Understanding Neighborhood Racial Change

SAMIR MAYEKAR: Good morning. My name is Samir Mayekar, and I'm the managing director of the Polsky Center for Innovation and Entrepreneurship at the University of Chicago. And I'm actually a visiting scholar here at the Federal Reserve Bank of Chicago. I'd like to thank you all for joining us for Understanding Neighborhood Racial Change, a very important conversation.

Now, before I joined the Chicago Fed, I served a term as Chicago's deputy mayor with a focus on economic and neighborhood development. And over the course of visiting almost every neighborhood in Chicago and designing major investment programs such as INVEST South/West, I came to the conclusion that some of the most vibrant communities in our city are mixed income and mixed race. Just think of neighborhoods like Uptown or Rogers Park, the Bridgeport-Chinatown area, and Kenwood-Hyde Park.

However, truly diverse communities are actually in the minority in America due to long-standing segregation. And today's two presentations will spark very important dialogue on the topic of race, change, and neighborhoods. You're going to hear from Marcus Casey on Distinguishing Causes of Neighborhood Racial Change-- A Nearest Neighbor Design. And you'll also hear from Daniel Hartley on Preferences over the Racial Composition of Neighborhoods-- Estimates and Implications.

And I'm really looking forward to learning more about their research and hearing from the panel of experts that the Economic Mobility Project has gathered to discuss these topics. So I'm now going to turn it over to Kristen Broady, Director of the Chicago Fed's Economic Mobility Project. Over to you, Kristen.

KRISTEN BROADY: Thank you so much, Samir. And now I'd like to introduce Dr. Marcus Casey, director of undergraduate studies and associate professor of economics at the University of Illinois Chicago, who will present his work on distinguishing causes of neighborhood racial change with a nearest neighbor design. Marcus, over to you.

MARCUS CASEY: Thank you, Kristen. Slides? Thank you, Evangelo. OK, so thank you for everyone for joining in. This paper is co-written with a number of co-authors here. I just want to make one correction. John Orellana-Li is now at the Federal Reserve Bank of Philadelphia as well.

And I need to say the appropriate proviso, that none of the views I express here reflect the views of the Federal Reserve Bank of Philadelphia or the Federal Reserve System. Next.

OK, so, as we just heard from Samir, Chicago, like many other neighborhoods in the country, are still relatively characterized by race. So we've seen some declines in segregation. But we still see a lot of the same lines that existed for the last 50 years or so persist.

And so the question that brought all of us here is, why? So some of this-- or if you ask the typical economist, they would say that this is largely driven by income and wealth. However, there's a lot of research-- for example, this paper by Aliprantis and all in 2022-- that show that Black and white households of similar income/wealth are actually still pretty strongly segregated.

And this is somewhat surprising, this persistence in segregation, in large part because if you ask people, like lots of surveys out there, lots of people say, I prefer to live in a slightly diverse neighborhood. And so trying to understand the mechanisms through which we maintain this high level of segregation despite the fact that we prefer some level of diversity is a bit of a puzzle to social scientists. Next.

So our motivation for writing this paper is to ask the question, in contemporary housing markets, given that so many other aspects of our lives are much more integrated than they were, say, in the middle of the 20th or even the late 20th century, are households still responding to race? And that's a very difficult question, right?

So a lot of our social science research is built on this edifice of thinking about-- so I have here on one of the bullet points, the tipping theory. And the idea is that much of racial transition and the persistence of segregated neighborhoods is driven by racial preferences.

However, what many cities have seen in the last 20 years, especially-- 20, 25 years-- is a strong gentrification push. So, for example, Chicago is no different than many other cities. A lot of the neighborhoods around the South and West sides and the North sides that were formerly more blue collar in nature are now full of high-income and high-education households.

And so you can see racial composition occur in those contexts without people actually really responding to race. And there's a lot of research that suggests that maybe in modern housing markets, people aren't really choosing their neighborhoods necessarily on the basis of race or choosing who their neighbors are on the basis of race-- that maybe this is indirect because of some larger income/wealth process. Next.

So the thing is that-- is there a way that we can actually approach this to try to figure this out, to disentangle this puzzle? And so the empirical challenge, from the perspective of a researcher, is the fact that neighbors and amenities are highly correlated. The one thing that we do know is that there's a lot of income inequality in our society. And so changes in amenities are often coupled with changes in neighbors or the composition of those neighbors.

The other piece is-- and from the perspective of a researcher-- that neighbors aren't randomly assigned. People are choosing to sort into particular neighborhoods based on their preferences. And so, as a consequence, this is a very, very, very difficult problem to deal with. Next.

OK, so what do we do to try to present some new insight into this problem? So what we do is we put together a very detailed data set using transactions-level data that come from a real estate company. And we're going to match that with demographic information from mortgage applications.

And what we're going to do is propose a new research design to use those data in a particular way to tease out, to isolate, a component of people's decisions that we might be able to interpret as telling us whether they're actually responding to the identities of their neighbors or not.

And so how do we get to race from that? Well, if you think about it, race, especially in the society that we live in, is still one of the most salient characteristics that we immediately respond to. And so even though, over time, we might learn about people's occupation, their incomes, and things of that nature, but we kind of know, for most people-- maybe not 100% of the people, but, say, 99% of the time, we have an idea of who they are racially when we first meet them. And so we're going to try to use this research design to figure out whether there's actually some evidence that people are responding to the actual identities of these neighbors. Thanks. Next.

OK, so let's talk a little bit about the data set that we use in this research. We're going to use, first and foremost, demographic information from mortgage application data that's made available under the Home Mortgage Disclosure Act of 1975. And, basically, this Act was passed in the '70s to monitor banks, whether they're actually engaging in individual discrimination of mortgage borrowers-- so they want to track the race of who they're originating loans to-- but also in an aggregate sense of understanding, where is the mortgage money going?

