Neighborhood Racial Composition and Mortgage Lending: City and Suburban Differences

ABSTRACT:

Racially discriminatory mortgage lending patterns have been documented in several cities, despite the fact that such practices are illegal under the Federal Fair Housing Act and other federal and state laws. This study finds that in Milwaukee, as in several other metropolitan areas, racial composition of neighborhood is negatively associated with mortgage lending activity by depository institutions even after the effects of income, condition of housing, and related population and neighborhood characteristics are taken into consideration. However, the effects of race are not linear and are different in the city and in the suburbs. In the city, the effects of race were largest in integrated areas, whereas in the suburbs the effects of race were positive when few minorities were present and negative in those areas having large concentrations of minority residents.