Mortgage Policies And Their Effects On Racial Segregation And Upward Mobility
Author(s) Nirupama Kulkarni and Ulrike Malmendier


We document that housing policies aimed at increasing homeownership and reducing disparities can have adverse consequences, arising from sorting and deteriorating place-based factors. Exploiting variation in the ease of mortgage financing and targeting of underserved neighbourhoods in the 1992 GSE Act, we show that, while Black homeownership increased in targeted neighbourhoods, white families moved out, especially when mortgage financing became more accessible in the surrounding areas. Segregation increased and upward mobility deteriorated among low-income Black families and among those low-income white families who remained. We identify declining house prices, education spending, and school quality in targeted areas as plausible channels.

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