And the nice thing about these data are, A, they're publicly available. But, B, they actually give us quite a bit of information on the mortgage borrowers. And since most people in the United States use a mortgage when they buy a home, we actually can learn a lot about the buyers of various homes. And we can use this information in connection with the transactions data. Next, please.

With the transactions data, we can match these to the transactions data to actually be able to monitor the dynamics of who owns which house and when they're leaving. And so the real estate data here is from CoreLogic Solutions. It's basically aggregated public records data on deeds and mortgages from county assessor's offices.

The main things that we get from that are that we actually know transaction dates, closing dates, and price. We know the actual address these homes are. We get the mortgage amount and terms. And so combined with information on lenders, mortgage amount, and location, we can match these data to the HMDA data to give us essentially a panel data set that we can use to study these neighborhood entry and exit dynamics. Next, please.

OK, so how do we construct these? If you want to look at our paper, we give a lot more information about this. But, basically, we're going to use several pieces of information-- the census tract, origination year, mortgage amount, and so on and so forth as described in bullet point 1.

And then what we'd do is that once we've matched the data, then we have to go in and actually assign neighbors to each individual house. And so the first way we'd do this is to use the sequential street numbering. So, for example, you would go on any street here in Chicago, for example. You'd be in the 1500 block of West Monroe, and you'd see 1528, 1530, 1532. And so we are able to characterize houses by those types of locations.

And then, in a second pass, we can use the latitude and longitude to make sure, in circumstances where there's strange street numbering, that we can actually make sure that these houses are actually close. And so, again, after we've assigned all these neighbors using this panel data set, we actually can characterize, for a lot of neighborhoods, who's going in, and who's going out by demographics-- race, income, and some of the other things. And so it allows us to do more than what's typically been able to do when people have used things like data sets, such as just the census or other data like that. Next, please.

OK, so this will give you a sense of what the coverage is. Basically, these are MSAs that we use in the analysis. Notice we don't use every place in the United States, and that's in large part because of the research design, because we want places that actually have both whites and Blacks. And we're going to focus specifically on whites and Blacks in this paper because of the historical nature of segregation in the United States.

Future work can actually expand this across different races and ethnicities. But here we wanted to make sure we were choosing places to use that actually have sufficient numbers of Blacks and whites transacting so that we can be sure that we could have the right comparisons for doing the empirical work. Next, please.

OK, let's talk a little bit more about the research design before we get into the results, OK? So what are we doing here? What we're trying to do is control for neighborhood features and households' expectations because people could be choosing to leave or enter neighborhoods based on some other aspect of the neighborhood, like, for example, there's a park nearby or something like that. And so what we want to do is effectively control for that as best as possible and then see if there's differences in people's behavior if somebody's moved a little bit closer to them versus a little bit farther away. Next slide, please.

So what's the experiment here? So we want to think about a house as being "treated" if they receive a next-door neighbor on either side of them in the same block and quarter of a year. And we're going to compare their responses to receiving this different-race next-door neighbor to control incumbents, who are a little bit farther down the block. So think 2 to 3 doors.

And so what we're going to do is use that contrast to learn whether people are effectively moving faster when this different-race neighbor moves closer to them. And so the interval that we're going to study is moved within 2 years of a different-race neighbor's arrival. And then we're going to interpret that response as a response to the identity of that new neighbor. Next, please.

OK, so this will just give you a quick overview of what we're doing here. The black house on this block is the, say, treated house. And then we're looking at whether they received a person at point 1 or 2. And we're going to compare it to points 4 and 1 3 in this baseline set-up.

In another version of the research design that we talk about in the paper, we're going to expand this to distance as the crow flies. And that's where the 8, 6, 9, 10, 7, 5-- but if you want to see those results, you can check out the new version of the paper. It should be available soon. Next, please.

OK, let's talk about the main results. So this right here, just to explain what's going on here-- this is plotting the coefficients from our regression, from our experimental regression. You're going to look at, 1, the circles here are the move propensity, the probability of somebody moving after receiving a new different-race neighbor. And the diamonds here are if they received that different-race neighbor 2 to 3 doors down.

And the way to interpret this is that people are much more likely to move in response to the new different-race neighbor moving next door-- in this case, Black current residents-- then if that different-race neighbor moved 2 to 3 doors down. So this seems to suggest that they move much quicker when that different-race neighbor moves next door. Can you move to the next slide, please? Next slide?

OK, if you look at this-- this is white current residents-- you find basically a similar effect, that white current residents are much more likely to move when that different-race neighbor-- in this case, a Black person-- moves next door than if that Black person moved 2 to 3 doors down. So what we interpret this as is that they seem to be responding more strongly to people who move in their very local vicinity. Next slide, please.

And so, just to summarize, this provides pretty strong evidence, given the research design, that there's an increase in the relative likelihood of moving to receiving a different-race neighbor for both Black and white current residents. So it seems like they're responding to these new different-race neighbors who move close to them. And you can think of this as telling us something about the lower bound of responses in the sense that other people might be responding on the block. But they're just not responding as strongly as the person who had somebody move next door to them. Next slide, please. OK. Next slide, please.

OK, so the first question that probably pops into your mind, given history, is, could people be moving because new opposite-race neighbors impact home prices? So I want to get out because I'm worried that this is going to affect my price. And so what we do is we test, using that research design, if home transaction prices are actually affected by this new opposite-race neighbor. Next slide, please.

And this is the estimate for Black current residents. And, as you can see here, receiving a different-race neighbor both 1 door or 2 to 3 doors down, and they sold within 2 years-- really, there's no difference in the expected price of the sale. So it's not like they're responding because their housing prices are differentially affected by this new different-race neighbor. Next slide, please.

We find a similar estimate for white current residents as well, that basically this is a null effect of this different-race neighbor moving nearby. So this gives us stronger confidence that what we're picking up is people responding to the identities of the neighbors and not some basic economic response, some concern that prices are going down. Next slide, please.

