Different Paths to Homeownership: A Closer Look at Racial Disparities in Los Angeles

Title: Different Paths to Homeownership: A Closer Look at Racial Disparities in Los Angeles

Date: 9/1/2001

Author(s): Stuart Gabriel and Gary Painter

Executive Summary:

This working paper constitutes an important contribution to our knowledge by furtherexplaining the residual racial disparity in homeownership rates between AfricanAmericans and whites in Los Angeles in 1990 (first analyzed by professors Painter andGabriel in The Decision to Own: The Impact of Race, Ethnicity, and Immigrant Statuspublished by the Research Institute for Housing America). The previous study showedthat roughly half of the raw differential could be attributed to the poorer socioeconomicendowments of African Americans. This working paper goes further. Using a newmethodology, it eliminates the gap entirely for half of the African Americans in thesample. And for the other half, it reduces the gap between those African Americansand comparable whites by 60 percent. The research now accounts for over three-fourthsof the original measured homeownership gap of 22 percent between white and AfricanAmerican households.
This working paper builds upon the original study's important findings. Both papersdeal with one of the key issues facing researchers and policymakers: Why is thehomeownership rate for minorities much lower than it is for whites?

A key finding of the earlier research was that attributing endowments of more affluentwhites to Hispanics, Asian Americans, and recent immigrants studied in the Los Angelesarea raised their homeownership rates to levels comparable to or even greater thanwhites. While that research also showed that the weaker economic status among AfricanAmericans in Los Angeles explained much of the differential in homeownership rates,a racial differential still existed.

This working paper addresses that remaining differential by asking the followingquestions: Do all African Americans have lower, endowment-adjusted homeownershiprates? Or are some African Americans on "paths" to homeownership that are statisticallycomparable to like white households?

The follow-up study presented here produced some intriguing results. The study looksmore closely at the same population of African Americans as the earlier study. Theauthors divide their sample into mutually exclusive groups that seem to be on differenttracks in the housing market: movers to outlying San Bernardino County, movers toSouth Central Los Angeles, and movers to other areas within Los Angeles County. Thestudy verifies that these groups are on different "paths," as the groups reacted differentlyto changing economic and demographic developments in choosing a destination.

Having established these differences, Painter and Gabriel then statistically estimatewhy members of each group choose homeownership over renting. Having applied thesame "endowment" approach to each group as the previous paper did to all AfricanAmericans as a whole, the authors find that the racial disparity is not uniform among all African Americans in the study. Rather, the African Americans who moved to eitherSan Bernardino County or to South Central Los Angeles were just as likely to behomeowners as whites if they had the same resources. These two groups constitutedhalf of the sample. The homeownership gap for the remaining half of the original sample(African Americans who located in other areas within Los Angeles County) was reducedsignificantly from 28 percent to 11 percent.

The import of these results goes beyond learning about racial differences inhomeownership in one city in the country. First, they demonstrate that the use ofstatistical models must be kept in perspective. Researchers still have a lot to learnabout how minorities (and whites) make their housing market decisions. As Painterand Gabriel demonstrate, reworking a model to account for previously unexploredbehavior can significantly change results that are consistent with-but not necessarilydue to-discrimination.

Second, the results are significant because they show that the homeownership decisionis one involving many factors. Racial affinity and antipathy both have been documentedas important factors in where people choose to live. The results for the locationalchoice model in this study also demonstrate that the social and economic characteristicsof a neighbor are important in determining where one lives. And groups that differ intheir geographic preferences also differ when it comes to tenure choice decisions. Whilea family may prefer to own its own home, it may have strong preferences to live in aneighborhood with desirable amenities and with good access to job opportunities. Thus,it may move to such an area even if the opportunities to buy a home that it can affordare limited. As the authors note, those sorts of factors could well explain thehomeownership disparity between white and African American movers to other areaswithin Los Angeles County.

However, the study should not be interpreted as ruling out that both subtle and not-so-subtle discrimination may be at work. Discrimination-or the legacy of pastdiscrimination and segregation-may contribute to the all-important weaker economicendowments among minorities, to their locational decisions, or to the outcome of theirhome and mortgage shopping processes. This research should spur others to explorein more depth how the interrelated issues of race, preferences, economic disparities,and economic/racial living patterns affect housing opportunities for all minority groups.While we must be vigilant to end housing and mortgage discrimination, publicpolicymakers must have a much better understanding of how people choose where tolive and what this means for their housing choice.