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Abstract
Vast differences between the U.S. city of today and that of a quarter-century and half-century ago call for a rethinking of conventional frameworks that provide an explanation of clustering/segregation along racial/ethnic lines. Accordingly, we put forth a new framework, market-led pluralism, that better fits today's realities. Existing frameworks—assimilation, stratification, and resurgent ethnicity—miss a central element of today's racial/ethnic residential mosaic, the market makers. At the center are housing developers who continually unveil new urban spaces with culturally open communities; lending agencies that, encouraged and supported by government policy, provide highly affordable mortgages to an increasingly wide range of households; real estate brokers and agents for whom the discriminatory practices of the past are illegal, profit reducing, and often beside the point in today's marketplace; consumers whose preferences emphasize class-type elements such as amenities in housing and neighborhood, tempered by affordability; and communities that impose their own development agenda, or lack thereof, on the housing market. The efforts of these market makers are facilitated by pervasive and fluid information (e.g., via the Web, e-mail, cell phone); procedures that are more systematized, automated, and transparent; and well-working market mechanisms. Fleshing out market-led pluralism is done in five steps focusing on (1) building (developers-builders), (2) lending (banks, mortgage agencies, government policy and entities), (3) selling and renting (real estate practices, including discrimination), (4) consuming (buyers, renters, their preferences), and (5) local communities (annexation, zoning, development agendas, cooperative agreements among communities). Empirical support for the framework is drawn from secondary data and key-informant, protocol-driven interviews, largely focused on the Columbus, Ohio, metropolitan statistical area.
Las vastas diferencias entre las ciudades estadounidenses de la actualidad y las de hace un cuarto de siglo y medio siglo exigen la reconsideración de las estructuras convencionales que proporcionan una explicación del agrupamiento/segregación a lo largo de las líneas raciales/étnicas. De acuerdo con esto, proponemos una nueva estructura, un pluralismo dirigido por el mercado, que se ajusta mejor a la realidad actual. Las estructuras existentes, asimilación, estratificación y grupos étnicos resurgentes, carecen de un elemento central en el mosaico racial/étnico residencial de la actualidad, los creadores del mercado. En el centro se encuentran los promotores de viviendas, quienes continuamente descubren espacios urbanos nuevos con comunidades culturalmente abiertas; las agencias prestamistas que, estimuladas y apoyadas por las normas gubernamentales, proporcionan hipotecas altamente económicas a una creciente variedad de familias; los agentes y corredores inmobiliarios para quienes las prácticas discriminantes son ilegales, reducen las utilidades y frecuentemente son obsoletas en el mercado de la actualidad; los consumidores cuyas preferencias enfatizan los elementos de clase como las comodidades en la vivienda y los vecindarios, controladas por las posibilidades económicas; y las comunidades que imponen su propia agenda de desarrollo, o la carencia de la misma, en el mercado de viviendas. Los esfuerzos de estos creadores de mercados son facilitados por la información fluida y generalizada (esto es, la Web, correo electrónico, teléfonos celulares); procedimientos que son más sistematizados, automatizados y transparentes; y mecanismos que funcionan bien en el mercado. El desarrollo del pluralismo dirigido por el mercado se hace en cinco pasos que se concentran en (1) construcción (constructores promotores), (2) préstamos (bancos, agencias hipotecarias, normas y entidades gubernamentales); (3) ventas y arrendamiento (prácticas inmobiliarias, inclusive la discriminación), (4) consumismo (compradores, rentistas, sus preferencias), y (5) las comunidades locales (anexión, zonificación, agendas de desarrollo, acuerdos de cooperación entre comunidades). El apoyo empírico de la estructura se basa en datos secundarios y en entrevistas de informantes claves accionadas por protocolos, grandemente centradas en el área estadística metropolitana de Columbus, Ohio.
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Acknowledgments
Assistance in preparing this article was provided by Wenqin Chen, Jackie Cruikshank, Hyejin Yoon, Ohio State's Center for Urban and Regional Analysis and Initiative in Population Research, and many key informants listed in Note 7. The article also benefited from observations by Bill Clark, UCLA; Fred Day, Texas State University at San Marcos; Don Haurin, Ohio State University; David Kaplan, Kent State University; Linda Lobao, Ohio State University; Ed Malecki, Ohio State University; Audrey Singer, Brookings Institution; Joel Wainwright, Ohio State University; Bobby Wilson, University of Alabama; Elvin Wyly, University of British Columbia; and three anonymous reviewers. Also important were audience responses to presentations at meetings of the Association of American Geographers, European Regional Science Association, International Conference on Population Geographies, Population Association of America, and the Race, Ethnicity and Place Conferences. This is very much appreciated.