And so, as I say here, that this suggests that there's no evidence of a price effect. And so what we argue is what we're picking up is an actual identity effect. And that's important because the main identity effect that we think we're picking up is a race effect. Next slide, please.

So now you may think, well, is race just a proxy for income? And so what we do is that we estimate a model that allows for differential responses by race and income. We have, actually, a whole lot of coefficients here. But I'm going to present just two of them, just to show you that, yes, income does matter.

But, as we show here, the circles are for Black residents. The diamonds are for white residents. And if you look on the left side of the graph, you see that the move responses are much bigger for people receiving different-race neighbors with a lower income versus different-race neighbors with the same or higher income.

There's still a move response there, still a positive move response. But it seems like they're responding even more so when they receive this different-race neighbor with a lower income, which actually has implications if we think about the fact that we both face racial inequality, but we also face quite a bit of income inequality in society. And so if we want to foster both racially integrated and economically integrated neighborhoods, this suggests that we have some work to do. Next slide, please.

And so what this says is that the responses are even stronger for Blacks and whites when they receive a new neighbor of a different race with a lower income. Next slide, please.

And so I'll conclude there. There's a lot more in the paper if you want to check it out when the new version is available. But what I've basically shown you is that people are responding to the identities of their neighbors. If we want to interpret that contrast and move response, that localized contrast is saying something about people responding to the identity. And we argue that the most salient of that identity is race.

There's no evidence that they are selling for lower prices. So it's not like they're worried, or it seems like that prices are dropping off the cliff when these new different-race entrants come near. There is an effect of income, but it interacts with the preexisting racial effect. And so what it tells us is that race, the role of race, even though it might be relatively muted relative to the blockbusting era of the 1960s or 1950s and '60s, race still matters in housing markets. And it matters for both Blacks and whites in this context.

But income matters too. And so what it tells us a little bit more about is that it might tell us a little bit about the importance of the hyperlocal social interactions. Like getting people to appreciate difference among their neighbors on all these dimensions might be the way to go in terms of thinking about ways of fostering stable, integrated neighborhoods. Next slide, please. Thank you. And I'll hand it over to Dan.

DANIEL HARTLEY: Thanks so much, Marcus. So I'm going to present a project on Preferences over Racial Composition of Neighborhoods-- Estimates and Implications. This is joint work with Morris Davis at Rutgers University and Jesse Gregory at the University of Wisconsin. Next slide, please.

So since I work at the Chicago Fed, I have to tell you that the opinions expressed are those of the authors and do not necessarily represent the views of the Federal Reserve Bank of Chicago or the Board of Governors of the Federal Reserve System. Next slide. Thanks.

OK, so what motivates this project? Racial and ethnic segregation in the United States remains quite high despite falling since peaks in the 1950s through 1970s. In fact, 27% of white people live in census tracts with 95% or more white residents. 94% of white people and 42% and 47% of Black and Hispanic people live in a tract where their race is the majority. Next slide, please.

So what are we doing in this project? First, we ask, how stable are neighborhood racial and ethnic composition patterns? And then we develop a model of neighborhood choice where households move over the course of their life and may have preferences about the racial and ethnic composition of their neighborhood. We develop and validate an identification strategy for estimating preferences about neighborhood racial and ethnic composition. And, finally, we discuss the implications of our estimates both with respect to the stability of current neighborhood composition and consider some policy implications. Next slide, please.

So what do we want you to take away from our project? First, we have a new method for estimating preferences over neighborhood racial and ethnic composition. We estimate our neighborhood sorting model for 197 metropolitan areas.

Second, we perform an analysis of neighborhood stability. We find that preferences over racial composition are sufficiently strong that the long-run demographic composition of most neighborhoods is, in fact, unstable. Finally, we look at actual census data, which shows that changes in racial and ethnic composition of neighborhoods are actually quite common in the United States. Next slide, please.

So how do we go-- what do we consider in terms of estimating preferences in our model? So we think about types of households. We classify households into types based on four elements. First, race-- Black, Hispanic, and white and other.

The second, by the age of the household head-- so either young, 25 to 44; middle-aged, 45 to 64; or old, 65-plus. Either they're renters or homeowners. And, finally, based on three segments of credit score ranges-- low, below 600; middle, 600 to 720; and high, 720-plus. Next slide, please.

So why do we include these types? So we think that types are a modeling device that capture key dimensions of differences in preferences and allow for those preferences to change over the life cycle. We think this may be important for modeling racial dynamics. Race is not a sufficient statistic for preferences, and we find that within race, some types are more likely than others to live in integrated neighborhoods. Next slide, please.

So what are these preferences over racial shares capturing? First, the direct preference or distaste for neighbors of a given race. Second, any amenities that might change in response to the racial composition of the neighborhood-- so retail establishments, local public goods, such as government services. And, finally, also, the anticipated treatment or mistreatment by one's neighbors based on race. Next slide, please.

So the data that we bring to estimating the model comes from the Federal Reserve Bank of New York's consumer credit panel survey, Consumer Credit Panel, which is based on Equifax credit records. It's a 5% sample of the US population. It's a panel which goes from 1999 to the present. And the key variables in this data set are the location of the household, the census block that they live in, the Equifax risk score, which is a credit score provided by Equifax, their age, and also mortgage and other debt variables.

We're going to focus on moves within metro areas, and we're going to include metro divisions with between 50 and 1,000 census tracts for computational reasons. That's going to leave us with 197 metro areas. And our full sample has more than 142 million person-year observations. Next slide, please.

So to turn to our model estimates and what they imply about neighborhood stability-- so we have a technique to estimate preference parameters. And see our Chicago Fed working paper for all of the details of this technique and the estimation strategy. But what we find is that same-race preferences are quite strong. This implies that the current neighborhood racial composition is not very stable. Next slide, please.

