The Impact of Federal Housing Policies on Racial Inequality

Ali, Omer, Durham NC

Investigators

Abstract

This award was provided as part of NSF's Social, Behavioral and Economic Sciences Postdoctoral Research Fellowships (SPRF) program. The goal of the SPRF program is to prepare promising, early career doctoral-level scientists for scientific careers in academia, industry or private sector, and government. SPRF awards involve two years of training under the sponsorship of established scientists and encourage Postdoctoral Fellows to perform independent research. NSF seeks to promote the participation of scientists from all segments of the scientific community, including those from underrepresented groups, in its research programs and activities; the postdoctoral period is considered to be an important level of professional development in attaining this goal. Each Postdoctoral Fellow must address important scientific questions that advance their respective disciplinary fields. Under the sponsorship of Dr. William Darity, Jr. at Duke University, this postdoctoral fellowship award supports an early career scientist investigating the impact of federal housing policies on racial inequality. The goal of this research project is to advance our understanding of the root causes of racial inequality by examining the role played by discriminatory housing policies. Studying the impact of New Deal housing policies on blacks and whites will test a narrative attributing present-day racial disparities in home-ownership and wealth to federal programs that favored white households. The findings of this study have the potential to shape our understanding of the origins and persistence of racial inequality; a phenomenon that affects all Americans through its impact on political discourse, government policy, and individuals' views about public policies, including criminal justice, taxation, social programs and public school finance. To explain the ubiquity of black disadvantage, an emerging narrative points to the federal government's New Deal housing programs as culprits in exacerbating and congealing racial disparities by discouraging black home-ownership and promoting residential segregation. The objective of this project is to interrogate this narrative by bringing data to bear on its hypotheses. The research plan involves using full count census data from the 1930 and 1940 decennial censuses to estimate the short-term impact of the Federal Housing Administration's (FHA) mortgage guarantee program on black and white home-ownership, home values, and socioeconomic standing. A second objective involves using census data samples starting in 1950 to estimate the long-term impact of the FHA's mortgage program on these same outcomes. A novel instrumental variables strategy will be used to gain causal leverage on this question, as counties that receive higher levels of FHA lending may also exhibit elevated racial disparities for unrelated reasons. Original data collection from the National Archives will shed light on the geographic distribution of FHA mortgages at the level of individual addresses and present a descriptive account of FHA mortgage recipients. Data collection from the 1950 census of housing will extend the duration of time for which we can measure program activity by a decade. The project seeks to produce the first comprehensive empirical evaluation of an important federal program that has likely shaped the racial geography of urban areas across the US. This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.