind of difference between transit service and transit need or demand. But need and demand are different things. A need means that there are people whose lives would be better if they had transit. A demand is an indication that transit service, if it were provided, would achieve high ridership.

These terms correspond to the two opposing goals of transit service. If the goal of service is ridership, then it should provide excellent service where there is demand. On the other hand, many people who need transit wouldn’t be served if transit agencies ran only high-ridership service. So transit agencies run a certain amount of service for the non-ridership goal of coverage, which responds to need. In other words, they spread service out so that everyone has a little bit, even though low ridership is the predictable outcome. This critical distinction is explained more fully here. It’s a difficult budgetary choice about dividing resources between competing goals, one that local governments need to think about…

Although AllTransit’s claims are framed in misleading terms, the idea of being able to accurately see exactly how well any given neighborhood is served by transit is a laudable one. Over the years I’ve written about other efforts to get this right. An especially important idea, buried deep in the overly complex methodology, is that a transit quality index should be about where you can get to in a given amount of time, rather than what transit is available. In my own work I routinely use this measure to describe the human benefits of transit service changes, because getting to destinations, and having a choice of more destinations, is what makes for a great life.

There seems to be two issues here: separating community values from possibilities as well as how to best measure transportation options. No city has an endless pot of money with which to fund mass transit. Yet, I imagine proponents of transit deserts would note that the general American orientation is toward driving and roads while mass transit has to regularly scrap for money. The measurement issue is hopefully an ongoing conversation as researchers with different decisions and aims work to find measures that both reflect the social realities as well as provide helpful information for residents and local governments.

But, I also suspect that this is critique is missing a key concern of some of those working in the food/transit/grocery stores/parks/medical care desert literature: the key is which groups are most affected by these deserts or have less access to these necessities. Many of the deserts – however defined and regardless of the goals of the community – seem to affect lower class and non-white residents. One could argue that a community might not have the resources or vision to extend mass transit to a particular area but this does not necessarily address the issue of residential segregation that is alive and well in the United States.

Eight (unlikely and unpopular) policy options for addressing housing issues

After a recent conversation with colleagues prompted by reading together the sociological work Evicted as well as my own thinking about residential segregation, I wanted to put together a blog post summarizing possible policy solutions to housing issues. I am not optimistic but here are the possible options I see at multiple levels:

  1. Provide incentives for developers and builders. This is a common strategy across different government levels: builders and developers are given access to choice properties or are able to build higher-end housing if they build cheaper housing or provide monies that could be used for cheaper housing. A number of major cities, including Chicago, have such incentives. However, it does not seem to have made a major dent in the amount of affordable housing that is needed. I have heard that argument that governments have simply not offered big enough incentives – there is a tipping point where this could really push builders and developers to construct cheaper housing. I don’t think I buy this argument. Even though there is clearly a market right now for cheaper housing, why would builders and developers not try to build the priciest stuff they can to bring in more profit?
  2. Other market-driven solutions beyond incentives. I’m on the record here as skeptical that free markets can address issues of residential segregation and housing. Vouchers have their supporters since they theoretically would allow poorer residents to access areas of the housing market they otherwise could not. At the same time, introducing vouchers leads to other issues such as inflated prices/rents and negative reactions to those with the vouchers.
  3. Local government action. Municipal officials have a good amount of control over what can be built within their boundaries. However, they are constrained by (1) local residents who want to protect their community (examples of NIMBY in action here and here) and (2) limited budgets and revenues so they are typically trying to maximize property and sales taxes while minimizing use of social services. The biggest tool municipalities have are local zoning guidelines that often constrict what can be built (see recent suburban non-housing examples here and here). One way that wealthier areas exclude those who are not so wealthy is to not allow multi-family housing or set guidelines requiring larger lot sizes.
  4. Metropolitan action. Housing is really an issue that spans municipalities as the majority of people live in one place and commute to another for work (plus drive elsewhere for other amenities). Yet, metropolitan governance does not exist on a large-scale in the United States. Outside of a few regions, this is not a viable option: people in different communities do not have ways to collaborate nor would they necessarily want to. This is particularly true of wealthier communities. Residents would argue that this is the purpose of local government: local residents should get to make decisions about their own communities rather than handing off money and/or control to an outside body that wishes to damage their quality of life. See examples of how this can play out regarding affordable housing in one region and another involving transportation across a whole region.
  5. State governments. States could decide to impose regulations and guidelines but then they would have to overrule municipalities. This is difficult. For example, Illinois in 2004 an affordable housing guideline where every community was supposed to have a certain percentage of their housing stock within affordable limits. The guidelines could have been useful but they had no teeth and what counted as affordable was loosely defined. As this 2015 Chicago Tribune article suggests, wealthier communities did not submit to the guidelines and “Lee acknowledged that the agency has no authority to enforce the mandate if municipalities do not submit affordable housing plans.” Nothing really changed – and I’m guessing this was intentional.
  6. Federal government. Even though the United States has public housing, it was difficult to get off the ground and is not viewed favorably by many. That whole single-family homes fights communism thing plus the American ideal is everyone owning a home. Even if public housing had some successes, on the whole federal efforts have promoted white suburbs mortgages for single-family homes are subsidized. Results for federal initiatives involving vouchers, such as Moving to Opportunity, are mixed as many of the residents end up in similar poor neighborhoods and it is not clear if certain long-term outcomes such as education and employment are positively affected. Federal efforts consistently draw negative responses from conservatives. Operators in the housing industry – the National Association of Home Builders, the National Association of Realtors, lenders, and others – mobilize to protect the mortgage interest deduction and single-family homes. American Apartheid suggested we lack the political will to enforce the 1968 Housing Act and thus we still have discrimination in housing (from mortgages to real estate agents to landlords and more).
  7. The court system. Given the relative lack of action by local and state officials, housing and zoning cases do occasionally make it to state and federal courts. I argued a few years back that I could envision the Supreme Court approving inclusionary zoning (I’m not sure I still think this given the current makeup of the court). They can indeed take action and compel other governmental bodies to address issues. Some famous cases include the Gatreaux case in Chicago where a court ordered scattered-site housing and the Mount Laurel cases in New Jersey combating exclusionary zoning. The problem with these is that they require taking legal action in the first place, they can take a long time to litigate, and while the results may be compelling, they are still often viewed unfavorably and putting the changes into action are not easy.
  8. Non-profits and religious groups. Either sets of groups have limited resources – housing is a very expensive proposition on a large scale – or are more interested in other concerns. Groups like Habitat for Humanity may do good things but they can only build so many houses and not all communities or neighborhoods are welcoming to their projects. Churches, particularly big ones, could access a good amount of resources but housing is more of a structural issue that many conservative Christians may not want to get into.

