Housing Policy, Race, Inequality, and Disparate Impact

FORTHCOMING DECEMBER 2018

Using one of the most robust samples of mortgages available for the nation’s top 100 metropolitan areas, the distribution of credit by race and neighborhood racial composition is analyzed. By examining over one million mortgages using multilevel modeling violations of the Fair Housing Act surfaced, including disparate impact towards minorities and women. Unequal distribution of capital to communities with many single-mother households is also uncovered, suggestive of a proxy for crime and neighborhood disadvantage. Minority neighborhoods remained undercapitalized, however, gaps narrowed relative to previous studies. Minority applicants were less likely to originate mortgages relative to Whites even after considering financial, assimilation, demographic, and housing characteristics, though White mortgage applicants were hindered more in segregated neighborhoods. Fifty years after the passage of the Fair Housing Act, minority mortgage applications disproportionately failed and considerable variation remains unexplained by differences in applicant qualifications like income, hinting at disparate treatment practices. I conclude that minority status and segregation deter mortgage approval beyond any plausible correlation with ability to repay the mortgage and these disparities remain durable post-recession.

Full Text: JSTOR O’Neil