PPA786: Urban Policy
Class 10:
Housing Discrimination
and Its Causes
PPA786, Class 11: Housing Discrimination
• Class Outline
▫ Race/Ethnicity and Homeownership
▫ Measuring housing discrimination with audits
▫ Theories about the causes of housing
discrimination
▫ Evidence about the causes of housing
discrimination
▫ Fair housing policy
PPA786, Class 11: Housing Discrimination
• Homeownership
▫ Differences in homeownership by group do not
prove discrimination.
▫ But discrimination and disadvantages (including
lower wealth and income) from past
discrimination are the most likely explanations.
▫ Moreover, these gaps have not changed much in
decades, suggesting, but not proving, that
discrimination (and its legacy) are still important
problems.
PPA786, Class 11: Housing Discrimination
PPA786, Class 11: Housing Discrimination
• Studying Discrimination
▫ Recent studies of discrimination have focused on
methods that try to isolate the impact of
discrimination from the impact of other factors.
▫ To design good policy, we need good measures of the
extent to which discrimination is taking place—and of
its causes.
▫ The main technique is called a housing “audit.”
 Most audits allow a researcher to control for factors other
than discrimination.
 Some recent “correspondence” audits use a randomassignment design.
PPA786, Class 11: Housing Discrimination
• Housing Audits (Also Called “Tests”)
▫ Matched pair design with two teammates who
 Are equally qualified for housing,
 Have the same characteristics, training, timing, and request,
 Differ on race or ethnicity.
▫ Audit teammates successively inquire about an advertised
housing unit randomly selected from the newspaper.
▫ The order of their visits is randomized.
PPA786, Class 11: Housing Discrimination
• Housing Audits
▫ Used to Measure How Much Discrimination Exists.
 Discrimination exists if the minority auditors are
systematically given less favorable treatment than their
(equally qualified) teammates.
▫ Used to Test Hypotheses About the Causes of
Discrimination.
 Audit studies can observe the circumstances under which
discrimination occurs—and hence test theories that
predict discrimination under some circumstances.
PPA786, Class 11: Housing Discrimination
• Strengths of Housing Audits
▫ Audits yield a powerful narrative, which makes cases
of discrimination plausible in both research and court
settings.
▫ Audits can control for virtually everything that a
housing agent should consider in making decisions
about a potential customer.
▫ Audits provide direct measures of discrimination,
unlike other approaches, which look for signs of
discrimination in housing prices, segregation patterns,
and so on.
PPA786, Class 11: Housing Discrimination
• Weaknesses of In-Person Housing Audits
▫ Audits are expensive and hard to manage.
▫ Audits only observe the marketing phase of a
transaction.
▫ Audits do not involve random assignment, so the
possibility that the results reflect unobserved
differences between teammates cannot be ruled out
(although it can be minimized by good management).
▫ For important practical reasons, housing audits are
not “double blind,” so the possibility that auditors try
to influence the results cannot be ruled out (although
it can be minimized by good management).
PPA786, Class 11: Housing Discrimination
• The Housing Discrimination Studies
▫ National studies were conducted in 1977, 1989, and
2000, and 2012.
▫ They were funded by HUD and
▫ Designed to give nationally representative estimates of
discrimination.
▫ All 3 studies involved black-white audits and Hispanicwhite audits in both the sales and rental markets
(about 1,000 audits in each category)
▫ HDS 2000 and 2012 also looked at discrimination
against Asian-Americans and Native-Americans.
PPA786, Class 11: Housing Discrimination
• Discrimination in Black-White Rental Audits
Coefficient
Incidence
2000
1989
2000
1989
Advertised unit available
0.620*
0.398*
0.059
0.057
Advertised unit inspected
0.586*
0.790*
0.063
0.112
Similar unit available
0.036
0.373*
0.004
0.04
Similar unit inspected
0.031
0.542*
0.002
0.038
How many units recommended
0.601*
1.069*
0.105
0.211
How many units inspected
0.695*
1.199*
0.102
0.197
Incentive provided
1.548
0.658*
0.075
0.046
Asked to fill out application
0.375
-0.179
0.05
-0.024
PPA786, Class 11: Housing Discrimination
• Discrimination in Hispanic-White Rental Audits
Coefficient
Incidence
2000
1989
2000
1989
Advertised unit available
1.886*
0.718*
0.125
0.093
Advertised unit inspected
0.362
0.145
0.046
0.019
Similar unit available
0.04
0.075
-0.002
-0.001
Similar unit inspected
0.428
0.742*
0.029
0.061
How many units recommended
0.361*
0.435*
0.083
0.088
How many units inspected
0.179
0.361*
0.029
0.054
Incentive provided
-0.208
1.271
0.023
0.077
Asked to fill out application
-0.017
0.252
0.005
0.03
PPA786, Class 11: Housing Discrimination
• Discrimination in Black-White Sales Audits
Coefficient
2000
1989
Incidence
2000
1989
Advertised unit available
0.031
0.860*
0.007
0.119
Advertised unit inspected
0.268
0.607*
0.066
0.149
Similar units inspected
0.611*
0.690*
0.146
0.137
Follow-up contact made
0.191
0.655*
0.039
0.108
Financial help offered
0.22
0.706*
0.054
0.147
PPA786, Class 11: Housing Discrimination
• Discrimination in Hispanic-White Sales Audits
Coefficient
Incidence
2000
1989
2000
1989
Advertised unit available
-0.235
1.483*
-0.049
0.246
Advertised unit inspected
-0.44
0.784*
-0.109
0.189
Similar units inspected
0.16
0.774*
0.04
0.153
Follow-up contact made
0.32
1.338*
0.067
0.168
1.374*
0.306
0.330
0.069
Financial help offered
PPA786, Class 11: Housing Discrimination
Source: HDS 2012
PPA786, Class 11: Housing Discrimination
Source: HDS 2012
PPA786, Class 11: Housing Discrimination
• Discrimination against Other Groups
▫ In the case of Asian-Americans, HDS 2000 and 2012 found
 Discrimination in the sales market is comparable to
discrimination against blacks, but
 There is not much evidence of discrimination in the rental
market.
