Introduction
Racial segregation is often considered as one of the elements that influence the community in which whites or blacks live. In this light, whites prefer living in areas where other white people are dominant, and the black populations prefer living near many other blacks. The origins of the identified preferences, as well as the social psychological underpinnings of these provisions, are hotly debated. In this regard, individuals question whether colorblind or race-conscious preferences influence where people live, or whether the racial composition of a particular neighborhood has a net influence on living preferences. This questioning is likely to bring to light the idea that racial composition can be considered as a proxy for social class [5]. The demographics of a particular neighborhood can be regarded as an attribute that influences property prices.
The fundamental objective of this paper is to conduct an assessment regarding the manner in which race, specifically the minority population, affect property value. In line with this objective is the idea that the divide between owning property among the white population and the racial minorities is likely to continue growing into proportions considered monopolistic. For this reason, this literature review looks into the relationship between race and property valuation. The articles used to conduct the review will reveal that the gap in residential valuation is a derivative of the existing racial segregation within different neighborhoods [5]. This conclusion follows the notion that demographic constitution of a particular neighborhood can lead to the increase or decrease in property value.
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Major Concerns Regarding Race and Property Value
Racial resident segregation is fundamentally seen as a derivative of the preferences of the whites and the minorities. Property is an inanimate and concrete thing that contains tangible characteristics. For instance, land ownership cannot determine the characteristics of a given property. Logically, the identity of a property owner cannot change the physical nature of a particular parcel of land, which is an indication that he or she should not affect its market value. However, this logic ceases to be considered when the property belongs to racial minorities [1]. Many people share the belief that property values are likely to depreciate when the occupant or owner of is black or from other racial minority groups such as Latinos. For this reason, the valuation and devaluation of property are seemingly tied to racial beliefs. Even though such a conviction might not be true, it shapes the reality in the society.
The proposition that racial minorities are likely to cause the depreciation of real property value is irrational. The irrationality creates as well as maintains a shameful reality that properties owned by racial minorities appreciate at lower rates when compared to property owned by the white people. However, preferences explaining segregation focus on the desire by white people to avoid black dominated neighborhoods due to racial prejudice [4]. The view that the presence of racial minorities reduces property values is something that is used to mask bias. On the other hand, this view could also be used to get rid of conclusions indicating that segregation is a structural issue rather than the cumulative effect of decisions made by individuals. Nevertheless, property value concerns can be justified by referring to the crime rates in a particular neighborhood, the area’s infrastructure, and institutions such as schools.
The proposition that the race of a property owner can affect the property’s market value is true. However, it is essential to recognize that the most important factor that can be used to maintain the stability of racially mixed neighborhoods is the demand for property by the white population. Most racial minorities purchase homes sold by African Americans or by individuals from their races [1]. When white people refuse to purchase property in areas where many African Americans live, the pool of potential buyers is also likely to reduce. This situation indicates that the potential bidders for the properties being sold in such a region will reduce, meaning that the purchase prices for the properties owned by the black population reduce. For this reason, the decline or appreciation in property value is a derivative of the demand displayed by the white population. Furthermore, white property owners in racially transitioning areas can cut back on making improvements or maintaining the properties.
The idea that white people are likely to cut back on costs attached to the maintenance and improvement of properties in neighborhoods that are transitioning racially accounts for the omission of the role that white people play in influencing property values. The concern regarding the relationship between race and property values factors in the perceptions that white people have. This provision relates to the idea that property ownership by black people harms the purchasers and real property owners. In this case, the black population presumably pays a disproportionate amount of their earnings for housing, which is limited in the accumulation of equity accumulation as well as the poor quality of the residential environment in which the racial minorities live [1]. The black middle-class population is also affected since they avoid creating wealth in such neighborhoods, a factor that stifles the appreciation of the property values.