So to illustrate that instability, this figure plots the Black population share of the metro area on the x-axis and an instability index on the y-axis. This instability index ranges from 0, which would be stable, up to 1, which is completely unstable. And each dot is a metro area in our sample.

So what you see is that as the Black population share of the metro area increases from 0 to about 20%, there's strongly rising instability. And then it kind of flattens out above 20%. So the question this brings up is, does this instability comport with the actual data on neighborhood change in the United States? Next slide, please.

So here's a plot from actual data showing the fraction of census tracts with significant racial change. So on the x-axis, each dot you're going to see a particular decade from one decennial census to the next. On the y-axis, you're going to see the share of census tracts that have this amount of change.

I'll draw your attention first to the blue line at the bottom, which is showing really, really big changes in racial shares-- so up or down by at least 25 percentage points. And, you see, that type of extreme racial ethnic change basically was prevalent in the '60s and '70s but has become a bit less prevalent since 1980.

However, if you pay attention to the black line, what you see is the share of census tracts that have had a greater than 5 percentage point change in racial shares, which is still quite significant. Here you're seeing 40% to 50% of census tracts in any decade since 1960 to the present is experiencing this amount of racial and ethnic change. Next slide, please.

So this slide breaks down what was the bottom line on the last figure, and these are the really large changes in racial share. And what this is showing is that, basically, increases in the Black population share of above 25 percentage points were driving the blue line in the last figure. And so these large increases in Black population share were prevalent in the 1950s, '60s, and '70s, but since 1980 have become much less frequent. Next slide, please.

So this shows you the same thing but for these still large but much smaller changes in racial population shares-- racial and ethnic population shares. And what you see is that changes in Black population share, the orange line, have become gradually less frequent since the 1950s to the present, while changes in the Hispanic population share have risen from 1970 to the present. Next slide, please.

So the next thing we think about is we consider particular policy simulations. So we consider the following experiment. Suppose local governments allow developers to expand existing low-income housing tax credit developments by 10%-- so increase the number of existing LIHTC units by 10%. Mechanically, this could reduce segregation.

It's a relatively small change in many neighborhoods. And these neighborhoods already have experience with low-income housing tax credit neighbors. So we use our estimates of racial preferences to run simulations of what might happen under this policy. Next slide, please.

What we find is we compute three statistics and report the median of each. So, first, the share of all tracts in the metro area where either the Black or Hispanic share changes by more than 5 percentage points. And we find 60% of census tracts-- the median is 60% of census tracts have increased in the Black or Hispanic share by more than 5 percentage points.

Second, we calculate a Black-white dissimilarity index, a measure of segregation. And we find that this increases by 49 percentage points. And a similar measure for the Hispanic-white dissimilarity index. We find that this increases by 57 percentage points. So, overall, we're finding small policies change seems to lead to large change in racial composition in neighborhoods and further increases segregation in the long run. Next slide, please.

So, to conclude, we develop and estimate a model of neighborhood choice where households move over the course of their life and may have preferences over the racial and ethnic composition of their neighborhoods. The implications of our estimates are that, a, current neighborhood compositions are not very stable, and, b, seemingly small policy interventions may lead to increased segregation in the long run. We also show historical data on neighborhood racial composition, which shows that change is the norm in neighborhoods in the United States. Thank you very much, and I'll turn it back over to Kristen.

KRISTEN BROADY: Thank you so much, Dan. Thank you to Marcus as well, and thank you, Samir. I have the pleasure of introducing our esteemed group of panelists. First is my old boss and colleague, Dr. Andre Perry, senior fellow at Brookings Metro. Dr. Rachael Woldoff is a professor of sociology at West Virginia University.

Dr. Valerie Wilson is the director of the Program on Race, Ethnicity and the Economy at the Economic Policy Institute. Ashley Bell, Esq., is the chief executive officer of Ready Life. And now I am pleased to introduce our moderator, Stacey Vanek Smith, global economics correspondent for NPR. Stacey, I'll turn it over to you.

STACEY VANEK SMITH: Excellent. Thank you. It's so interesting for me to hear all of this research being done about racial segregation in neighborhoods because it's an issue that has been talked about for so many decades, historically-- things like redlining and white flight. And the thing I find so interesting is that there have been policies put in place to address these issues.

And so one of the first questions I wanted to put to our panel is, have these policies-- these laws, in some cases, even-- have they done any good? Is the situation any different now than it was in the past? Has it gotten better? Is it bad in a different way? I'd just be so curious to do a little bit of a comparison between what we've seen historically and what we're seeing now.

Everyone, definitely feel free to jump in. Ashley, I wondered if we could start with you on this.

ASHLEY BELL: Yes. I mean, it's a great question. And good to be with everyone. When I think about this question, and I look at the data, they're very staggering numbers. When we look at the baseline of who is even eligible to own a home in our current construct, you look at the major credit reporting agencies, all of which would tell you that the majority of Black people in this country don't have a prerequisite credit score to even own a home.

And so, therefore, home ownership for Black Americans will hover always between 42%, 46%. But the question is, well, if it was on par with white Americans in the mid-'70s, what would those numbers look like? What would those neighborhoods look like? Who would be moving? Who wouldn't?

You just have such a small number. I think full participation or at least more parity in participation would be interesting to see how that would play out. And so our focus has always been on giving more people access to the actual ability to own a home.

STACEY VANEK SMITH: Rachael, I think your research has also touched on this. Is there anything that you've noticed?

RACHAEL WOLDOFF: Yeah. I mean, I originally started doing this work quantitatively. But then I shifted and did a qualitative study looking at white flight in a neighborhood-- it was in a large eastern city. And the population-- I sorted by census tract and looked at a community that had the highest turnover from white to Black, one of the three highest in the city in a Black-white city.

