June 18, 2018

Racial Rent Differences in U.S. Housing Markets

Dirk W. Early
Paul E. Carrillo

This paper exploits an unusually rich data set to estimate racial differences in the rents paid for identical housing in the same neighborhood in U.S. housing markets and how they vary with neighborhood racial composition. It overcomes the shortcomings of the data used in previous studies. It is large (over 400,000 observations), covers all parts of the country, and contains detailed information about the housing units and their immediate neighborhoods and the census block group of each unit. Importantly, due to the sample size, there are many blacks living in predominantly white neighborhoods and many whites in predominantly black neighborhoods. Results suggest that households led by blacks pay more for identical housing in identical neighborhoods than their white counterparts and that this rent gap increases with the fraction of the neighborhood white. In neighborhoods with the smallest fraction white, the premium is about 0.6 percent. In neighborhoods with the largest fraction white, it is about 2.4 percent. This pattern holds across different types of areas, namely the 50 largest metro areas, all other metro areas, non-metro areas, and areas with the highest and lowest levels of racial segregation in housing.