THE SCHOOL OF CITY AND REGIONAL PLANNING
GEORGIA INSTITUTE OF TECHNOLOGY
Under the provisions of the regulations for the degree
DOCTOR OF PHILOSOPHY
on Thursday, April 27, 2017
1:30 – 4:00 PM
in the Architecture West Room 250
will be held the

DISSERTATION DEFENSE
 
for
 
Elora Lee Raymond

The Impact of Racial Segregation, Income Sorting and Risk-Based Mortgage Pricing on Housing Wealth Inequality: A Comparison Between Urban Regions in the United States
 
The Examiners Are:

Professor Dan Immergluck, School of City and Regional Planning, Georgia Institute of Technology

Professor Roberto Quercia, Trudier Harris Distinguished Professor and Chair, Department of City and Regional Planning

Professor Bruce Stiftel, Chair of the School of City and Regional Planning, Georgia Institute of Technology

Dr. Shatakshee Dhongde, Assistant Professor of Economics, Georgia Institute of Technology

Dr. Micheal Elliott, Associate Professor, School of City and Regional Planning, Georgia Institute of Technology
 
Faculty and students are invited to attend this examination.

Abstract:

Housing wealth is the cornerstone of U.S. households’ balance sheets and the largest store of wealth in the United States. This research examines rising housing wealth inequality between 2005 and 2015 in an urban context. The literature suggests that rising income inequality, rising income segregation, or racial segregation could be a cause. Other research highlights the role of mortgage lending in generating inequality. The subprime and foreclosure crises have a well-documented association with housing inequality. Research also highlights risk-based mortgage pricing more generally as a mechanism for widening inequality.

I first examine the drivers of urban housing wealth inequality with a cross-sectional regression analysis in 2000-2005. I examine how income and racial segregation affect housing wealth inequality between cities prior to the crisis, and find that income inequality is weakly correlated with housing wealth inequality, but income and racial segregation have strong effects. Then, I examine how changes in segregation explain rising housing wealth inequality during the real estate and financial crises of the 2000s, or if mortgage market factors explain the rise. I find that changes in income inequality lead to higher housing wealth inequality; that rises in Black racial segregation again explain much of the increase, and that subprime lending does not fully account for that effect. Finally, I use individual level data in a series of quantile regressions to understand the drivers of housing wealth inequality during the housing market recovery years of 2010-2015. I find that risk-based mortgage pricing and income segregation significantly interact to produce significant and meaningfully large increases in housing wealth inequality over a 5-year period, from 2010-2015.

These findings have ramifications for national housing finance reform, as well as for state and local mortgage programs and policies like inclusionary/exclusionary zoning.    The current administration has put housing finance reform at the top of its agenda. Many proposals suggest partial or complete privatization of the government sponsored enterprises (GSEs), which would lead to increase in risk-based pricing and market segmentation. Additionally, reform could disrupt GSE subsidization of state and local mortgage revenue bond programs.  I recommend that state and local actors seek to preserve these capacities  and scale up local programs to guarantee mortgages and provide down payment assistance where possible.  I also recommend that cities weigh carefully the costs of exclusionary zoning not only on income segregation, but on widening wealth inequality within their region.