Price and Prejudice: How a Neighborhood’s Ethnic Characteristics Affect Housing Values

Dr. John Yinger looked at Cleveland housing market at the turn of the millennium to see if neighborhood ethnicity impacts housing prices in his article “Hedonic Estimates of Neighborhood Ethnic Preferences” from Public Finance Review.

The abstract:

This article uses a new hedonic technique to examine households’ ethnic preferences and help assessors estimate the impact of neighborhood ethnicity on housing prices. A hedonic function, which relates housing and neighborhood characteristics to house values, is the envelope of households’ bids for these characteristics. This article derives this envelope by combining theories about household sorting across neighborhoods with constant-elasticity demand functions for neighborhood characteristics and housing. Estimates for the Cleveland area in 2000 find that some households prefer neighborhoods without black or Hispanic residents, whereas others prefer largely black or Hispanic neighborhoods, and that house values reflect ethnic preferences.