Supporters of the new "neighborhood schools" plan for Wake County, North Carolina might assume that families will be able to "vote with their feet" and move to a school of their preference.
The data hints at inequity in how mortgage loans are made, but that is not really the point that I am trying to make. Nor is this a conclusion that should be seen as limited to Wake County. In most districts, school funding is at least loosely correlated with property values. That means that it is a norm for well-off neighborhoods to have better schools. Thing is, it doesn't have to be that way. The reason that I am looking at Wake is only because they're doing their best to develop a problem. Since the most recent school board election, their district has been dismantling its old assignment plan. That system sought to put a ceiling on the concentration of poverty in the student populations of its schools. Now, they are redistributing under a new plan that is loosely described as "neighborhood schooling."
Critics argue that schools in low-income areas will gradually succumb to the challenges of the plan. Data show that low-income students perform at better levels when they have a socioeconomically diverse set of classmates. For years, that insight has guided the reassignment policy. It meant that Wake set a ceiling on the share of low-income students that could be assigned to any school. The results were evident: Wake was recognized as a leader in urban school policy.
Unfortunately, the truth is different. CRA-NC has studied mortgage lending in Wake County for three years, from 2006 to 2008. Our results show that minority families are obstructed from moving to upper and middle class neighborhoods. They have a harder time getting a loan than white families do, at all points of the economic strata. Household income does not make much of a difference. In fact, the greatest discrepancy in access to mortgage loans is between upper income white and upper income minority borrowers.
Here are a few data points that I am working on right now:
- When low income minorities try to buy a home in a middle income neighborhood in Wake County, they are denied for a conventional home purchase loan at a rate that is 2.25 times greater than the denial rate for white borrowers with similar income profiles.
- When low-income minorities (income less than 80 percent of the average for Wake County) try to buy a home in an upper income neighborhood (greater than 120 percent AMI), they are denied at a rate that is 1.88 times higher than white borrowers with a similar profile.
Even more interesting are the numbers that show how minority and African-Americans are challenged to buy into well-0ff neighborhoods, regardless of income. I switched my focus from low-income African-Americans to upper income African Americans. Now we are focusing on only African-Americans with incomes greater than 120 percent of the average. This is well-off group. To qualify for this group, a household would have to have an income of at least $84,000.
The picture is even more troubling when minority borrowers are filtered to include only African-American borrowers. Then, the same comparisons become even greater: 3.28 times more difficult for upper income black borrowers to buy a home in a middle income neighborhood, and 3.63 times more difficult to buy a home in an upper income neighborhood. Translated simply, this says that even white black households make a lot of money, they have hurdles to go with banks.
This data is from 2008*.
The discrepancies were even greater in 2007: very low income African-America borrowers that applied for a mortgage to buy a home in an upper-income neighborhood were turned down at a rate that was almost five times greater than that of white borrowers with a similar profile.
Research shows that even as incomes between white and African-American households are more equivalent now than there were in the 1960s, there is still quite a lag in terms of assets. The Pew Foundation reported that white households had between 12 and 13 times more in assets, including in home equity, than did African-American households. The ratio was slightly less for Hispanic households.
All of this should underscore that residents will not be able to "vote with their feet" in response to the new neighborhood schools policy. If people try to move to a good school, it may be not be so easy.
We don't want to consign anyone to being trapped in a bad school. It is contrary to having an opportunity society, and it makes no sense for the ongoing economic development of our community.
*single-family homes, home purchase only, conventional loans for owner-occupied properties.