Black-White Housing Price Differentials: Recent Trends and Implications

Black-white housing price differentials consistent with racially discriminatory practices are rarely found by the studies that have used post-1970 data. Instead, those studies report price differentials consistent with the theory that whites buy segregation by bidding up the price of housing in certain neighborhoods. Unfortunately, the specifications used in most of these studies have been flawed. Here, a properly specified model is estimated using Annual Housing Survey data, augmented with objective measures of neighborhood conditions, from Grand Rapids, Michigan. The price differentials found support the trend found by the improperly specified models. Specifically, various owner bundles cost up to 16 percent more and various renter bundles cost up to 20 percent more in the predominantly white than in the predominantly black submarket. To the extent that residential integration remains one of society's goals, this trend calls for innovative policies that go beyond enforcement of existing Fair Housing laws.