And I interviewed people. I interviewed what we call the stayers, like the whites who stayed. And then I interviewed some of the leavers. And then I interviewed two groups of Blacks that moved in, which is the "pioneers," Black people who bought from whites, and then the next group, Black people who bought from Blacks as Blacks moved out.

And I just talked to them about, what were you thinking? How did you make this decision? What'd you think of the new neighbors? It's more holistic. And I do love research on preferences and affordability and understanding those dynamics. But I'm actually at a stage now where the why part is really what I'm interested in.

And, in my research, I found that there is a lot of-- and dealing with other people's perceptions of Black people moving in. So, for instance, let me give one example. If I asked a white, elderly resident, what do you think of your new next-door neighbors moving in-- and these are places where both houses on either side would be for sale once a Black resident moved in or something-- they would tell me.

They would say, oh, did you see they're firemen? They're cops. Did you see their SUV? Did you see their deck they're building? They're using these markers of upward mobility to describe why-- anticipating that I might think the neighborhood is declining. And this is a neighborhood where the homeownership rate stayed exactly the same, so these were Black people buying houses.

And what I learned also, though, was that they're anticipating that other people are going to perceive the Black residents as causing a decline. So they may not feel that way, but their adult children don't want them "in a ghetto." Or, yes, those people bought a house, but it's going to be a slippery slope.

And this is how self-fulfilling prophecies happen is that, yes, this neighbor is a fireman. This neighbor is "one of the good ones," using racialized language like that. But what's going to happen next? And they may be OK with that one neighbor, but they're viewing that as possibly affecting property values, crime, schools, all of these kinds of things.

STACEY VANEK SMITH: It's interesting to hear you say that because one of the things that I found really fascinating in Dr. Casey and Dr. Hartley's research is how much people care about the racial makeup of their neighborhoods. Now, everyone on the panel has conducted research about this and also talked just with people about these issues across the country. I'm wondering what you all have found about this-- what you've heard from people, what the data has shown.

ANDRE PERRY: Well, Stacey, I want to just interject and maybe level set a bit--

STACEY VANEK SMITH: Yes, please.

ANDRE PERRY: --just to say that there's a reason why lawyers sought to dismantle separate but equal-- that segregation leads to resource deprivation, lower quality of life, violence, in some cases-- that there is a social and moral imperative to integrate. And so I just wanted to set that because that serves as the backdrop.

With that said, there are mechanisms and policies that we can put in place to help integration along. You heard the use of low-income tax credits. We can redistrict schools. We can redistrict voting blocks and voting districts. There are multiple tools that we can use to encourage integration.

However, there are social norms that include valuing people based on the color of their skin. And so I just wanted to say that what I appreciate, these tremendous contributions from Daniel and Marcus, is to show how hard it is to meet this social and moral imperative to integrate.

And that's not to say, oh, Black people need white people in order to get good schools. And it's certainly not saying-- but there is this issue. I do think that we don't look at the negative impacts on white people for not integrating.

Certainly, we are seeing how these harms play out in our body politic, where ignorance is really moving policy in ways because, not to be Pollyannaish, we don't sit across from each other. We don't tolerate our neighbors. And so there is a social cost attributed to all this work.

But, certainly, at least in my work, I see the intrinsic value of whiteness being played out in the marketplace, in housing, in businesses, and all sorts of things. But I just wanted to level set a bit that integration is a good. And we should continuously strive for integrated neighborhoods despite how hard it is.

STACEY VANEK SMITH: Going off of that a little bit, I wonder, maybe, if, before we go on, we could talk about some of the effects of racial segregation in neighborhoods, maybe some of the economic effects and otherwise. Andre, I'd love to hear from you, and also, Ashley, I know you've done quite a bit of research in this. So, yeah, maybe before we go on, we just talk a little bit about what we see in areas that are quite racially segregated.

ANDRE PERRY: Yeah. I'm sitting here in Charlotte, in a hotel in Charlotte, participating in the Southern Education Foundation conference examining the effects of segregation on schooling. And we know that in schools that are predominantly white, they get $23 billion more in revenue than schools that are predominantly people of color. That is by design. That is not a coincidence. That is by design because we create a financing structure that privileges localities and property.

We could create a funding formula at a state level to redistribute those taxes in a more equitable way, but we choose not to. In my work in the housing sector, we see that neighborhoods that are predominantly Black, where the share of the Black population is 50% or higher, compared to places where the share of the Black population is less than a percent, on average, homes in Black neighborhoods are priced 23% less than their counterparts. And this is after controlling for education, crime, walkability, all those fancy Zillow metrics.

STACEY VANEK SMITH: Like a quarter less, almost.

ANDRE PERRY: Right. And the implications of that is that that's less revenue for school districts, less revenue for municipalities, less revenues for people to start a business. In fact, that $156 billion is the equivalent of more than 4 million Black-owned businesses based upon the average amount Black people use to start their firms. It would have paid for more than 8 million four-year public college degrees. It's a big number.

And so segregation still has a dramatic impact. And, obviously, the consequence-- and this is where Marcus and Daniel's work also highlights-- this correlation between race and income matter. So when you are deprived from resources because of race, that contributes to socioeconomic discrimination as well. So it has consequences all over the place. I just wanted to name housing and education as being two.

ASHLEY BELL: And the two are linked. Obviously, in this country, we fund our education based off of property taxes at the local level. So when you're talking about how do you pay for education, you look at neighborhoods. You look at property values.

But, again, we have laws on the books now that are built to make sure that brown folks and Black folks are prohibited from moving into certain neighborhoods. When you look at the supply issue, right now we have a supply issue with this current market, where you have not enough homes out there. So we're working with tech companies all the time that are trying to take people who are-- even the ones that are investing and buying up the block and are trying to rent them out to Black and brown people to make a profit.