All of these options are difficult to implement. On the whole, many wealthier suburbanites and urban residents do not want any kind of cheaper or subsidized housing in their neighborhoods or community.

If I had to pick two levels that provide the best opportunities, I might go with local government and the courts. Zoning guidelines are often developed by average citizens sitting on local committees. Get named to such committees and you can influence this process. The courts are a way to get around the unpopularity of introducing cheaper housing as such measure are unlikely to find broad support. At the same time, as noted above, the court route has its own challenges.

Perhaps the most daunting option in my mind is trying to influence the federal level. Does any political party talk seriously about housing? After all, one journalist captured this quote:

The former governor of the Bank of England, Mervyn King, told me this: “Most countries have socialized health care and a free market for mortgages. You in the United States do exactly the opposite.”

It will be hard to alter an entire system based on providing socialized mortgages for the middle-class and above.

A deep American social problem: residential segregation

This post is about a crucial American social problem. It is not about uncivil discourse, increased immigration, political polarization, a decline in social trust, consumerism, or other regularly-discussed options. Rather, underlying many other American issues is residential segregation which occurs by race and class. Here are just some of the social spheres it affects:

  1. Schools. While Americans tend to see more education as a silver bullet to all social problems, the fate of schools is closely tied to their neighborhoods and communities. This is not mainly about funding. It is more about mixing kids of different socioeconomic backgrounds together. Read about the Coleman Report from 1966.
  2. Social networks. Even in a digitally connected, who you live near affects who you and/or your kids see on a regular basis. Live near people like you and you will interact with people like that more.
  3. Quality of life in the community and availability of social services. Factors like crime, public parks, health care, local amenities (libraries, park districts, civic organizations), and local programs (through local governments as well as non-profits and other civic organizations) are connected to the wealth and resources of a community.
  4. Access to jobs. Spatial mismatch describes situations where jobs available to lower-skilled workers are far in distance from lower-skilled workers. Live in a wealthier community and you are likely closer to better jobs.
  5. Access to good housing. Affordable and quality housing is difficult to find in many places in the United States but those with more resources and whose race and ethnicity are viewed more favorably have more housing opportunities.
  6. Building wealth. Since wealth creation is tied to homeownership and good jobs, those who have harder times accessing these two things have a harder time developing and passing along wealth. The disparities between the wealth of whites and blacks as well as Latinos are huge.
  7. Concentrated poverty. As wealthier communities are able to keep poorer residents out through a variety of methods (even as poverty increases in the suburbs), poorer residents can be limited to certain neighborhoods and communities which can exacerbate problems.

