The High Cost of Segregation: Exploring Racial Disparities in High Cost Lending

Publication Date: April 2009

Publisher: Furman Center for Real Estate

Author(s): Vicki Been; Ingrid Gould Ellen; Josiah Madar

Research Area: Social conditions

Keywords: segregation; subprime lending; Affordable Housing

Type: Article


Research consistently has found evidence of significant racial disparities in the incidence
of subprime lending. This paper investigates the relationship between the residential
racial segregation in a metropolitan area and disparities in the share of loans members of
different racial groups in that area received that are subprime. Specifically, we evaluate
the impact that the extent of black-white and Hispanic-white segregation in each of about
200 of the country’s metropolitan areas has on the likelihood that a black or Hispanic
borrower in the area will receive a subprime loan. In addition, using data from New York
City, we examine how the concentration of different racial groups within a neighborhood
affects the probability that borrowers of all races living in the neighborhood will receive
subprime loans.