Do Real Estate Agents Encourage Segregation?

A lot of people seek out city life because of the diversity of cultures and people represented in the country’s population hubs. But, even in 2017, the most diverse cities in the U.S. continue to be the most segregated.

Real Estate Agents pbs rewireIn many of the most bustling places in the country, population diversity does not equal diversity within neighborhoods. In these most segregated cities—including Chicago, Atlanta and Milwaukee, according to Brown University’s American Communities Project—people are living near others who are racially similar to them, carving out communities within cities that are divided largely along racial lines. These divisions often lead to resource inequities.

When you look at it that way, the idea of the American city as a great mixing pot of people and cultures is kind of an illusion. But experts are trying to figure out how best to break down those barriers.

What’s causing segregation within cities?

There are a lot of factors working against the integration of cities (although some places are doing well at this, including Sacramento, California, and Anchorage, Alaska, according to the data), including racial bias against places that are associated with minorities, some researchers have found.

Related to this is the way houses are sold in big cities. Max Besbris of Rice University and Jacob William Faber of New York University studied the real estate industry in New York State to figure out how its business practices could be influencing neighborhood segregation.

They found that the vast majority of New York’s real estate agents are working in white and Asian neighborhoods, concentrating where homes are most expensive and segregation is highest. On top of that, they’re steering families of certain races and ethnicities to certain places.

Who’s working where

Real Estate Agents pbs rewireBesbris and Faber took a look at where real estate agents are working in New York—and found big differences. The state’s majority-Asian neighborhoods each had about 20 real estate agents working to place families in them; majority-white neighborhoods had 12.

But, on the other end of the spectrum, majority-black and majority-Hispanic neighborhoods each had only three agents.

This could be related to the disparity in average home values in white, Asian, Hispanic and black neighborhoods. The average house in a majority-white neighborhood cost the most at $541,930; the average house in a majority-black neighborhood cost the least at $321,876, the researchers found.

By crunching the numbers, they learned that New York’s real estate agents are flocking to the most expensive neighborhoods. Low-income neighborhoods, where the average home cost $133,890, had the fewest number of real estate agents working in them, about three per neighborhood. In the state’s high-income neighborhoods, where the average home cost $527,158, the most real estate agents worked—about 19 per neighborhood.

The problem with ‘steering’

On top of examining housing and industry data, researchers also talked with 45 real estate agents about how they do their jobs. They learned that agents often make assumptions about where their clients want to live based on race—a practice called “racial steering.”

Though blatant racial steering was outlawed in the 1968 Fair Housing Act, the practice “is still very prevalent in the housing market,” Besbris said to Rice University.“But it’s likely due to the fact that agents want to get deals done at high prices and done quickly. They think showing white clients houses in nonwhite neighborhoods is not an effective sales strategy—unless the nonwhite neighborhood is gentrifying.”

Upselling, a sales technique aimed at getting a buyer to spend more on something (in this case, a house) than they intended to, could also be contributing to racial segregation, as well as higher home prices, the researchers found. Buyers spending more on homes because of upselling can send the wrong message about a neighborhood—that its houses cost more because living there is in high demand, driving prices up further. This ballooning effect can price out lower-income families who might have been able to afford a home there otherwise.

Besbris said he hopes the research will spur changes within the real estate industry.

Katie Moritz

Katie Moritz is Rewire’s senior editor and a Pisces who enjoys thrift stores and pho. Reach her via email at [email protected] or on Twitter @katecmoritz.