You still got draconian laws in cities across the country that prohibit 1 or 2 or more people not being related living in the same home. Well, that's intended to make sure that Black and brown people don't move into these neighborhoods. This is local legislation, not federal, not state. This is county by county, city by city.

When you look at that and the effects of it, what ends up happening is that you end up taking neighborhoods that could easily help us with the supply problem by allowing renters to move into neighborhoods. But they're prohibited by that, and they're being shut down. So when we look at the barriers to owning a home, you got to start with the fact that if you're going to create wealth in this country, you're going to talk about creating Black businesses, you got to have a safety net. That safety net begins with an appreciating asset, which is owning a home.

There are still too many barriers to people owning a home. And it begins with, as our brother Perry said, when you look at income, income for people under 35, especially in the Black community, is more around the gig economy. The current system doesn't recognize the person making money on Cash App, the person making money at point of sale.

If they don't have a W-2, they're invisible to the system. It will take much more money, much more liquidity to own a home when they don't have that traditional W-2. We have to be able to change the current culture of underwriting so that you see people for more than a credit score, see them for the income they're making, and understand that if you're paying $4,000 a month in rent, then why wouldn't you pay $4,000 a month in a mortgage if you're paying it anyway?

Those are the sort of common sense logic that we're trying to bring to the marketplace so that people understand that the way that we've been doing it has created segregation. And if you believe in the credit scoring system as it is, then you fundamentally have to believe that it's racist because that means that 54% of Black and brown people or Black people specifically aren't eligible, aren't worthy of owning the roof over their head.

STACEY VANEK SMITH: Well, yeah, I'd love to talk about that a little bit, the connection between-- I think this came up in Dr. Hartley's research-- economic segregation and racial segregation. Valerie, maybe you could speak to that a little bit. What is the connection there? What are some of the similarities, differences?

VALERIE WILSON: Yeah, so I think it's important to understand that the purpose of racial segregation is economic segregation. My primary area of focus is the labor market. And one of the opening lines that I've started using any time I give a presentation about labor market disparities is that large and persistent racial disparities in unemployment and wages are a defining feature of the US labor market.

And I think that that's something that we see in this research as well. You started with the question about whether or not our observations and our research ring true with what Dan and Marcus presented today. And I think, absolutely, when you look at the labor market, another area where we've had laws on the books for decades against discrimination, yet we still see discriminatory outcomes persistently over time.

That being the case, race is used to decide and maintain an economic hierarchy in this country, social and economic hierarchy. And I think one of the interesting things that comes out of Dan's and Marcus's research is that there is a preference even for economic segregation within racial groups regardless of race. I think that too functions as some way of people's sense of wanting to protect their social or economic interests or status in some way.

But, also, as we've already discussed, given many of the underlying economic disparities and things like income and wealth, economic segregation is used to perpetuate racial segregation because, as Ashley just discussed, it presents barriers to people based on income and wealth, which are also highly stratified by race.

And I think the issue that he raised with regards to limiting the supply of housing and specifically limiting the supply of affordable housing is particularly important when we think about how economic segregation can be used to perpetuate racial segregation, and what that does to permanently limit people's opportunities to own property or to move into certain communities.

STACEY VANEK SMITH: I mean, I feel like it's really interesting to be talking about this now because I think, Ashley, you mentioned there's a supply issue with housing right now. And, certainly, changing houses, it's not something you can always do so fast in every market, even if you want to. I'm wondering-- I mean, obviously, some people, it's very easy to relocate. They have the money, the resources, the ability to relocate.

Sometimes people can't even if they want to. I'm wondering what happens with the people who, maybe, want to move but can't. What have you seen in that research? Maybe Valerie again, or I know Ashley or [INAUDIBLE].

ASHLEY BELL: Well, when you look at the marketplace and the innovation that's out there, you see companies popping up. Many that I work with and invested in are investing in these homes. They're buying homes. And if a home has 5 bedrooms in it, they reconfigure the home to make it 7 bedrooms, and they rent out each room. And the purpose of that is to create affordable housing for people that want to live close to where they work.

A teacher should not be required to drive or bus in 2 hours just to be close to the kids that she's teaching. And so how you fix that is you look at the bedrooms that are available in a community-- and there are plenty. There are plenty of people out there that own homes or homes that are out there that have bedrooms available. You look at that, and you say, all right, well, how do we fill them with people who want to work and live closer to where they go to work?

And so the problem is the local legislation says that you can't put 2 or more people in that home because they're not related. But the reality is that's what created a barrier because they know the people moving in there that actually teach their kids, that serve their kids, that they see every day at the hospital and at the grocery store working the cashier, being a manager at all these places. They don't want them living close to where they actually work.

And so we've been fighting locally, jurisdiction by jurisdiction, to lessen that because what will actually happen-- if you open up supply, then, obviously, the prices come down for affordable housing. And a lot of these people, to your point, would live in a place like that because they're transitioning. They're saving money to own a home.

They're trying to get past the other barriers to owning a home. And this is where the market is trying to shift to. But you see the barriers of racism embedded in decades of these policies that are prohibiting that evolution.

STACEY VANEK SMITH: I think, Rachael, you mentioned talking to people in an East Coast city and neighborhoods about people who stayed, people who left. What differences did you hear, or what did you hear from people you spoke with?

RACHAEL WOLDOFF: I mean, that research is from a while ago. But it's about how all people want to have safety. They want to have neighbors that they trust. They want to have order. They want to have their kids go to good schools, and what that means is different for different people.

But in my current research, which is really about affordability and fair housing, there is kind of-- and I want to address this with Andre and get his view on this. There is, at least in my field, in sociology and urban sociology, a lot of discourse right now about the how and the why of how-- if you have a neighborhood that's a predominantly white neighborhood-- and let's say it's Democrat. Let's say it's a Democrat-leaning community, where people view themselves as "nice white parents," that kind of thing.