▫ HDS 2000 found higher rental-market discrimination
against Native-Americans than against blacks or Hispanics.
PPA786, Class 11: Housing Discrimination
• Correspondence Audits
▫ Several correspondence audits (in several countries) look
into rental housing discrimination using apartment ads on
a selected web site.
▫ Race or ethnicity is signaled by the name attached to each
inquiry.
▫ This is a more precise methodology because it can
literally assign race or ethnicity randomly.
▫ But it asks a narrower question because it can only
observe the initial response of a landlord to an inquiry.
PPA786, Class 11: Housing Discrimination
• Hanson & Hawley (Journal of Urban
Economics, September-November, 2011)
▫ This study is based on ads posted on Craigslist.
▫ They conducted 4,725 audits in 10 large cities.
▫ Overall, the probability of a response for an applicant with a
“white” name was 4.54% higher than for an applicant with a
“black” name.
▫ This difference ranged from over 8% in Boston and Los
Angeles to less than 1% in Atlanta and Dallas.
PPA786, Class 11: Housing Discrimination
• Hypotheses about the Causes of Housing
Discrimination
▫ Agent Prejudice
 Agents may act out of their own prejudice.
▫ White Customer Prejudice
 Agents may act to protect an existing white customer
base.
▫ Statistical Discrimination
 Agents may make a greater effort if transaction is
thought to be more likely.
 This could reflect perceived preferences of their
customers, agent stereotypes, or perceived
constraints, such as discrimination by lenders.
PPA786, Class 11: Housing Discrimination
• ORY Study: Findings on the Causes of
Discrimination
▫ Asking Price
 Agents’ marketing effort increases with asking price for whites
but not for blacks.
 For blacks, not whites, a unit is more likely to be shown if it is
cheaper or smaller than the advertised unit.
 These results suggest that agents have preconceptions about
blacks’ ability to pay for expensive houses, a sign of statistical
discrimination.
PPA786, Class 11: Housing Discrimination
• ORY Study: Findings on the Causes of
Discrimination, continued
▫ Race/Ethnicity of Agent
 Like most other studies, ORY do not find that black agents
discriminate less against blacks than do white agents.
▫ Agency Size
 ORY find that large agencies discriminate less than small
agencies, either because they are better informed about the law
or because they do not depend on business from a particular
neighborhood of (prejudiced) whites.
PPA786, Class 11: Housing Discrimination
• Fair Housing Legislation
▫ The Civil Rights Act of 1866
▫ The Civil Rights Act of 1968
▫ The Fair Housing Amendments Act of 1988
▫ Legislation creating FHAP and FHIP in the 1980s
PPA786, Class 11: Housing Discrimination
• The Civil Rights Act of 1866
▫ This act was resurrected by a U.S. Supreme Court
decision in 1968.
▫ It prohibits disparate-treatment discrimination on
the basis of race in all forms of contracting.
▫ It has been widely used in fair housing litigation
by local fair housing organizations.
PPA786, Class 11: Housing Discrimination
• The Civil Rights Act of 1968
▫ This important law was passed right after the
assassination of Martin Luther King, Jr.
▫ It has strong language prohibiting discrimination in
housing of many forms, including redlining and
disparate-impact.
▫ It had very weak enforcement provisions and excludes
sales by owner and rentals in owner-occupied 1-4
family buildings.
▫ It gives private fair housing groups standing to sue.
PPA786, Class 11: Housing Discrimination
• The Fair Housing Amendments Act of 1988
▫ This law added much stronger enforcement
provisions, including large fines.
▫ It set up administrative law judge system
(although either party can request federal court).
▫ It gave HUD extensive investigative powers, which
have been little-used so far.
PPA786, Class 11: Housing Discrimination
• FHAP and FHIP
▫ FHAP is the Fair Housing Assistance Program.
 It provides financial assistance to state and local
government fair housing offices,
 Which are required to process cases first (if their law is
“equivalent” to federal law)
▫ FHIP is the Fair Housing Initiatives Program.
 It supports private fair housing groups,
 Such as the Fair Housing Council of Central New York,
 Which are the backbone of the enforcement system.
PPA786, Class 11: Housing Discrimination
• Audits as an Enforcement Tool
▫ Audits were developed by private fair housing
groups to help with their enforcement efforts.
▫ HUD, Justice, and private fair housing groups
have made extensive use of audits as an
enforcement tool.
▫ Audit evidence of discrimination has proven to be
very effective in court proceedings.