Association for Public Policy Analysis & Management

The foreclosure crisis that struck many US cities during second half of the last decade had profound economic and social consequences on community well-being. But the full impact of the crisis was distributed unevenly across racial groups, with the combination of geographic concentration in precarious housing markets, lender targeting and mortgage vulnerability, and risky borrowing producing rates of foreclosures among black and Latino homeowners that were dramatically higher than white or Asian ones.

Ultimately we are concerned with racial disparities in foreclosure experience because of the potential consequences of foreclosing on a home. Considerable work has highlighted the impact of foreclosure on economic insecurity (Pfeffer et al. 2013; Shapiro et al. 2013) and mental and physical well-being (Arcaya et al. 2013, 2014; Houle 2014; Libman et al. 2012; Pollack et al. 2011). Understudied, however, are the residential repercussions of foreclosure, despite the potential for residential changes to be substantial given that foreclosures nearly-always result in a residential move. The extent to which migration following a foreclosure leads families into different neighborhood contexts – e.g., into ones with a greater concentration of co-ethnics, ones with higher rates of poverty, or ones located in certain parts of a city – thus has important ramifications not just for family well-being, but for broader for trajectories of neighborhood change and patterns of residential segregation (Hall et al. 2015).

Because foreclosure often corresponds with economic and familial hardship – the loss of a job or a marital dissolution – one might expect that foreclosed households (or household members) move to less-advantaged neighborhoods. A tendency to move toward lower-status neighborhoods is likely compounded by the change in tenure – from owning to renting – brought about by foreclosure. If this patterns holds, foreclosure migration will heighten racial inequality in residential domains simply by the fact that black and Latino households have higher risks of foreclosure. Yet, racial/ethnic residential stratification may be further intensified by underlying racial differences in neighborhood mobility, which make black and Latino households more likely than whites to move into poor, racially isolated neighborhoods (South and Crowder 1997, 1998; South, Crowder, and Chavez 2005).

In this paper, we seek to explore these issues by assessing the racial variation in the neighborhood dynamics of foreclosure migration. To do so, we use household-level data from the Panel Study of Income Dynamics linked to Census data on neighborhood socioeconomic conditions and racial compositions to assess how migration events following (or during) foreclosure impact the context of households’ neighborhood in racially-selective ways. More specifically, we test whether changes in neighborhood conditions (i.e., between origin and destination neighborhoods) among foreclosed household – namely in terms of co-ethnic concentrations, poverty levels, and spatial location – are patterned racially. To assess whether any racial differentiation in the neighborhood consequences of foreclosure migration simply reflects underlying racial differences in migration, we compare these changes for foreclosed households to other households making residential moves but not having experienced foreclosure.