THE IMPACT OF SHIFTING NEIGHBORHOOD RACIAL COMPOSITION ON HOME VALUE APPRECIATION

Abstract

My research looks at the way that changing neighborhood racial composition impacts property values. Housing market reactions to changing neighborhood racial composition may be one of the primary reasons for persistently high levels of black-white residential segregation. Most of the previous research on this topic was done in the 1960's and 1970's, and there is reason to expect that the patterns may have shifted since then. By focusing on the 1990-2005 time period, my research significantly updates the age-old question of "Do property values drop when blacks move in?" The geographical focus of this project is the greater Philadelphia Metropolitan area, however, the patterns observed are likely similar to other US post-industrial cities, particularly of the Northeast and Midwest. Recent home sales transactions are used to estimate property values by tract, which in turn is used to calculate home value appreciation. Decennial census data is used to quantify the shift in neighborhood racial composition, and National Center for Education Statistics (NCES) data is used to examine whether or not school district racial composition has a separate impact more significant than neighborhood racial composition. The major finding is that neighborhoods which experienced substantial racial transition had lower levels of home value appreciation than comparable predominately white neighborhoods. My results suggest that the dynamics of the housing market further exacerbate the racial inequality that is already present in the labor market and in educational attainment, which subsequently contributes to a large and persistent racial wealth gap.