The Rest of the Story – The AEI Housing Center’s Critique of “How We Investigated Racial Disparities in Federal Mortgage Data”

Slides

The American Enterprise Institute’s Housing Center released its revised working report: “The Impact of Race and Socio-Economic Status on the Value of Homes by Neighborhood: A Critique of the Brookings Institution’s ‘The Devaluation of Assets in Black Neighborhoods.’” The call reports on the Housing Center’s analysis of and improvements to the widely-cited Brookings study by Perry et al. “The Devaluation of Assets in Black Neighborhoods” (2018).

Audio Recording

Key takeaways

  • A recent Markup/Associated Press (AP) analysis found that decline rates, after controlling for 17 independent variables, are higher for the protected classes than for the non-protected one.
  • However, as we have pointed out for home valuations and appraiser bias, these arguments alleging systemic racism do not hold up to close scrutiny. We are, however mindful that many past and continuing housing and other policy actions to address racial discrimination have had unintended consequences that have done substantial harm to low-income households generally, and minority households in particular.
  • The discrepancies in lending inputs as highlighted by the Markup/AP study disappear once one considers the lending outcomes in the form of risk-adjusted default rates.
  • Logically, the higher decline rates for the protected classes cannot be reconciled with higher risk-adjusted default rates for said classes. Thus the Markup/AP study fits in the larger context of recent “research” and anecdotes alleging discrimination without much evidence. This is the rest of the story
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