The Effects of Demographics on the Variations of Property Values
Dorothy Brown posits that the median net worth of the white households has increased significantly in recent years [3]. The author posits that one of the most important elements that have led to the creation of a concrete white middle class is home ownership. However, the same is not true for the black population, most of who purchase own homes in neighborhoods where minorities are the majority. Brown conducts an assessment of different studies to indicate that the value of properties in many of the neighborhoods in which black people live do not appreciate in the same rate as the homes in which white people live [3]. Brown further posits that the appreciating gap between the blacks and whites commences when the black population living in a particular neighborhood is more than 10%, which means that the percentage of the minorities owning homes in such neighborhoods are likely to be more. This statistic could be used to reveal that white people live in neighborhoods that are dominated by other white people, which is contrary to the decisions made by black people regarding the idea that they decide to live in areas where minorities are more than the whites are.
The argument presented above confirms the notion that the percentage of blacks in a particular neighborhood can affect the worth of the properties in the area. In this case, when the percentage of minorities living in a particular neighborhood is high, the value of the properties or homes in the region is likely to stall or decline. David Rusk, who likens the existing gap to the imposition of segregation tax, supports this situation [6]. Rusk considers that one of the factors that can explain the existing variations in the home value-to-income ratios in metropolitan regions is a derivative of residential segregation. The degree of racial segregation determines the gap in the property values in different regions. The study by Rusk further indicates that black homeowners were receiving less value on their properties than the white homeowners [6]. An individual could argue that the differences in property values originate from racial segregation.
Brown refers to a study by Gregory Squires to indicates that a significant number of whites tend to avoid neighborhoods that are racially diverse. The study indicates that the reason for the avoidance is attached to notions that the conditions in such neighborhoods support crime and that the white people consider the schools in such neighborhoods as unsuitable for their children. For this reason, whites are not likely to purchase property in areas where the minorities are the majority population, regardless of whether the property meets their needs or desire. Conversely, black people living in neighborhoods dominated by whites win, but they are a smaller part of the entire population in the particular neighborhood [3]. This situation confirms the claim by a significant number of people that when minorities move into a particular neighborhood, the area begins deteriorating.
In line with the above-mentioned claim is the idea that white residents in a given neighborhood flee once nonwhite residents begin moving into the area. They flee from such neighborhoods primarily due to the perception they hold that the value of the property in such places decline. Their choices also influence businesses and jobs. According to the article by PBS, when the minority communities share approximately 10-20% of the schools, more white people are likely to get away from such neighborhoods to the point upon which the minorities become more than 80% [5]. Consequently, when white people choose to leave such neighborhoods, property prices decline. Given the fact that wealthy communities have better services and low taxes compared to the less wealthy communities when white people move from neighborhoods with high black populations, they take their wealth away from such places [5]. As a result, the total wealth of the neighborhoods in which minorities are the majority declines.
The provided indicators underscore the inequity of the attitudes held by white people regarding property owned by racial minorities. Even though property ownership by minorities does not change the fundamental features of a real property, the appreciation of this property can occur. However, the appreciation is dependent on discriminatory factors as well as white market evaporation. For instance, lending institutions are likely to discriminate against individuals seeking to purchase property from neighborhoods dominated by racial minorities [6]. Conversely, as noted earlier, the discriminatory factors are also likely to decrease the provision of fundamental public services. These irrational beliefs can be considered as factors that suppress the value of property owned by minorities more than the characteristics of the actions of the minority owners. For instance, Rusk posits that white neighbors that decide to leave neighborhoods that attract more residents from minority communities are likely to sell their properties or homes at higher prices than it would have been before the entry by the blacks [6]. The prices might be higher because of the pent-up demand by the black purchasers, particularly when the housing market is tight.
An important factor that shapes racial residential preferences, particularly for the African American populations, is the concern regarding the possibility of being discriminated against in whiter neighborhoods. Jamelle Bouie provides an example of the discriminatory effects on property prices by considering the racist methods used by a Brooklyn property owner responsible for the gentrification of neighborhoods such as Crown Heights, Bushwick, and Bedford-Stuyvesant. The property owner explained that he was doing all that he could to ensure that he evicts black people from his properties [2]. The reason for doing so is primarily because a considerable number of his white tenants ask whether black people are living in the buildings, a factor that informs their decision on whether to live in the same region or otherwise. The property owner indicates that not many white people like living in an area where black people live, consequently influencing the decision by such property owners to evict them. For this reason, most of the property owners would not be willing to pay so much money to have black individuals to live in their buildings.
