White suburbanisation facilitated black homeownership in the mid-20th century

Leah Boustan, Robert Margo

12 February 2011

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Over the 20th century, the residential patterns of US households became increasingly divided by race. From 1940 to 2000, the share of the metropolitan white population who lived in the suburban ring increased from 38% to 74%, whereas, even by 2000, over 60% of the black metropolitan population remained in central cities.

Economists and sociologists have long maintained that white departures for the suburbs hurt remaining city residents by starving the urban tax base and contributing to the formation of isolated racial enclaves (see, for example, Massey and Denton 1993, Cutler et al. 1999, Ananat 2007).

In new research (Boustan and Margo 2011), we argue that white suburbanisation had a silver lining by contributing indirectly to the rise in black homeownership. As white households moved to the suburbs the relative price of housing in urban neighbourhoods fell, enabling some black households to become homeowners. Our analysis is closely related to the literature on the “filtering” of the urban housing stock. In US cities, the oldest housing is located in the historical central city. When new housing is built on the urban periphery, rich households move out of the central city, opening up a portion of the older housing stock for remaining city residents (Sweeney 1974, Weicher and Thibodeau 1988, Brueckner and Rosenthal 2009).

Our work demonstrates that racial filtering of the urban housing stock can help to explain why black homeownership rose so dramatically from 1940 to 1970, before the first federal legislation to combat racial discrimination in housing markets (the Fair Housing Act of 1968). While in 1940 only 21% of black households lived in owner-occupied housing, 50% of black households owned their home by 1970. Furthermore, unlike the rise of white homeownership, which was facilitated by the large stock of single-family homes in the suburbs, black homeownership increased without a significant wave of black suburbanisation.1

We estimate the relationship between black homeownership in the central city and white suburbanisation in the surrounding metropolitan area using a sample of 100 large cities.2 In particular, we examine changes by decade from 1940 to 1980, asking whether the rate of black homeownership in a central city increased faster during periods in which the surrounding metropolitan area experienced larger increases in white suburbanisation.

We find a positive relationship between white suburbanisation and the rate of black homeownership in central cities, as depicted in the scatter plot in Figure 1. However, this positive relationship is only apparent in the Northeast and Midwest. In these regions, our estimates suggest that a 10 percentage point increase in the share of whites who lived in the suburban ring increased the rate of black homeownership in the central city by 3 to 4 percentage points. By this measure, the departure of whites for the suburbs can explain two-thirds of the increase in urban black homeownership in the North and Midwest from 1940 to 1980, or around one quarter of the increase in black homeownership nationwide.

Figure 1. Change in the white suburban share and change in black central city homeownership: Northeast and Midwest

Notes: Each point indicates the share of whites in a metropolitan area who live in the suburban ring and the share of black households in the central city who live in an owner-occupied dwelling, net of Census year and metropolitan area fixed effects. The sample is restricted to metropolitan areas in the Northeast and Midwest.

The regional difference in the effect of white suburbanisation on black homeownership can be accounted for, in large part, by two related factors: population density in the central city and the overall rate of growth in the metropolitan area. The older, denser, and slower-growing cities of the Northeast and Midwest had lower rates of new housing construction during this period. As a result, prospective black homeowners relied more heavily on the supply of housing generated by racial turnover of the existing housing stock rather than on new construction.

Establishing causality

Despite these results, we may still be concerned that the rise in black homeownership is not caused by white suburbanisation per se but rather by some third factor that is correlated with the movement of white households to the suburbs. In metropolitan areas where access to credit is expanding, white households can finance moves to the suburbs and black households may have been able to borrow to purchase a home. Alternatively, white households may have been more likely to leave central cities populated by poor black households who were also less able to afford homeownership.

To address these concerns, we look for an “instrumental variable” associated with white suburbanisation that otherwise had no effect on black homeownership. Our variable is the number of new interstate highways passing within one mile of the central city. Baum-Snow (2007) demonstrates that highway construction encouraged suburbanisation by reducing the time cost of commuting from a bedroom community to the central city. We find that the component of white suburbanisation due to new highway construction is also strongly related to black homeownership, suggesting that our earlier results are not contaminated by other potential factors.

Conclusions

Although suburbanisation had negative consequences for central cities, it also benefited remaining urban residents, especially the large black communities in central cities, by lowering the cost of homeownership. Historically, increases in black homeownership have been a key factor in the long-run accumulation of wealth in black households. A home is often the largest asset in a household’s wealth portfolio. As a result, homeownership has been shown to improve child outcomes and psychological well-being and to forestall urban decline (Green and White 1997, Dietz and Haurin 2003, Rosenthal 2008, Turner and Luea 2009).

References

Ananat, Elizabeth O (2007), “The Wrong Side(s) of the Tracks: The Causal Effect of Racial Segregation on Urban Poverty and Inequality”, NBER Working Paper 13343.

Baum-Snow, Nathaniel (2007), “Did Highways Cause Suburbanization?”, Quarterly Journal of Economics, 122:775-805.

Boustan, Leah Platt and Margo, Robert A (2011), “White Suburbanization and African-American Home Ownership, 1940-1980”, NBER Working 16702

Brueckner, Jan and Stuart Rosenthal (2009), “Gentrification and Neighborhood Housing Cycles: Will America’s Future Downtowns be Rich?”, Review of Economics and Statistics.

Cutler, David, Edward Glaeser, and Jacob Vigdor (1999), “The Rise and Decline of the American Ghetto”, Journal of Political Economy, 107:455-506.

Dietz, Robert D and Donald R Haurin (2003), “The Social and Private Micro-level Consequences of Homeownership”, Journal of Urban Economics, 54(3):401-450.

Green, Richard and Michelle White (1997), “Measuring the Benefits of Homeowning: Effects on Children”, Journal of Urban Economics, 41:441-461.

Massey, Douglas S and Nancy A Denton (1993), American Apartheid: Segregation and the Making of the Underclass, Harvard University Press.

Sweeney, JL (1974), “Quality, Commodity Hierarchies, and Housing Markets”, Econometrica, 49:147-167.

Turner, Tracy M and Heather Luea (2009), “Homeownership, Wealth Accumulation and Income Status”, Journal of Housing Economics, 18(2):104-114.

Weicher, John, and Thomas Thibodeau (1988), “Filtering and Housing Markets: An Empirical Analysis”, Journal of Urban Economics, 23:21-40.


1 Single family homes tend to be owner-occupied regardless of their location. In 1960, for example, over 80% of single family dwellings in both the city and the suburbs were owner-occupied, compared to less than 20% of multi-family units.

2 We also conduct a supplementary analysis of household-level Census records in 1940 and 1980.

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Topics:  Poverty and income inequality

Tags:  US, housing, race, real estate

Associate Professor of Economics at UCLA

Professor of Economics, Department of Economics, Boston University

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