Racial Segregation in Housing Markets and the Erosion of Black Wealth
NBER Working Paper No. 25805
Housing is the most important asset for the vast majority of American households and a key driver of racial disparities in wealth. This paper studies how residential segregation by race served to erode black wealth. Using a novel sample of matched addresses from prewar American cities, we find that rental prices and occupancy soared by about 40 percent in blocks that transitioned from all white to majority black. However, home values fell on average by 10 percent over the first decade of racial transition and by a staggering 50 percent in major African American destinations such as Chicago, Philadelphia, and Detroit. These findings suggest that, because of the segregated housing market, black families faced dual barriers to wealth accumulation: they paid more in rent for similar housing while the homes they were able to purchase rapidly declined in value.
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Document Object Identifier (DOI): 10.3386/w25805