Why is it then, when a affordable housing community is proposed in the neighborhood, why do those same people not want it there? Why do those same people-- not even low income. Honestly, a townhouse community with density that's going to cause-- the idea is, we're not really a townhouse kind of place. We have single family homes.

And these kinds of norms about what kinds of housing are appropriate for this kind of community, that NIMBYism, not wanting low-income people-- and this is one of the things that's hard to capture too, I think. And one of my critiques of quantitative preference data is just that it's hypothetical sometimes. So people say, oh, no, I'm not like that. And then you can't really know what they would actually do.

And I wonder also, by the way, how this would be complicated in the current era when people are using things like signage, political signage, to decide, is this a place for me or not? If there's Trump signs everywhere, if there are Black Lives Matter signs, these are indicators.

When I walk through-- I live in a white neighborhood right now, but my daughter is Black. I don't how our household would be classified. But I really actively am proud to show people, you can move here. There's people here who are wanting more diversity, trying to signal that to people buying.

But it's hard if there's someone on your street with some really aggressive signage. And we had a house like that on my street, where there was some aggressive make libtards cry again kind of thing. And there was a house for sale. And I was thinking, who's going to buy that? Who's going to buy that house, because I don't think I would.

And I actually talked to the people who bought the house. And they said, I just hoped that would just go away. They were white. And it's just not their issue. It doesn't bother them that much. But, for me, I couldn't live next to that person because we would have a lot of conflict. And I don't want to look at that every day.

So getting a little deeper into, who is this person? What does that person symbolize to you? Why would 1 house down bother you versus 2 houses down?

ASHLEY BELL: That's the reality.

RACHAEL WOLDOFF: Oh, and I was just going to say, even if the property values didn't change, they could still anticipate-- they may not know that. And they may think they're going to change.

ASHLEY BELL: And I've represented families, especially Black families that have moved next to white people. And the difference is when they rent that house next door, they come in with a totally different vibe. I've had Black families subject to violence, guns pointed at them. And a lot of it starts with the fact that if the white family owns the home, and the house next door is renting, they automatically assume they don't have enough money.

They automatically assume that they're lower income. And many times, in these instances, you're not talking about owning. You got people that will move out of the neighborhood but not sell it, but rent it. And when they rent it, there's a whole different dynamic than if they had have sold it to that Black family.

RACHAEL WOLDOFF: And I would add to that the family structure piece, because right now I'm looking at vouchers, research on vouchers. And landlords don't have to take vouchers in a lot of places. And they do discriminate against women of color, women with children.

Voucher discrimination makes it-- when landlords are allowed to do source of income discrimination, that right there, that's a policy that causes segregation to persist and really affects intergenerational poverty for Black families since the '70s because even if they move, they tend to move-- low-income families-- into other low-income areas. So they're not having upward mobility across generations residentially.

ANDRE PERRY: Well, I want to just add to that-- and some of this is anecdotal. But I do believe that many people, Black, white, have internalized this idea that you can get growth through exclusivity and not through inclusivity-- that it's better to have a monolithic school than to have an integrated one.

While I do think that, around schooling, people have seen the benefits of diversity there, but by and large, I do think that we're much more willing to say, hey, we can improve if we get rid of the poor people, we get rid of the Black people. In addition to that, I do think that many people see that there is an intrinsic value placed on whiteness that can influence housing prices and the like.

And so while, certainly, these papers dealt with that issue, to what you're saying, Rachael, there is still a belief that-- you heard it on the-- remember when Trump was running in '16. We're not going to-- we're not going to allow people to reduce your home values.

We're not going to hurt your communities because while they may not say-- and this is blue, red, whatever-- they may not say or believe that they are racist. But they have accepted many practices that are steeped in racism. It's impossible to completely untangle single-family zoning ordinances from some of these vestiges. It's impossible. The way we've organized schools, land use in general has been predicated on racism.

And so I think-- and this is anecdotal. I do think there is a socializing to not believe in inclusion because-- and Dan brought this up. I thought the use of the [INAUDIBLE] stuff was good because there are policies and practices we can employ to increase inclusivity. In particular, around the density issue, we need to dismantle a lot of these single-family zoning ordinances, knowing of the importance of, quote unquote, "opportunity neighborhoods," that we need to share the wealth, so to speak.

RACHAEL WOLDOFF: And for the sake-- honestly, for the sake of the children and for families who live here, when you're a pioneer, if you live in a community with very few Black people, like I do, things that happen anecdotally are hard to explain when you're with other white people.

If you don't have a critical mass of Black families there to share the concern and to make the change at the school-- if I go to a school, if I go to visit the school-- this happened, literally-- and it's a good school. You walk in to visit, go through all my kids' schedule. And I walk in, and there's a sign. And it says Jefferson's vision. It's a big poster, and it has a picture of the plantation, Monticello, in the room.

And I'm sitting there, and I can't hear anything she's saying. I'm thinking, would they have Hitler's vision of Auschwitz there? I'm a Jew. Would they do that? And so afterwards even my own husband doesn't really want to bring this up in the moment. And so he goes on the schedule.

But I do talk to her. I explain it. But she says, you know what? These talks are great. These talks, I love these talks. And then it's over, and the poster's still there.

And I know there were other Black families that must have seen this, but maybe they didn't feel that they could speak on it. Maybe they're not organized because you need a critical mass of people to critique curricula that are way out of date, banned books. All these things that are coming to the fore now, these are all racialized issues. They're not race neutral. Nothing is in residential subjects and when it comes to property.

STACEY VANEK SMITH: Well, I'd love to take our last bit of time and talk about some possible solutions or policies that could help improve situations, get critical masses of people into neighborhoods, help neighborhoods diversify and increase good interactions between neighbors. I feel like, Ashley, you mentioned laws that are sort of-- well, I was going to say unintentionally, but it doesn't sound like it's unintentional. But what are some of the policy changes or things that could change that might make a positive impact? And, Valerie, I'd love to hear maybe from you and from everyone.