Notes
a Structure is implicit, not explicit.
1 The ten MSAs are Atlanta, Baltimore, Chicago, Dallas, Detroit, Houston, Los Angeles, New York, Philadelphia, and Washington.
2 See http://www.albany.edu/mumford/; under Projects, click American Communities Project, and Census 2000. The data also include Exposure and Isolation indexes and socioeconomic-demographic variables for analysis and comparison purposes. For a discussion of these indexes see CitationMassey and Denton (1988) or CitationKaplan and Holloway (1998).
3 This is not intended to set aside Columbus's ongoing segregation. Using the SUNY Albany Mumford Center Web site, dissimilarity indexes for the entire MSA are for white versus African American, 68.4 in 1990 and 63.1 in 2000, a drop of 5.3; for white versus Asian, 45.4 and 41.5, a drop of 3.9; and for white versus Hispanic 28.8 and 37.7, an increase of 8.9. The latter reflects locational instability given the near absence of Hispanics in 1990, 0.8 percent of the population, and growth in the ensuing decade to 1.8 percent. For the central city alone, white versus African American is 65.4 in 1990 and 59.2 in 2000, a drop of 6.2, and white versus Asian is 38.9 and 35.0, a drop of 3.9. For suburbs alone, white versus African American is 58.8 in 1990 and 51.1 in 2000, a drop of 7.7, and white versus Asian is 45.1 and 40.7, a drop of 4.1.
4 An informative and entertaining example of these structural forces in the form of the it point system is provided by CitationEugenides (2002) when Milton Stephanides looks for a house in Grosse Pointe Michigan, a prestigious Detroit suburb: “Stephanides. What kind of name is that?” “It's Greek.” … Miss Marsh makes a notation on her pad. … “May I ask what business you're in … ?” “The restaurant business.” Another mark of pen on pad. … “What denomination are you?” … “My wife takes the kids to the Greek Church” … “And you need space for your two children … ?” “Yes. Plus we have my folks living with us.” … Miss Marsh begins to add it all up. [She thinks to herself] “Let's see. Southern Mediterranean. One point. Not in one of the professions. One point. Religion? Greek Church. That's some kind of Catholic, isn't it. So there's another point. And he has his parents living with him! Two more points! Which makes—five! Oh, that won't do. That won't do at all.” … No one spoke of it openly. Realtors only mentioned “community standards” and selling to “the right sort of people.” Now that white flight had begun, the Point System was more important than ever. You didn't want what was happening in Detroit to happen out here. … [After Milton says he wants the house, Miss Marsh says] “Of course, it's all contingent on the approval of the loan.” [another opportunity for discrimination] … “You don't have to bother with that,” my father said, relishing the moment. “I'll pay cash.” … But … What about the fact that real estate agents had shown him only the least-desirable houses, in the areas closest to Detroit? Houses no one else wanted? (255–57).
5 These observations aside, there have been efforts to rearticulate the assimilation framework in light of contemporary dynamics; see, for example, CitationAlba and Nee (2003) and CitationClark (2003).
6 That these studies are not directly concerned with in-group attraction muddies their contribution to understanding that point, but an argument for in-group attraction can be derived from the many graphs shown in CitationClark (2002). Offsetting this is the fact that his samples represent the entire urban areas of Atlanta, Boston, Detroit, and Los Angeles and that analyses that might better bring out in-group attraction (e.g., stratifying the sample along economic lines or by sub-areal units) are not presented. Nevertheless, Clark concludes that his findings “re-emphasize the importance of own-race preference and other race avoidance” (253). Using the same data set, however, CitationCharles (2005) concludes that “ethnocentrism plays it some role in shaping neighborhood racial composition preferences, but its role is always small and inconsistent … [also] detailed analysis of qualitative … data further substantiate this conclusion, providing virtually no support for the ethnocentrism hypothesis among blacks” (66).
