Not for Rent: Factors Behind Racial Discrimination in the US Rental Market

Despite the legal strides made toward racial conciliation in the decades since the Civil Rights Movement, race-based discrimination remains a common concern among renters in modern cities. Reports show this is not a misguided perception. According to figures from the US Census Bureau and the US Equal Employment Opportunity Commission, the country’s population increased by 8.97 percent from 2003 to 2013 while reports of new incidents of racial discrimination increased by 15.91 percent during the same period.

Past studies have identified two primary sources of racial discrimination. The first is taste-based discrimination, which results from racial prejudice. In these instances, individuals hold largely negative preconceived notions of other races that have no basis in fact or experience. The second is statistical discrimination, where an absence of information leads individuals to form expectations of others that are based on perceived characteristics of an entire group.

Determining the type of discrimination most commonly at play in the rental market is key to creating the appropriate policies that will be effective in reducing discrimination.

To get to the root of the issue, researchers Michael Ewens, Bryan Tomlin, and Liang Choon Wang run an experiment on this topic in the study, “Statistical Discrimination or Prejudice? A Large Sample Field Experiment,”which tests several hypotheses related to taste-based and statistical rental discrimination. Their experiment involves the analysis of responses to fake rental inquiry emails sent to 14,237 landlords advertising on Craigslist in 34 US cities.

In the study, the authors send emails using common white-sounding and African-American-sounding names. Each email falls within one of the following three categories: rental inquiries containing positive information about the applicant (specifically, that the applicant has a good job and is not a smoker), inquiries containing negative information about the applicant (that the applicant is a smoker and has a bad credit rating), and inquiries containing no personality signals beyond the racial association of the applicant’s name.

The researchers then create statistical and econometric models to test a number of hypotheses for the experiment that distinguish between the two types of racial discrimination. These hypotheses include predictions that a white applicant is more likely, on average, than a black applicant to receive a positive response to an email inquiry with no signals, and that inquiries with positive information would result in a narrower positive response gap in predominantly black neighborhoods, while those with negative information would similarly shrink the response gap in predominantly white neighborhoods. Additionally, the researchers introduce a prejudice parameter into their models in order to test for taste-based discrimination using modified versions of these hypotheses.

Ewens, Tomlin, and Wang find that for messages sent without a signal of applicant quality, emails sent with African-American-sounding names received 9.3 percent fewer positive responses than those with white-sounding names. The finding here affirms the first hypothesis; the experiment also confirms the hypothesis that positive signals widen the gap in responses between black and white applicants.

Negative signals in the inquiry emails result in a 50 percent greater reduction in the probability of a white applicant receiving a positive response from a landlord. Further, black applicants receive a significantly greater number of positive responses when their inquiries include positive information about themselves.

Most importantly, the researchers find that these results provide evidence of statistical discrimination rather than taste-based discrimination in the landlords’ responses. That is, while rental discrimination is real, most often it is a result of a lack of information rather than malicious intent. Landlords may not even realize that their actions are discriminatory.

Therein lies the significance of this study: Understanding the true cause of rental discrimination will allow policymakers to promote increased information dissemination, which may reduce inequalities among racial groups. Only then can we move toward realizing a marketplace that is fair to all prospective renters.

Article Source: Michael Ewens, Bryan Tomlin, and Liang Choon Wang, “Statistical Discrimination or Prejudice? A Large Sample Field Experiment,” The Review of Economics and Statistics, March 2014.

Feature Photo: cc/(peterbaker)