ASHLEY BELL: Yeah, I think we got barriers we have to tear down as a country when it comes to access to housing. It begins with alternative underwriting, to me. That is the biggest barrier. Having only 44% of Black people own the home over their head is just such a beginning of the cycle of all these ills we're talking about, from education to crime. All these things are at the root of what makes a neighborhood a neighborhood.

We have to look at cash flow-based underwriting. We have to look at-- if people are making money, and if people are paying their rent on time and paying their bills on time, our current credit system looks at whether or not a middle class family has high utilization on their Discover card they've had 10 years and lets that dictate whether they own a home, not the fact that they paid rent on time every month for the last 5 years. And they're actually paying more per square foot than their neighbor that owns a home, and they're renting.

And so until we can get rid of this and understand that the current credit underwriting system is inherently racist because the effects of it show that it's racist, and just look at the numbers and believe that and then say, OK, we can't accept that as a country-- we have to have a better system. And if people are making money, and they're able to pay their bills on time and pay for the roof over their head, they should have the right to own that roof.

If we start there, then we can say, all right, with all these new people who are coming into the system who now can own a home, let's make sure that they can get into a neighborhood of their choosing and get it at the right price. And they should be able to buy a home and sell a home for the right price, on market price. And they should be safe and able to pursue their dreams for their family in those communities. But it starts with getting us access. This should be the last generation where the majority of Black people do not have the ability to own a home.

RACHAEL WOLDOFF: How do you respond-- can I ask how you respond? Because I'm just pushing back and picturing my students in my urban social class. They'll say, well, having that wealth, those wealth holdings to purchase a home, it's not the same as renting because what if the roof caves in, and you don't have-- that down payment is a proxy for your wealth. In case of an emergency, or you lose your job, how are you going to pay for a house? And so what do you-- what do you say to that, Ashley?

ASHLEY BELL: I say to it that there's a lot of people who are currently renting who are paying more for the roof over their head than people who actually own a home. And they don't get any of the advantages of creating equity in the first place. So if you actually own a home, and you're creating equity, well, when that roof falls in, you got equity in your home you can lean on.

Housing prices are going through the roof right now. And we're missing billions of dollars of wealth in our community because we're renting and paying for somebody else's mortgage instead of paying for our own. So it's defeatist to believe that you can rent forever and not have the ability of creating any equity in some kind of way were better than-- the average age of the first-time Black homeowner is in his 40s, and you sign a 30-year mortgage. That means that you're 70 before you pay it off.

To me, those numbers don't add up. We must find a way for people to own a home and own it younger. By the time white people get in their mid-40s, it's their second or third home. And guess what? The equity they have from those two or three purchases, that's the wealth that started their business, their fintech, that saved their mother when she got sick, and she had to pay for health care bills.

The safety net begins with getting us access. So we can't be afraid that we're worried about our air conditioner going out, which is why we don't want to own a home. Or we're worried that there will be a leak in the roof because I guarantee you, when you own a home, and you live in a neighborhood where you own a home, and you have that equity, you have the safety net to do all those things but also to pursue your dreams for your family and pass on generational wealth, which is what we're talking about. How do we catch up generationally? And that begins by having something to pass down when our days are done here to our kids.

VALERIE WILSON: And building on that, I think we've already talked a lot about the issue of supply and how that impacts affordability. We've talked about the impact of various zoning restrictions that really limit the ability to build more housing and even higher-density housing and create more mixed-income neighborhoods. I think that we still will bump up against the fight against, yeah, that's a good idea, but don't do it here. And so that is a broader political issue.

But I know that in a number of places locally, they are connecting student debt and home ownership. We just recently released a paper that looks at DC specifically on thinking about how we can use relief of student debt or people who have student debt and connecting that to various incentives and opportunities for people to buy a home and to buy it sooner, Ashley, as you just indicated, as of having to wait much later in life to be able to get into home ownership.

So there are opportunities, but there will continue to be barriers. And the bottom line is it's really difficult to stop people from moving out when the demographics of their neighborhoods changes. But there are things, I think, that can be done to make the opportunity to own a home more broadly accessible.

ANDRE PERRY: I want to just add a few things. We've talked a lot about home ownership, but we did not talk about commercial real estate ownership as well. And Marcus brought out in his point, the connection between some of these neighborhood amenities and the neighbors themselves. Cities, municipalities, counties should be strategic about creating incentives so that you can see diversity in the commercial real estate offered in neighborhoods.

1% of American families own 80% of commercial real estate. It's an astounding number, 1%. And so if you really want to effectively diversify neighborhoods, you should also pay attention to the amenities that are offered in that neighborhood as well. And so I think there's multiple ways to do that. But I think we also need to think about how we can leverage commercial real estate as a way to try to get the kind of diverse and stable neighborhoods that society needs.

STACEY VANEK SMITH: Excellent. Well, I think we've hit the end of our time. But I really want to thank our panelists for a really interesting and, I think, illuminating discussion. And thank you, everyone in the audience, for listening and participating. And this has just been really wonderful.

KRISTEN BROADY: Thank you so much, Stacey. I'd also like to thank Andre Perry, Ashley Bell, Rachael Woldoff, Valerie Wilson, our presenters, Marcus and Dan, and opening remarks from Samir. This has really been a great event. I know I certainly learned a lot. I hope that you did too.

You can look forward to Dan Hartley's policy brief coming out within the next couple of weeks. I certainly hope that you will read Marcus and Dan's research papers. We'll also be putting out a summary of their work.

And you can look forward to more events from the Chicago Fed. Please continue to check out our website and subscribe. And we'll continue to reach out to you with more interesting research. Thank you from the Economic Mobility Project and have a great rest of your day.