7 The remainder of this section draws on in-depth conversations with several informants who are highly knowledgeable about the housing market, in both its owner and renter aspects. These include B. Brace, BRB Real Estate, community developer, and University District Commission; J. Brant, new home consultant, Dominion Homes; E. Brown, longtime real estate developer; I. Cohen, CPA; C. Curtis, new home consultant, M/I Homes; J. Edelstein, Owner, Morse Creek Commons; J. Flinn, mortgage broker, Red Capital Group; K. Gibson, Assistant to the Executive Director, Mid Ohio Planning Commission; T. Krumlauf, Suburban News Publications; C. Peffley, Vice President, Prospect/Sky Bank; A. Stemple, new home consultant, Maronda Homes; and from Ohio State University, J. Cowley, D. Haddad, D. Haurin, E. Malecki, H. Morrow-Jones, and M. O'Kelly. We also spoke with minority home owners (L. Bryant, W. Chen, F. El-Hennawy, Z. Lyons, C. Mahdi) and consulted a plethora of Web sources.
8 In addition to Ohio and Indiana, M/I develops in Delaware, Florida, Maryland, North Carolina, and Virginia. Our empirical analysis of the Columbus MSA also draws on information from Dominion Homes (www.dominionhomes.com), which develops in Indiana, Ohio and Kentucky; Maronda Homes (www.maronda.com), which develops in Georgia, Kentucky, Ohio, Pennsylvania, and Florida; and Rockford Homes (www.rockfordhomes.net), which develops only in central Ohio. Although these dominate the Columbus market, they are modest in size compared to, for example, KB Homes (www.kbhome.com) and Pulte Homes (www.pulte.com), which, respectively, serve approximately forty-three metro areas in sixteen states and fifty-three metro areas in twenty-nine states.
9 A concern with the nexus of developers and urban morphology dates at least to initiatives in the 1960s by planners at the University of North Carolina. Examples include CitationChapin, Hemmens, and Weiss (1960), Chapin and Weiss (Citation1962, 1965), Kaiser (Citation1966, Citation1968), and CitationWeiss et al. (1966). Also relevant to the theme is CitationBourne (1981), especially chapter 6, which describes the land development process. Coincidently, the first author's very early work (e.g., CitationBrown and Longbrake 1970) considered similar questions.
a See http://phoenix.about.com/cs/real/a/masterplanned.htm for a comprehensive discussion of master-planned communities. That site quotes a member of urbanfutures.org, a program of the Reason Public Policy Institute, who says “Master-Planned Communities [are] suburbia's response to the boring, cookie-cutter, detached globs of housing that still make up much of America's suburban nation.” Also useful is www.kbhome.com, click on Build and Dictionary of Terms.
11 An example of mixed-use community development is described by CitationStratton (2005) in reporting on a new project near Grove City Ohio, just outside the southwest corner of Columbus's outer belt (I-270). This is a 1,600-home endeavor that will feature two M/I Homes communities (1,000 of the 1,600 lots), one beginning at $160,000 and another at $200,000; condominiums constructed by two builders for upscale markets (Truberry Group, Newbury Builders); and luxury houses constructed by custom builders (Showcase Homes). The project is an element of a larger one that also includes commercial development, with the entirety being narrated by Grove City.
12 Licking County is not included because it contains New Albany and Reynoldsburg, which are already represented in . Other counties were omitted because their prison and nonprison populations cannot be separated.
13 Data are from the Ohio Department of Education “interactive local report card” at ilrc.ode.state.oh.us; school district boundaries are from the Public Utilities Commission at www.puco.ohio.gov/puco.cfm, click on Utility Maps, County Maps of Ohio Utilities, and School Districts and Townships.
14 Historically, mortgage lending has been highly local in its institutional base and customer focus, but this changed dramatically over the past quarter-century. Bank entities increasingly consolidated operations, statewide initially, then across state lines, and ultimately toward regional and nationwide enterprises (enabled by acts such as the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, Public Law 103-328). This progression significantly impacted the mortgage market, which became a major focus in its own right and big business. As CitationHagerty (2004) notes, “in what was once an extremely splintered business, the major big players are rapidly taking market share from the rest of the pack.” An example is Countrywide Financial, which in 2004 was “America's No. 1 residential lender,” surpassing major banks such as Wells Fargo and Citigroup (CitationHagerty 2004). Further, the cost of borrowing was reduced by technology and economies of scale, and as noted by the Countrywide CEO, “there is still lots of potential for efficiency gains. By eliminating bureaucratic practices and stacks of paper, $ 1,500 of costs would vanish from each loan transaction.” The result has been a stimulus toward increased borrowing.
