Jacob S. Rugh

Racial Segregation and the American Foreclosure Crisis

The rise in subprime lending and the ensuing wave of foreclosures was partly a result of market forces that have been well-identified in the literature, but it was also a highly racialized process. We argue that residential segregation created a unique niche of minority clients who were differentially marketed risky subprime loans that were in great demand for use in mortgage-backed securities that could be sold on secondary markets. We test this argument by regressing foreclosure actions in the top 100 U.S. metropolitan areas on measures of black, Hispanic, and Asian segregation while controlling for a variety of housing market conditions, including average creditworthiness, the extent of coverage under the Community Reinvestment Act, the degree of zoning regulation, and the overall rate of subprime lending. We find that black residential dissimilarity and spatial isolation are powerful predictors of foreclosures across U.S. metropolitan areas. To isolate subprime lending as the causal mechanism through which segregation influences foreclosures, we estimate a two-stage least squares model that confirms the causal effect of black segregation on the number and rate of foreclosures across metropolitan areas. We thus conclude that segregation was an important contributing cause of the foreclosure crisis, along with overbuilding, risky lending practices, lax regulation, and the bursting of the housing price bubble.

Segregation in Post-Civil Rights America: Stalled Integration or End of the Segregated Century?

In this paper we adjudicate between competing claims of persisting segregation and rapid integration by analyzing trends in residential dissimilarity and spatial isolation for African Americans, Hispanics, and Asians living in 287 consistently defined metropolitan areas from 1970 to 2010. On average, black segregation and isolation have fallen steadily but still remain very high in many areas, particularly those areas historically characterized by hypersegregation. In contrast, Hispanic segregation has increased slightly but Hispanic isolation has risen substantially owing to rapid population growth. Asian segregation has changed little and remains moderate, and although Asian isolation has increased it remains at low levels compared with other groups. Multivariate analyses reveal that segregation and isolation are being actively produced in some areas by restrictive density zoning regimes, large and/or rising minority percentages, lagging minority socioeconomic status, and active expressions of anti-black and anti-Latino sentiment, especially in large metropolitan areas. Areas displaying these characteristics are either integrating very slowly (in the case of blacks) or becoming more segregated (in the case of Hispanics), whereas those lacking these attributes are clearly moving toward integration, often quite rapidly.

New evidence on racial and ethnic disparities in homeownership in the United States from 2001 to 2010.

Using 2001-2010 homeownership data for the United States we analyze changes in racial and ethnic disparities between whites and blacks, Asians, Mexicans, Cubans, Puerto Ricans and other Hispanics. We employ Integrated Public Use Microdata (IPUMS) combined with local credit scores and house price to income ratios. Controlling for demographic, income, wealth, employment, and housing characteristics, we find no significant differences between whites and Asians, Mexicans, or Cubans. Conversely, blacks and Puerto Ricans remain substantially disadvantaged. We conduct further analysis for the 2001-2003, 2004-2007, and 2008-2010 periods of the housing boom and collapse. Blacks and Puerto Ricans experienced decreased disparities during the peak years of the boom. Puerto Rican parity with whites continued to improve during the crash while gains among blacks eroded. The results suggest the homeownership differences between whites, Asians, Mexicans, and Cubans are apparently explained by socioeconomic status while racial disparities among blacks and Puerto Ricans evolved but continue to persist.

The Provision of Local Public Goods in Diverse Communities: Analyzing Municipal Bond Elections

Scholars have shown that diversity depresses public goods provision. In U.S. cities, racial and ethnic divisions could seriously undermine investment. However, diverse cities spend significant amounts on public goods. We ask how these communities overcome their potential collective action problem. Using a new data set on more than 3,000 municipal bond elections, we show that strategic politicians encourage cooperation. Diversity leads officials to be more selective about requesting approval for investment and more attentive to coalition building. We show that diverse communities see fewer bond elections, but that the bonds proposed are larger and pass at higher rates. Diverse cities tend to offer voters bonds with more spending categories and are more likely to hold referenda during general elections. As a result, diverse cities do just as well as homogenous cities in issuing voter-authorized debt. Thus, political elites perform an important mediating function in the generation of public goods.