Even though the sentiments considered above are racist, they are not surprising. In this case, racial discrimination also affects real estates, as brokers and lenders also consider the racial background of an individual to determine their actions. Bouie recognizes public opinion on this topic by indicating that 28% of the white people support the idea that it is the right of a property owner to discriminate against another person based on their race when they are selling their property [2]. The author's argument is a derivative of the General Social Survey used to measure the attitudes that Americans have about different topics. The responses from the white respondents also indicated that only 25% of them were willing to live in neighborhoods in which half of their neighbors were non-white [2]. The statistics provided could be used to explain why most property owners would not prefer to have minorities living in their buildings. Such preferences also affect property prices.
Margalynne Armstrong refers to the belief presented by Oscar Stern, a professional property appraiser, to indicate that the pent-up demand for housing by black people can lead to the increase in property prices when the previous owners were white individuals. The value of the property in places that were formally dominated by white people can be sustained after minorities occupy the neighborhoods, but they value is not likely to increase [1]. On the other hand, when African Americans move to a neighborhood dominated by whites, the white people will not only choose to move, consequently attracting other minorities. In this case, the incoming purchasers in such neighborhoods are not likely to be white people. This situation can occur primarily because professionals in the real estate business consider racial stereotyping as one of the concerns that influence the participation of blacks in the property market.
Conclusion and Recommendation
The belief that property ownership by minorities intrinsically causes the value of the property to decline is not rooted in logic. Nonetheless, the belief has an impact on the society. Racial segregation still exists in the contemporary society, meaning that it is still possible for minorities to encounter discrimination when purchasing the property. Even after becoming homeowners, minorities are not likely to experience the same appreciation in the value of their property as the white people do. On the other hand, when minorities would wish to sell their homes or property, they face a less competitive market since only a few of the potential purchasers are white. These provisions constitute the elements that could be used to explain why property value in areas dominated by minorities is significantly lower than the value of property in white neighborhoods.
One of the possible recommendations for this issue includes preventing the steering of the white people. In this regard, it would be vital for realtors to get rid of the idea that white people are not interested in living in black middle-class suburbs. Some of the houses in such regions present purchasers with good value, which means that they receive good value for money. For this reason, players in the real estate industry should strive to portray areas dominated by minorities in a positive light. The portrayal is likely to reverse the negativity individuals attach to black communities. In this case, enhancing the market for property owned by minorities would be one of the steps to consider to ensure that the value of their property appreciates. Such a move is also likely to reduce the wealth disparity between comparable minorities and white homeowners.
Bibliography
[1] Armstrong, Margalynne. "Race and Property Values in Entrenched Segregation." University of Miami Law Review 52.4 (1998): 1051-1065.
[2] Bouie, Jamelle. "Persistent Racism In Housing Is A Tax On Blackness." Slate Magazine . N.p., 2015. Web. 11 Apr. 2018. <http://www.slate.com/articles/news_and_politics/politics/2015/05/racism_in_real_estate_landlords_redlining_housing_values_and_discrimination.html>
[3] Brown, Dorothy. "How Home Ownership Keeps Blacks Poorer Than Whites." Forbes.com . N.p., 2012. Web. 11 Apr. 2018. <https://www.forbes.com/sites/forbesleadershipforum/2012/12/10/how-home-ownership-keeps-blacks-poorer-than-whites/#7dcade274cce>
[4] Krysan, Maria et al. “Does Race Matter in Neighborhood Preferences? Results from a Video Experiment.” AJS; American Journal of Sociology 115.2 (2009): 527–559.
[5] PBS. "RACE - The Power of an Illusion. Go Deeper: Where Race Lives." Pbs.org . N.p., 2003. Web. 11 Apr. 2018. <http://www.pbs.org/race/000_About/002_06_c-godeeper.htm>
[6] Rusk, David. The “Segregation Tax”: The Cost of Racial Segregation to Black Homeowners . The Brookings Institution, 2001. Web. 11 Apr. 2018. <https://www.brookings.edu/wp-content/uploads/2016/06/rusk.pdf>
