Mortgage Policies And Their Effects On Racial Segregation And Upward Mobility

Nirupama Kulkarni and Ulrike Malmendier

Working Papers from Centre for Advanced Financial Research and Learning (CAFRAL)

Abstract: We document that housing policies aimed at increasing homeownership and reducing disparities can have adverse consequences, arising from sorting and deteriorating place-based factors. Exploiting variation in the ease of mortgage financing and targeting of underserved neighbourhoods in the 1992 GSE Act, we show that, while Black homeownership increased in targeted neighbourhoods, white families moved out, especially when mortgage financing became more accessible in the surrounding areas. Segregation increased and upward mobility deteriorated among low-income Black families and among those low-income white families who remained. We identify declining house prices, education spending, and school quality in targeted areas as plausible channels.

Keywords: Upward mobility; homeownership; segregation (search for similar items in EconPapers)
JEL-codes: D14 J15 R21 R23 R31 (search for similar items in EconPapers)
Pages: 112
Date: 2021-07
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Persistent link: https://EconPapers.repec.org/RePEc:ris:cafral:022290

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