The US Great Recession: exploring its association with Black neighborhood rise, decline and recovery

ABSTRACT The United States experienced the Great Recession between 2007 and 2009 and many American cities and communities are still suffering from its legacy. During the prior period of the early and mid-2000s, many inner city African American communities were experiencing gentrification, driven in part by the real estate bubble that popped in 2007. While much has been written about the institutional and structural causes and consequences of the Great Recession, this article seeks to better understand its community-level implications by investigating the relationship between lending and property value patterns in three gentrifying African American communities just before, during and after this economic calamity. In particular, we investigate Bronzeville in Chicago, Harlem in New York City and Shaw/U Street in Washington, DC. Evidence suggests the Great Recession differentially influenced the development trajectories of these urban neighborhoods. In Bronzeville severe and prolonged property decline resulted, while much less economic stagnation was experienced in Harlem and Shaw/U Street. The Great Recession did not have uniform implications for urban African American neighborhoods: distinct community and city contexts, in particular racial and class neighborhood transitions and citywide unemployment and housing market conditions, mediate the influence of national economic decline and recovery.

Riding the Stagecoach to Hell: A Qualitative Analysis of Racial Discrimination in Mortgage Lending

Recent studies have used statistical methods to show that minorities were more likely than equally qualified whites to receive high–cost, high–risk loans during the U.S. housing boom, evidence taken to suggest widespread discrimination in the mortgage lending industry. The evidence, however, was indirect, being inferred from racial differentials that persisted after controlling for other factors known to affect the terms of lending. Here we assemble a qualitative database to generate direct evidence of discrimination. Using a sample of 220 statements randomly selected from documents assembled in the course of recent fair lending lawsuits, we code texts for evidence of individual discrimination, structural discrimination, and potential discrimination in mortgage lending practices. We find that 76 percent of the texts indicated the existence of structural discrimination, with only 11 percent suggesting individual discrimination alone. We then present a sample of texts that were coded as discriminatory to reveal the way in which racial discrimination was embedded within the social structure of U.S. mortgage lending, and to reveal the specific microsocial mechanisms by which this discrimination was effected.

Painting the Whole Picture: Foreclosure Rates among Asian American Ethnic Groups in Orlando, Florida, and Phoenix, Arizona

Abstract This article contributes to the literature on the stratification of Asian American homeowners by systematically measuring the foreclosure rates of multiple Asian American ethnic groups, Native Hawaiian and Pacific Islanders, and other racial groups in Orlando, Florida, and Phoenix, Arizona. Using novel data and methods, Korean and Vietnamese homeowners are estimated to experience foreclosure rates as high as those of blacks and Latinos, disparities hitherto obscured by more modest foreclosure rates among Asian American borrowers overall. The results suggest greater attention should be paid to the recent Sunbelt settlement of Korean and Vietnamese Americans to better understand why they were devastated by the housing crisis.

The social structure of mortgage discrimination

Abstract In the decade leading up to the US housing crisis, black and Latino borrowers disproportionately received high-cost, high-risk mortgages—a lending disparity well documented by prior quantitative studies. We analyse qualitative data from actors in the lending industry to identify the social structure though which this mortgage discrimination took place. Our data consist of 220 depositions, declarations and related exhibits submitted by borrowers, loan originators, investment banks and others in fair lending cases. Our analyses reveal specific mechanisms through which loan originators identified and gained the trust of black and Latino borrowers in order to place them into higher cost, higher risk loans than similarly situated white borrowers. Loan originators sought out lists of individuals already borrowing money to buy consumer goods in predominantly black and Latino neighbourhoods to find potential borrowers, and exploited intermediaries within local social networks, such as community or religious leaders, to gain those borrowers’ trust.

Deception, Development, and Democracy:

Jacob Rugh on Christopher Mele’s Race and the Politics of Deception.