15 Subprime lending refers to loans at an interest rate that is above the normal market rate. In a buy-down mortgage, the initial rate is abnormally low, rises yearly, and often is accompanied by a minimal or zero percent downpayment; for example, “2-1 buy-down deals, in which [builders] buy down the interest rate on the mortgage by two percentage points the first year and by one percentage point the next” (CitationSimon 2004). Hybrid ARMs “promise a fixed rate for the first three, five or seven years and then adjust annually, generally in lockstep with Treasury rates” (CitationPowell 2005).
16 In this ratio, 28 is “the maximum percentage of monthly gross income that the lender allows for housing expenses … [which] includes payments on loan principal and interest, private mortgage insurance, hazard insurance, property taxes, and homeowner's association dues … often referred to as PITI [principal, interest, taxes, insurance].” The 36 is “the maximum percentage of monthly gross income that the lender allows for housing expenses plus recurring debt [where the latter] includes credit card payments, child support, car loans, and other obligations that will not be paid off within a relatively short period of time (6–10 months).” Hence, if one's monthly gross income is $ 3,750 ($ 45,000 per year), monthly housing expenses should not exceed $ 1,050 (28 percent of $ 3,750) and housing plus recurring debt expenses should not exceed $ 1,350 (36 percent of $ 3,750; Wickell 2004).
a Because the expanded pool of potential home buyers is more likely to include persons not qualified for a (traditional) conventional mortgage, increases in subprime loans provide an index of how that pool has grown. In this regard “the subprime share of loans surged from under one percent in the early 1990s to six percent of home purchase loans and ten percent of refinance loans by 2001” (Joint Center for Housing Studies 2004, 16). Taken alone, subprime loans grew 691 percent in dollar value between 1993 and 2001, whereas conventional loans grew 58 percent (albeit from a higher base; Joint Center for Housing Studies 2004, 36, Table A-7 for “metropolitan areas as defined by the Office of Management and Budget for 1993 Home Mortgage Disclosure Act [HMDA]”). Similarly, CitationAndrews (2005) reports that “the volume of subprime mortgages soared from about $ 35 billion in 1994 to about $ 530 billion in 2004—more than 20 percent of all new mortgages [in 2004].” Simon and Hagerty (2006) report that “subprime mortgage originations climbed to $ 625 billion in 2005 from $ 120 billion in 2001.”
18 Also central to government efforts to increase home ownership are FreddieMac (Federal Home Loan Mortgage Corporation), which provides a secondary market that purchases mortgages from lenders, and GinnieMae (Government National Mortgage Association), which provides a government-backed guarantee (similar to a secondary market) for mortgages related to government agencies such as the FHA. Other facilitators include the Home Mortgage Disclosure Act (www.ffiec.gov/hmda/) and the Community Reinvestment Act (www.ffiec.gov/cra/), both enacted in the mid-1970s. Earlier established programs include the FHA and Veterans Administration, both dating back a half-century. An indication of program effectiveness is home ownership rates and their growth. In this regard, from 1996 to 2005, the Asian share increased most, 9.3 points from 50.8 percent to 60.1 percent; Hispanics increased 6.7 points from 42.8 percent to 49.5; African Americans rose 4.1 points, from 44.1 percent to 48.2 percent; and whites also rose 4.1 points from 71.7 percent to 75.8 percent (www.infoplease.com/ipa/A0883976.html).
