Dr. Elora Raymond, City and Regional Planning, Clemson
“The Impact of Income Sorting and Risk Based Mortgage Pricing on Housing Wealth Inequality: A Comparison between Urban Regions in the United States”
Wealth inequality is growing in the United States. Because a home is the largest purchase most households make, housing wealth constitutes over half of household balance sheets, or roughly 64% of GDP. The magnitude of housing wealth is such that changes in its distribution will widen overall wealth inequality.
The institutional framework of mortgage markets continues to shift towards privatized solutions with less government subsidization for standardized, low risk, affordable mortgage products. The move towards risk based pricing and segmentation in mortgage markets has the potential to amplify inequality in the price of debt and in the accumulation of home equity for borrowers, even if the predatory practices which lead to the subprime mortgage crisis were not repeated. Simultaneously, income segregation is rising in the United States, particularly at granular, sub-jurisdictional levels. The literature suggests that income inequality and income sorting can also contribute to unequal home price appreciation.
This research places housing wealth inequality in the context of the urban process, and asks how national shifts in mortgage markets intersect with regional segregation to produce housing wealth inequality. Using national credit and mortgage records, I find that housing wealth inequality is quite high overall (Gini of .68). I also find that income segregation has a negative impact on homeowners at the bottom the spectrum, but increasing housing wealth for the top 10%. The findings suggest that policies to reduce wealth inequality in the United States should combine affordable, safe mortgage finance with inclusionary urban policies.
Friday, October 6, 2017 at 12:20pm to 1:30pm
Lee Hall, Lee 2-318 323 Fernow St., Clemson, SC 29634, USA