HUD Study Finds "White Flight" Continues to Worsen Residential Segregation

HUD's research publication PD&R Edge has just published the results of two surveys examining recent White Flight migration. “Validating the White Flight Hypothesis: Neighborhood Racial Composition and Out-Migration in Two Longitudinal Surveys” uses data from two longitudinal surveys, the Panel Study of Income Dynamics (PSID) and the Survey of Income and Program Participation (SIPP), to compare probabilities of neighborhood out-migration for Whites, Blacks, Hispanics, and Asians by neighborhood racial and ethnic composition. “White flight,” or the tendency of White households to move out of neighborhoods as the proportion of racial and ethnic minorities living in the neighborhood increases, is a basic assumption of theories of racial and ethnic residential segregation. Few studies, however, have empirically tested this assumption, with those that have relying almost entirely on PSID. Although PSID is a rich source of longitudinal data on the sociodemographic and economic characteristics of U.S. households, it is based largely on a sample of households originally drawn in the 1960s and their descendants. While research using PSID data has consistently confirmed that White households frequently move out as the number of minorities in a neighborhood increases, these studies examine the post-1960s period of increasing racial and ethnic diversity.

Findings

The researchers found that, for White households, the likelihood of out-migration increases as neighborhood minority shares grow. The trend is most apparent in predominantly White neighborhoods  - that is, when the percentage of minorities (non-White residents) in a neighborhood increases from 0-20%. Because most White households live in neighborhoods with few minorities, this finding suggests that in predominantly White neighborhoods, small increases in the share of minority residents can spur out-migration for some White households. In neighborhoods in which the minority share exceeds 20%, the rate of out-migration was slower. When the researchers examined Whites' responses to neighborhood proportions of Blacks, Hispanics, and Asians alone rather than the minority population as a whole, the results were similar: as neighborhood shares of each group increased from 0 to 20%, White households were more likely to out-migrate.

The studies' research also found that out-migration of Black households increases as the neighborhood share of Hispanic residents rises from 0 to 20%. Also, there was increasing out-migration of Hispanic households as Black neighborhood shares increased. Finally, it was found that the mobility behaviors of Asian households are largely indifferent to neighborhood racial composition.

Conclusions

The research highlights the continued important determining role of race in the migration decision making process and the broader spatial foundations that shape inequality and mobility. 

Earlier work appearing in PD&R Edge documented the difficulties HUD’s housing assistance programs have encountered in reducing racial and ethnic segregation. While housing assistance programs have successfully improved neighborhoods and the lives of individuals receiving assistance, these programs have not significantly reduced racial and ethnic segregation. 

This research found that additional barriers to efforts to reduce residential segregation are:

(1) The active resistance of some White households, who may resort to moving to new neighborhoods to avoid living with minorities. 

(2)  The tendency for minorities to  avoid neighborhoods predominantly occupied by other minorities. 

Therefore, "White flight” and minority neighborhood avoidance combined with discrimination in the search for housing, differential access to credit, and restrictive zoning laws are significant obstacles for HUD to achieve the stated goals of the AFFH, namely reduced racial and ethnic residential segregation. 

Read the May 14, 2024 HUD User article.

 Insurance Discrimination in Maryland

Maryland Finds Erie Insurance Illegally Rejected Baltimore Auto Customers in Minority Neighborhoods

On May 24th, the Maryland Insurance Administration (MIA) has ruled that Pennsylvania-based Erie Insurance racially discriminated by engaging in insurance “redlining” of predominantly Black neighborhoods in Baltimore. Through the Baltimore Insurance Network, four Baltimore-area insurance brokers had accused Erie in separate complaints filed in 2021: Baltimore Insurance Network LLC of Bowie, Ross Insurance Agency of Windsor Mill, and Welsch Insurance Group of Baltimore. All contracted or had contracted with Erie as agents to sell auto insurance policies. A fourth brokerage, Baltimore-based Burley Insurance, filed a similar complaint. The state’s ruling also said Erie penalized brokerage firms that failed to engage in discriminatory practices by reducing commissions or terminating contracts.

Kobi Little, NAACP Baltimore president, said the policies and practices exposed in the case are “prima facie evidence of institutional racism and structural inequity. This is corporate policy violence and it is a root cause of the physical violence and economic decay that we see in urban centers with significant Black populations. The impact is devastating in terms of the economic loss suffered by the firms serving urban markets and those in urban markets who are denied coverage. This is modern-day redlining and this case is just the tip of the iceberg.”

The MIA found that Erie unlawfully canceled or rejected business from brokers based on race or for other discriminatory or arbitrary reasons. It also found Erie unlawfully canceled or changed agreements for qualified applicants based on “adverse loss ratio,” a measure of an insurer’s profitability. The spokesman for Erie - with nationally has over 6 million home, auto, life, and business policies - disagrees with the findings. Erie has requested a hearing with the agency and expects to “defend our company against these claims.”

The state’s investigation discovered that because Erie’s auto insurance business in Maryland was not profitable, it kept its broad guidelines and set a secondary layer of eligibility standards that agents should use to reject qualified applicants (“front line underwriting”). The state is continuing a broader investigation of Erie’s market practices to determine they are part of a larger pattern of discrimination. 

The original complaints said Erie refused to underwrite policies based on a potential client’s race, ethnic origin, neighborhood and/or socioeconomic status. Baltimore Insurance and Welsch said that Erie urged them to not sell policies to people in Baltimore with “city sounding names.” Baltimore Insurance Network said it was told by an Erie branch manager to “place those people elsewhere, I don’t care where, just not with Erie. They don’t fit Erie’s appetite. Find better people.” That branch manager also told Baltimore Insurance that it was “devaluing the brand” by writing insurance policies for people in predominantly African American neighborhoods, and that the brokerage had to “understand Erie’s appetite.” Likewise, Welsch Insurance Group’s Thomas A. Welsch was told to get his business “from somewhere else.” Welsch’s contract with Erie was terminated in August 2019, citing poor underwriting practices and unacceptable policyholder service.

Baltimore Insurance said in the complaint it was told to reduce its sales by 30% by rejecting applicants who qualified for coverage and were mostly Black and living in inner-city neighborhoods. Erie required the brokerage to include criminal record checks for applicants, most living in low-income neighborhoods, though such checks were not part of Erie’s underwriting standards or the broker’s training. The attorney for Baltimore Insurance said in his client’s case alone, “these are hundreds if not thousands likely affected members of the public who Erie rejected based on discriminatory practices that the insurance administration has found to be unlawful.”

The MIA ordered Erie to calculate and pay the agencies all amounts in commission that had been withheld between December 2019 and May 2023 when Erie had notified the insurance administration it would restore commissions. Erie works with 13,500 licensed agents who serve customers across the company’s territory, Cummings said.

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Sources

Read the June 6, 2023 Baltimore Sun article.

Read the June 1, 2023 Baltimore Banner article.