19 CitationPowell (2005) reports similar words by Mari McQueen, a senior editor with Consumer Reports.
20 One consequence of the focus on current costs and low or no downpayment is an increase in foreclosure rates, especially in a difficult economy when individuals are laid off temporarily or lose their jobs entirely. One scenario is that interest rates rise for adjustable rate mortgages. Another is the case of new houses when property taxes kick in a year or so after purchase. Also, if there has been a minimal or zero downpayment, the home owner might not have a cushion to cover real estate commissions and other selling costs. If the housing market discontinues its upward trend (as in 2006–2007), which provides a shield against the situations such as those mentioned, the condition is exacerbated (CitationSimon and Hagerty 2006). In Franklin County, Ohio, for example, new foreclosure filings between 1994 and 2001 rose from 1,552 to 5,007, with an especially dramatic jump (32 percent) between 2000 and 2001 (United Way of Central Ohio 2004, 89), and foreclosures rose to 6,596 in 2005 (CitationSiegel 2006). Job loss and mortgage terms such as those just described are major factors on the road to foreclosure, but there are many others such as divorce, health crises, or undisciplined management of finances (CitationDutton 2005a, Citation2005b; CitationRiepenhoff 2005a, Citation2005b, Citation2005c; CitationWhitehouse 2007). Questionable practices also contribute. For example, CitationThompson (2005) says “[there is] a built-in conflict of interest … [in that] a broker who steers a borrower to a more expensive loan can snag a bigger fee for himself,” and a Editorial (2005) says “a recent Federal Reserve study shows that black Americans are three times as likely as whites to be signed up for high-cost ‘sub-prime’ mortgages that often force borrowers into default … uninformed borrowers are being herded into higher-cost mortgages more frequently than necessary … [and this] is a serious matter, given the unhappy history of redlining.” But it also needs to be noted that foreclosure occurs in all segments of the housing market, not just among the nonwhite or less advantaged, to the point that one real estate broker informant cited “see-through houses,” empty due to foreclosure, as a major problem in recently built communities. Also, CitationHudson (2007) notes the ambiguity wherein Lehman Holdings, “a prime example of how Wall Street's money and expertise helped transform subprime lending into a major force … says it is proud of its role in helping provide credit to consumers who might otherwise have been unable to buy a home.”
21 Data, provided by Ohio State's Center for Urban and Regional Analysis (www.cura.ohio-state.edu), consist of 1985–1998 deed transfer records. The data source is Ameristate, now a part of First American Core Logic (www.facorelogic.com).
22 A noteworthy aspect of the paired testing HDS data is its reliance on advertised properties, which represent only a portion of the housing market. This is an essential control in the survey design, but it also tempts arguments concerning the degree of discrimination in uncovered parts of the housing market and interpretation of findings from the paired testing data itself (CitationYinger 1998). This issue aside, CitationYinger (1995) provides a comprehensive discussion of the causes of discrimination in housing.
23 These data are described at the Web site of the Ohio State University Center for Urban and Regional Analysis (www.cura.ohio-state.edu). The survey was administered in 1999 by the Ohio State University Survey Research Center to households who sold one home and bought another in 1998, using a sample drawn from (what is now) CURA's Matched Home Buyer-Seller Data set. The full 1998 sample consists of 4,301 observations representing households in the seven counties that comprise the Columbus MSA. Our analyses were carried out both for all respondents who resided in the Columbus MSA and for the subset who also resided in its central county (Franklin); responded to the survey (n = 1,841 and 1,041, respectively); and identified themselves as either white (n = 1,576 and 903, respectively) or African American (n = 155 and 62, respectively). Other racial/ethnic categories are insufficiently represented.
24 One cannot, of course, be too sanguine about this conclusion. For example, working in the tradition of Schelling-type models Zhang (2004, 148) concludes “even a slight asymmetry in residential preferences between two groups [with no institutional discrimination] is enough to induce endogenous segregation.” Also relevant on this topic is CitationClark (1991).
25 Columbus's annexation policy also has been a highly effective tool in economic growth. In this regard, Columbus is often compared with Indianapolis, which realized similar achievement by merging the city and Marion County governments under their Unigov initiative (CitationHudnut 1995, 12–7), inaugurated in January 1970. A more recent example is the Louisville/Jefferson County Metro Government, inaugurated in January 2003. The three cities are also similar in their experience of urban sprawl and change in their racial/ethnic residential mosaic. Annexation, in whatever form it takes, is a means of protecting an urban area's tax base, providing a unified front for attracting economic activity and other development-positive initiatives, and streamlining government and government-provided services (CitationBowman and Pagano 2004).
26 Pay-as-you-grow policies are designed to offset the municipal costs of urban sprawl, but also to reduce sprawl by inducing compact growth (CitationBurchell and Shad 1998).
a Concerning the conversion of rural land to urban uses, which is central to changes discussed in this article, research on the topic has not considered its race/ethnicity dimension. See, for example, the Exurban Change Program of Ohio State University (http://aede.ag.ohio-state.edu/programs/exurbs/.
28 This discussion draws on observations by Jennifer Cowley, faculty member of the City and Regional Planning Program at Ohio State University, and Kimberly Gibson, Assistant to the Executive Director of the Mid Ohio Regional Planning Commission (MORPC).
29 To illustrate the outcome of a balanced planning process and gain some insight into how it is done, see CitationDoulin and Wilson (2005) and CitationPramik (2005) on Delaware County's Growth Corridor.