PPA786: Urban Policy

1
PPA786 Urban Policy

• Class 11
• Housing Discrimination
• and Its Causes

2
PPA786, Class 11 Housing Discrimination

• Class Outline
• Measuring housing discrimination with audits
• Theories about the causes of housing
  discrimination
• Evidence about the causes of housing
  discrimination
• Fair housing policy

3
PPA786, Class 11 Housing Discrimination

• Housing Audits
• Matched pair design with two teammates who
• Are equally qualified for housing
• Have the same characteristics, training, timing,
  and request
• Differ on ethnicity
• Audit teammates successively inquire about an
  advertised housing unit randomly selected from
  the newspaper
• The order of their visits is randomized

4
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 occursand hence test
  theories that predict discrimination under some
  circumstances

5
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.

6
PPA786, Class 11 Housing Discrimination

• Weaknesses of 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).

7
PPA786, Class 11 Housing Discrimination

• The Housing Discrimination Studies
• Conducted in 1989 and 2000 (another study in
  1977)
• Funded by HUD
• Designed to give nationally representative
  estimates of discrimination
• Both studies involved black-white audits and
  Hispanic-white audits in both the sales and
  rental markets (about 1,000 audits in each
  category)
• HDS 2000 also looked at discrimination against
  Asian-Americans and Native-Americans.

8
PPA786, Class 11 Housing Discrimination

• Discrimination in Black-White Rental Audits
• 
  Coefficient Incidence

9
PPA786, Class 11 Housing Discrimination

• Discrimination in Hispanic-White Rental Audits
• 
  Coefficient Incidence

10
PPA786, Class 11 Housing Discrimination

• Discrimination in Black-White Sales Audits
• 
  Coefficient Incidence

11
PPA786, Class 11 Housing Discrimination

• Discrimination in Hispanic-White Sales Audits
• 
  Coefficient Incidence

12
PPA786, Class 11 Housing Discrimination

• Discrimination against Other Groups
• In the case of Asian-Americans, HDS 2000 found
• Discrimination in the sale market comparable to
  discrimination against blacks
• Not much evidence of discrimination in the rental
  market
• HDS 2000 found higher rental-market
  discrimination against Native-Americans than
  against blacks or Hispanics.

13
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
  customers
• Or it could reflect agent stereotypes
• Or it could reflect perceived constraints, such
  as discrimination or redlining by lenders

14
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 than the advertised
  unit.
• These results suggest that agents have
  preconceptions about blacks ability to pay for
  expensive houses, a sign of statistical
  discrimination
• Neighborhood
• Units in integrated central city neighborhoods
  are less likely to be shown to blacks than to
  whites, a sign of response to potential white
  customer preferences

15
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 are
  more diversified and do not depend on business
  from a particular neighborhood of (prejudiced)
  whites.

16
PPA786, Class 11 Housing Discrimination

• ORY Study Findings on Redlining and Steering
• Redlining
• Agents are less likely to show a unit to any
  customer (black or white) if it is in suburban
  integrated neighborhood (even if the customer
  inquired about such a unit)
• Steering
• The likelihood of discrimination is lower in
  suburban integrated than in all-white
  neighborhoods.

17
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

18
PPA786, Class 11 Housing Discrimination

• The Civil Rights Act of 1866 (contracting)
• Resurrected by a U.S. Supreme Court decision in
  1968
• Prohibits disparate-treatment discrimination on
  the basis of race in all forms of contracting
• Has been widely used in fair housing litigation
  by local fair housing organizations

19
PPA786, Class 11 Housing Discrimination

• The Civil Rights Act of 1968
• Passed right after the assassination of Martin
  Luther King, Jr.
• Has strong language prohibiting discrimination in
  housing of many forms, including redlining and
  disparate-impact
• Has very weak enforcement provisions and excludes
  sales by owner and rentals in owner-occupied 1-4
  family buildings
• Gives private fair housing groups standing to sue

20
PPA786, Class 11 Housing Discrimination

• The Fair Housing Amendments Act of 1988
• Added much stronger enforcement provisions,
  including large fines
• Set up administrative law judge system (although
  either party can request federal court)
• Gave HUD extensive investigative powers, which
  have been little-used so far

21
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
• Who 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

22
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