AEI Vs. Brookings on Racial Bias in Housing

The friendly competition of ideas between Washington’s think tanks is alive and well.

The American Enterprise Institute and the Brookings Institution share the same block on Massachusetts Avenue. Our scholars have collaborated with theirs on groundbreaking research. But they can also disagree, as AEI’s housing scholars have shown with their critique of an influential Brookings paper.

In 2018, a team of Brookings scholars published a study on home values in Black-majority neighborhoods. They set out to estimate “the cost of racial bias” in the valuation of Black-owned homes.

Controlling for a number of variables meant to reflect neighborhood quality, they found that the average house in a Black-majority neighborhood was worth 23 percent less than a house in a similar area with fewer Black residents.

So, the authors asserted, “Differences in home and neighborhood quality do not fully explain the devaluation of homes in Black neighborhoods.” Racial bias, they concluded, explained the lower home valuations in Black neighborhoods.

Now, Ed Pinto and Tobias Peter, my colleagues at AEI’s Housing Center, have called that conclusion into question with a few changes to Brookings’ statistical model. They added two more controls meant to reflect homeowners’ socio-economic factors, such as income and credit score.

As a result, they found a much less statistically-significant relationship between a neighborhood’s racial composition and its home values.

Instead, they found that a number of other socio-economic variables — such as median age, average credit score, labor force participation, and educational achievement — had much more significant relationships with home values.

Now, this result doesn’t write racial discrimination out of the equation. Past racial discrimination has made Black Americans worse off in terms of these socio-economic factors. But our scholars’ finding also shows that current racial discrimination isn’t the most significant factor driving differences in home values.

AEI’s scholars also exposed critical flaws in the methods used by the team at Brookings. For example, the Brookings model couldn’t explain differences in home values across similar neighborhoods with few Black residents. My AEI colleagues also observed that significant differences in family formation across Black and White households might help to account for socioeconomic disparities.

Since the AEI Housing Center critique was last updated in November, the authors at Brookings have issued a rebuttal outlining their issues with the Housing Center’s methodology. And just this month, Pinto and Peter have written back. Both teams have shown good sportsmanship, sharing data and code, and have demonstrated a high degree of civility that is often absent from academic conversations on sensitive subjects like racial discrimination.

What’s at stake in this good-natured, academic back-and-forth, however, does reveal a serious rift that’s dividing our country. Some, mostly on the progressive side, believe that the difficulties and worse outcomes experienced by Black Americans are all caused by still-widespread racism and racial bias. Others say it’s more complicated, that other issues play a bigger role, and that blaming the current misfortune of Blacks on White racism is not only wrong but a distraction that pulls us away from addressing issues that are more likely to lead to improvements.

My own view is that these other issues — quality of schools, family formation, and skill development — are much more pressing than White racism. That’s certainly what I saw as a social services administrator in New York City, where these problems cut across racial and ethnic lines. And I’m glad AEI scholars are unafraid to challenge others, even our neighbors and friends at Brookings.