Now You See it, Now You Don't: Why Do Real Estate Agents Withhold Available Houses from Black Customers?

Abstract

Potential home buyers may initiate contact with a real estate agent by asking to see a particular advertised house. This paper asks whether an agent's response to such a request depends on the race of the potential buyer or on whether the house is located in an integrated neighborhood. We build on previous research about the causes of discrimination in housing by using data from fair housing audits, a matched-pair technique for comparing the treatment of equllay qualified black and white home buyers. However, we shift the focus from differences in the treatment of paired buyers to agent decisions concerning an individual housing unit using a sample of all houses seen during he 1989 Housing Discrimination study. We estimate a random effect, multinomial logit model to explain a real estate agent's joint decisions concerning whether to show each unit to a black auditor and to a white auditor. We find evidence that agents withhold houses in suburban, integrated neighborhoods from all customers (redlining), that agents' decisions to show houses in integrated neighborhoods are not the same for black and white customers (steering), and that the houses agents show are more likely to deviate from the initial request when the customeris black than when the customer is white. These deviations are consistent with the possibility that agents act upon the belief that some types of transactions are relatively unlikely for black customers (statistical discrimination). Journal of Economic Literature Classification: D1, D4, J7, R3 AbstractPotential home buyers may initiate contact with a real estate agent by asking to see a particular advertised house. This paper asks whether an agent s response to such a request depends on the race of the potential buyer or on whether the house is located in an integrated neighborhood. We build on previous research about the causes of discrimination in housing by using data from fair housing audits, a matched-pair technique for comparing the treatment of equally qualified black and white home buyers. However, we shift the focus from differences in the treatment of paired buyers to agent decisions concerning an individual housing unit using a sample of all houses seen during the 1989 national Housing Discrimination study. We estimate a random effect, multinomial logit model to explain a real estate agent's joint decisions concerning whether to show each unit to a black auditor and to a white auditor. We find evidence that agents withhold houses in suburban, integrated neighborhoods from all customers (redlining), that agents decisions to show houses in integrated neighborhoods are not the same for black and white customers (steering), and that the houses agents show are more likely to deviate from the initial request when the customer is black than when the customer is white. These deviations are consistent with the possibility that agents act upon the belief that some types of transactions are relatively unlikely for black customers (statistical discrimination).

The Not-in-My-Property Syndrome: The Occurrence of Ethnic Discrimination in the Rental Housing Market in Belgium

“…9 There appears to be no association between neighbourhood segregation and discrimination against ethnic minorities. Contrary to previous research in the U.S. (Hanson and Hawley 2011;Ondrich et al 2003;Page 1995), ethnic minorities do not run a greater risk of being discriminated against in neighbourhoods with fewer ethnic minorities. In the U.S., ethnic discrimination in the housing market may be due to lessors trying to prevent neighbourhoods crossing the tipping point (Hanson and Hawley 2011); this is not the case here.…”

“…A tendency towards this process is apparent in the US, where real estate agents steer black candidate-buyers towards lower priced properties (Ondrich, Ross, and Yinger 2003).…”

Hedonic Markets and Explicit Demands: Bid-Function Envelopes for Public Services, Neighborhood Amenities, and Commuting Costs

“…Second, discrimination could push blacks and Hispanics into neighborhoods with poor amenities, thereby reinforcing the correlation between unobserved neighborhood traits and ethnicity discussed above. One study based on 1989 housing audit data (Ondrich, Ross, and Yinger 2003) found that even after controlling for housing price, real estate brokers steered blacks, but not whites, toward neighborhoods that had lower average house values or higher average house ages than the one that was original requested. Third, discrimination might restrict the ability of minority households to move out of largely minority neighborhoods and thereby artificially boost housing prices there.…”

The Mechanisms of Spatial Mismatch

“…In this respect, housing market discrimination has been shown to play a central role in the segregation of Blacks, as evidenced by real estate agents who propose Black customers make fewer visits than White customers (Yinger, 1986). Such a discriminating behaviour finds two direct explanations: sheer racial discrimination (Becker, 1971) where suburban homeowners do not wish to sell or rent to Blacks; and, customer discrimination where real estate agents want to avoid Blacks settling in neighbourhoods that they think would then become less attractive for their White customers (see Ondrich et al, 2001). Housing market discrimination can also be accounted for by statistical discrimination in the context of imperfect information (Phelps, 1972;Aigner and Cain, 1977) where Blacks are perceived, on average, as bearing a higher default risk.…”