It is difficult to truly address a number of American social problems if this problem of residential segregation is not addressed. Read more about how this residential segregation came to be in an earlier post about the development of American suburbs.

Of course, residential segregation cannot be said to be the deepest American problem since beneath residential segregation is the uglier issue of the “American dilemma” or “America’s original sin“: racism.


Responding to “The Disturbing History of the Suburbs”

A recent episode of Adam Ruins Everything addressed how racism helped create the American suburbs. Here are my quick thoughts in response to “The Disturbing History of the Suburbs.”

-Using the Settlers of the Suburbs game as a visual tool is a clever technique with its Monopoly appearance (though I could also imagine linking it to Settlers of Catan). Urbanists over the years have developed numerous classroom activities involving games to help show students who development works. Like games, development tends to follow certain rules or patterns (even if from the outside those rules are hard to see or, in the case of the suburbs, it all looks fairly haphazard). Also, for a simulation of residential segregation, see the modeling of economist Thomas Schelling where the preferences of individual residents to live near people like them can add up to a racist system. For a good board game that gets at suburban development (though there is only a limited racial dimension), see my quick review of Suburbia.

-The main emphasis here is on redlining: federal guidelines for making loans based on the neighborhoods the home was in was then also picked up by private developers. There is a lot more to this story including what were the patterns already in place that make redlining seem logical to the government in the 1930s (the book Sundown Towns can help explain a lot as black Americans had truer geographic dispersion from roughly 1865 to 1890 but then were restricted in where they could live in the North) as well as what other groups were discriminated against with these policies. Redlining certainly did a lot but it was not the only technique used to limit where non-whites could live. Other options included restrictive covenants, provisions written into deeds, racial steering, blockbusting, and riots and bombings. And the groups targeted included blacks, Jews, Asians, Mexicans, and others. In other words, redlining was an important part of a large package used by white structures and individuals to keep their communities all white.

-The video then nicely suggests that the effects of redlining compounded over time: growing individual wealth for white homeowners, new development in whiter communities, limited wealth in redlined communities, and segregated schools in the long run. This is the Matthew Effect in action.

-At one point, Adam suggests Levittown is still mostly white. This may be the case yet minorities have moved in increasing numbers to suburbs in recent decades. At the same time, the legacy of housing discrimination lives on as racial and ethnic groups are not necessarily evenly dispersed across suburbs. And, as noted later, black and Latino residents still have a harder time obtaining loans and continue to face housing discrimination. This is despite the 1968 Housing Act which was intended to eliminate such discrimination; the sociologists who wrote American Apartheid suggested that we lack the political will to see the Housing Act through.

-Nikole Hannah-Jones of NYT makes an appearance to talk about school funding and how white suburbs can draw upon a larger property tax base. Yet, Hannah-Jones goes much further in a 2015 episode of This American Life titled “The Problem We All Live With.” I highly recommend this and have had multiple classes listen to the story of segregated schools in Ferguson, Missouri and other nearby suburbs of St. Louis. By a loophole in state law, Ferguson students were allowed to attend a wealthier white district and it worked…until the loophole was closed. School funding is not the major issue. The deeper issue is the segregation of schools which we know can help minority students. And we know that integration – the 1966 Coleman Report made this clear and busing was tried in a few places for a few years until the outcry was too great – would work but few suburbanites want to consider it as a legitimate option.

-The video closes with these two lines: “The suburb you live in was built on a foundation of segregation. And we can’t close our eyes to that.” I imagine many white suburbanites would still object. At least two good academic books addressing two different contexts (White Flight in Atlanta and Colored Property in Detroit) show how white suburbanites in the 1960s made a switch from race-based arguments for segregation to economic-based ones. Now, if you ask suburbanites about race and ethnicity in their community, they will tend to say that they do not know of any issues or do not contribute to the problem yet they are more willing to talk about quality of life, property values, and good schools. Additionally, suburbanites tend to associate certain classes with certain racial and ethnic groups, leading to different treatment. Of course, race and class are intimately intertwined in the United States and class can often be used as a proxy for excluding by race or ethnicity.

-Just a note on sources: the video uses an interesting mix of scholarly and journalistic sources. There is a lot of excellent academic literature on race and the suburbs and I have tried to point to some of those in this review.

In sum, this video could be a great start to a discussion of ongoing racial disparities in the suburbs. Residential segregation is not just present in large cities and it has long-lasting consequences. Even though the oft-cited histories of the American suburbs – such as Crabgrass Frontier – acknowledge redlining and discuss its implications, many Americans may be unaware of how race strongly influenced the creation of suburbs. (There were other influential factors present as well but that is a long story.) Going further, there are easy ways to go beyond this video and draw upon more complex studies of race in the suburbs.


