Minorities and property values (was: You've got to be kidding me!)

[Plan-it]

Just as a side note, here in Atlanta it appears that most segregation (at this point in the city's history) is economic more than racial, in general. White flight is reversing and the City of Atlanta is regaining population, primarily white older residents and educated younger multi-ethnic individuals. The large African-American middle class households with children are moving into the formerly white suburbs. On the South side of the Atlanta metro area the new African-American residents have gained a majority in some areas and have displaced caucasian individuals. The new householods in these areas (African-Americans) are better educated, have a higher household income, and are more interested in being involved in their community compared with the former Caucasian residents.

Property values have been generally uneffected by this impact (except in the City of Atlanta that is seeing gentrification and has rising property values as higher density housing is being built on areas that were former public housing tracts). In the jurisdiction I work for, we are seeing gentrification happen on a different scale. Middle class, predominantly African-American households are buying up 1950's bungalos, fixing them up and gentrifying/displacing the existing lower income, older, caucasian residents. Property values have increased substantially. The perception of decline occurs here in association with the growth of the Latino community. At the same time that the African-American population is increasing in population, the Hispanic/Latino population is also growing at a phenominal rate. This has caused a negative perception about property values based on nationality rather than race. This is an interesting and volatile topic.

[passdoubt]

She said that she and her husband were looking for the perfect place for a long time and finally came accross one. She said there was another house that they were thinking about putting a bid on but there were "black people in the neighborhood and they don't help the property value"

So it's a great house in a wonderful neighborhood that happens to have black people there? It's probably a great investment. As racism wanes the property values should increase, as more people begin to assess the value based on the wonderful neighborhood instead of the racial composition of the people who live there.

This is, of course, assuming that the neighborhood's racial composition and other characteristics are remaining constant.

Even if the woman is assuming that black people "lower property values," she's not thinking clearly. The black people there already would be depressing values enough for her to get in on the market and sell in the future. In real estate, like other investments, you want to buy low and sell high. If her assumption is true, she should be more concerned about how the racial composition is changing, not the fact that there are any black people there now.

But of course her premise isn't really correct; race and class intersect in a complex manner, and "racial steering" is still alive and well in real estate, as investigative news reports show us every five years or so. Upper income black areas and lower income white areas most certainly exist, and as jresta mentioned, working class white neighborhoods are experiencing rising housing costs due to an influx of Asian immigrants and migrants in many parts of the country. It's not nearly that simple.

In fact, if you look at neighborhoods in Philadelphia for instance, the ones with the greatest yearly increases in property values are some of the "blackest" in the city (although a lot of this is fueled by speculators selling empty burned out shells to eachother). I believe that the zip code with the lowest increase last year was Chestnut Hill, a wealthy white neighborhood far from the core of the city.

[jmello]

In real estate, like other investments, you want to buy low and sell high. If her assumption is true, she should be more concerned about how the racial composition is changing, not the fact that there are any black people there now.

You are assuming that this will be an investment, with an expected gain. Not everyone views a home in that context. Especially with this year's failing market.

[PennPlanner]

One should be careful not to oversimplify the situation. Comparing a gentrifying ghetto neighborhood with a wealthy white one is misleading (especially when gentrifying often means the neighborhood is turning white). What's more relevant is comparing two identical neighborhoods or subdivisions whose only difference is the skin color of the majority of the residents. There's enough evidence in the DC area to show that, for whatever reasons, the blacker the subdivision the lower the real estate values are going to be. It is nice to talk about a black subdivision of 500K houses until you realise that if the same subdivision was white, the houses would be worth 750K.

Another good example would be comparing Chestnut Hill with Mount Airy next door, the latter is decidedly more diverse and its housing stock is cheaper, par for par, with similar houses in Chestnut Hill or on the Mainline.

So it's a great house in a wonderful neighborhood that happens to have black people there? It's probably a great investment. As racism wanes the property values should increase, as more people begin to assess the value based on the wonderful neighborhood instead of the racial composition of the people who live there.

This is, of course, assuming that the neighborhood's racial composition and other characteristics are remaining constant.

Even if the woman is assuming that black people "lower property values," she's not thinking clearly. The black people there already would be depressing values enough for her to get in on the market and sell in the future. In real estate, like other investments, you want to buy low and sell high. If her assumption is true, she should be more concerned about how the racial composition is changing, not the fact that there are any black people there now.

But of course her premise isn't really correct; race and class intersect in a complex manner, and "racial steering" is still alive and well in real estate, as investigative news reports show us every five years or so. Upper income black areas and lower income white areas most certainly exist, and as jresta mentioned, working class white neighborhoods are experiencing rising housing costs due to an influx of Asian immigrants and migrants in many parts of the country. It's not nearly that simple.

In fact, if you look at neighborhoods in Philadelphia for instance, the ones with the greatest yearly increases in property values are some of the "blackest" in the city (although a lot of this is fueled by speculators selling empty burned out shells to eachother). I believe that the zip code with the lowest increase last year was Chestnut Hill, a wealthy white neighborhood far from the core of the city.

[jmello]

There's enough evidence in the DC area to show that, for whatever reasons, the blacker the subdivision the lower the real estate values are going to be.

Can you control for crime rate, public school quality, access to jobs and services, access to transportation, etc?

[PennPlanner]

Keep in mind that many of these variables, especially crime and schools, have direct impact on value of housing as so many people base housing purchases on schools and crime. Access to transportation less so (most of inner city Philadelphia has better access to public transportation than anywhere in Chester County, but no brainer as to which is the more expensive area to live). Otherwise if you try to control for all these variables you are looking at a black homeowner in a largely white community.

Back to the point: the reason why black communities tend to have lower housing values is because they are located in areas that often have lower scoring schools and higher crime problems and fewer retailing amenities. It is no secret that blacks, for whatever reasons quite indepdendent from real estate choices, score lower than whites or Asians on standardized tests. It is also no secret that blacks have lower household incomes than white, and that helps explain why black neighborhoods don't attract the kind of retail amenities that white neighborhoods do (national retailers base the location of new stores on the household incomes of the area).

[sams]

Can you control for crime rate, public school quality, access to jobs and services, access to transportation, etc?

Check out this journal article:

Michael Emerson, George Yancey, Karen Chai. "Does Race Matter in Residential Segregation? Exploring the Preferences of White America" American Sociological Review, 2001, vol 66

They found that, even when controlling for crime rate, public school quality, property rates, etc. that white people had biases against living in black neighborhoods. When these aspects were controlled for they rarely had problems with Hispanic or Asian neighborhoods, only Black neighborhoods.