Study Overview
For decades, US housing policies have aimed to increase homeownership and reduce racial disparities, but their success has been limited. We argue that the endogenous sorting of residents in response to place-based policies and deteriorating place-based factors help explain the lack of positive outcomes.
Study Results
In the context of the 1992 GSE Act, we show that, after the introduction of targeted support for mortgage financing in specific neighborhoods, Black homeownership mildly increased in those census tracts, but white homeownership strongly decreased. The sorting effect is most prevalent in tracts where, during the same time period, mortgage financing became more accessible in nearby census tracts. Children from low-income families who remain in the targeted areas display significantly lower upward mobility. We identify declining house prices, reduced education spending, and lower school quality as plausible channels.
Intervention: 1992 Federal Housing Enterprise Financial Safety and Soundness Act
Populations: low income households
Working Paper: Kulkarni, Nirupama & Ulrike Malmendier. 2022. "Mortgage Policies and their Effects on Racial Segregation and Upward Mobility"
IBSI Funding Acknowledgement: Lab for Inclusive FinTech (LIFT)