Pick the wrong suburb and you can try again

Keep trying and you might just find the suburb that suits you:

Switching suburbs after you’ve plunked down a hefty down payment and settled your children in school seems infinitely challenging, and indeed some recent transplants who have doubts about their new communities resign themselves to the idea that there is no such thing as a perfect suburb.

But for others, the gnawing sensation that something is not quite right pushes them to keep searching for another suburb, a better suburb, a place where they might actually feel at home. Maybe it’s the commute. Maybe the schools are too big or too small, or the town is too quiet or not quiet enough. Maybe what they thought was important — the big yard and the birds singing out the windows — was not so important after all….

Even if a possibility looks great on paper, one person’s idea of a great place to live can be another person’s nightmare. “The suburbs are not the same; the subtleties of their personalities are so different,” he said. “Just like someone living on the Upper East Side won’t fit into Williamsburg, someone who likes Maplewood may not fit into Short Hills. You can end up in a place that really doesn’t suit you.”

Moving to a new suburb may be the way to recapturing your identity, whether it’s somewhere where you can walk to dinner or a place with more like-minded people. But first, you should give serious thought to who lives in the town and what types of things go on there. Whom will you encounter when you walk your children to the park? Whom will you drink a beer with at the neighborhood block party? What do the mothers wear to drop-off, or will you see only nannies?

I get that the American suburbs are often about finding individual happiness. And buying a suburban home is a significant investment. The consumer is king. But, does this go too far? How many times can the average family move? Is there any concept of contributing to a suburban community rather than just finding people like you or that you enjoy?

One of the side effects of encouraging individuals to find the suburb that suits them is that it encourages further geographic sorting. Residential segregation is already a major issue in the United States and further moves for psychological or social fit likely allows those with more resources to pick their preferred setting.


Diversity in a community does not necessarily lead to diversity in interaction

Having a diverse population within a municipality or neighborhood doesn’t guarantee the groups will interact or work together:

Although my neighborhood was majority-black for much of my life, most of my friends were white. The same held for most of my parents’ friends. The kids I played with on my block were white. Diversity segregation of this kind manifested in other ways too. Mount Rainier is divided between single-family homes and the WWII-era brick garden apartment complexes that house two-thirds of the population. By the 1990s, these were overwhelmingly populated by people of color, while almost all of the white population lived in the single-family homes…

“On paper we are so diverse, but we really are not integrated,” Christopherson, Miles’ opponent in the mayor’s race, told me in the spring. “Just because you are exposed to people from the West Indies or El Salvador, or African Americans and whites, that has only a little benefit. But what if you were also coming together in a city committee or city events?”…

At present, Mount Rainier is still majority-black, and there are plenty of Hispanic and black homeowners. But consider the most extreme scenario, in which the single-family housing stock largely becomes the preserve of white professionals while working-class people of color remain in the apartments. In that case, Mount Rainier would experience a dispiritingly familiar form of segregation, where urban design and geography separate races. The two housing stocks in town do not share the same commercial corridors. The residents of the apartments are often transitory, and they do not vote as often. They tend to not identify with the commercial corridor near U.S. 1, which contains the Glut Food Co-op and harbors much of the civic infrastructure. Instead, the residents of the brick, multifamily housing do their shopping on the high-speed autocentric Queen’s Chapel Road commercial corridor.

The proposed solution? More interaction across groups within the public school system:

“The important thing is consistent exposure over a long period of time,” says Camille Z. Charles, professor of sociology at the University of Pennsylvania and director of its Center for Africana Studies. “We are often friendlier with people we actually interact with. We do find there is lasting benefit to that, which is why we think it is important to have [diversity] in schools because kids spend so much time in classrooms and on school campuses.”

Four quick thoughts:

  1. This is where Census data can let us down and experience on the ground is helpful. From a macro level, a community or city can look very diverse. An obvious example is a major city like Chicago which is around 45% white but is one of the most segregated cities in America. However, this also happens in much smaller communities as well. Take Wheaton, Illinois. Starting in the late 1800s, a small population of blacks lived on the east side of the city. This was unusual: very few Chicago suburbs had any black residents. But, how much interaction was there between groups in Wheaton?
  2. The author notes that this community is unusual in that a sizable white population remained even as the black population grew. This doesn’t happen in many places: as minorities move in, whites leave.
  3. While race is highlighted here as the dividing force, it sounds like social class is also a factor. While the two areas are closely intertwined, addressing one without the other may be as profitable.
  4. The proposed solution in the public schools is not an unusual one. Yet, it does highlight how few social institutions in the United States really cut across racial or class lines. Where else might people of different groups interact when most other opportunities (from churches to local government to social clubs and civic groups) are segregated?