Do African Americans Prefer to Live in Segregated Communities?
Defina, Robert, Business Review (Federal Reserve Bank of Philadelphia)
The devastation caused by Hurricane Katrina shocked the country and revealed glaring inadequacies in the infrastructure of New Orleans. Images of homes and stores inundated by floods, residents trapped on roofs, and stories of lost children gripped the nation and left many asking how such outcomes were possible.
Perhaps just as surprising was another fact the storm laid bare. New Orleans, the country was to see, had a housing market sharply segregated by race. News stories of the storm's impact uncovered neighborhood after neighborhood overwhelmingly composed of African Americans. While the Crescent City obviously had white residents, they appeared to live in areas largely separate from African Americans.
New Orleans, it turns out, is not an isolated case. Forty years after the civil rights movement and the Fair Housing Act of 1968, racially segregated housing continues to be widespread. By most measures the extent of segregation has moderated somewhat during the past several decades. Yet analysts, such as Douglas Massey, find that two-thirds of African Americans currently live in metro areas racially divided enough to be classified as "highly segregated" or "hyper-segregated."
The fact that housing segregation has persisted into the 21st century is not disputed. But the reasons it has endured are less clear. Beginning in the 1970s and continuing into the 1990s, there seemed to be broad agreement that racial segregation was mainly due to past and ongoing discrimination in the real estate and lending markets. This view was buttressed by the careful work of scholars such as Douglas Massey and Nancy Denton and John Yinger. (1)
That thinking, however, has been challenged by an idea called the self-segregation hypothesis. Proponents, including Stephen and Abigail Thernstrom, and Orlando Patterson, argue that race relations have improved markedly over time. While discrimination may have underpinned housing segregation in the past, it no longer plays an important role. Rather, according to this hypothesis, current levels of segregation reflect the preferences of African Americans to live together. These researchers also assert that desires for same-race neighbors stem from positive and natural inclinations to live with one's own racial or ethnic group and to preserve and support a shared and unique culture. Put simply, segregation continues because birds of a feather flock together.
The self-segregation hypothesis portrays housing segregation in a relatively positive light. From an economic perspective, voluntary choices in any market lead to the most efficient outcomes for society unless individual decisions affect others who are not part of the transaction. That is, if everyone is already doing what they want, it is not possible to make anyone better off. So it is when African Americans voluntarily choose to live in segregated communities. Far from being a problem, segregation would represent a set of choices to be respected. Nothing can be done to improve matters, nor should anyone try. In fact, economists have pointed out that segregated neighborhoods might provide some social benefits, as well as social costs. (2)
The process of self-segregation can be contrasted with one in which racial discrimination underpins segregation. With active discrimination, groups of individuals are unwillingly excluded from full participation in the market. This might result, for example, from racial "steering," whereby African Americans purposely are not shown properties in certain areas. It could also occur if African Americans are refused mortgage loans for reasons unrelated to their creditworthiness. In these cases, the prices and quantities transacted in the market will not fully incorporate the true demands for housing. The market will then be inefficient, and at least in theory, some people could be made better off by actions that eliminate the discrimination. …