At Zillow Research, our days are fully consumed with bringing you the best, most interesting and most actionable real estate research around.

But to that end, we also find time to read a variety of reports, news stories and investigations, on any number of issues, from social justice, to economics, to real estate and sports. We read them for education, for entertainment and out of pure curiosity – and each one helps us discover new questions we want to answer and helps identify new trends worth following.

Zillow Reading List is a regular roundup of these interesting pieces we come across, with some thoughts about each and how it ties into our existing research and/or has spurred new questions. We’ll post these roundups regularly, and of course will continue to strive to publish research that is as enriching, thought-provoking and useful as these pieces have been to us.

Enjoy!

The High Cost of Borrowing for Minorities

Patrick Bayer, Fernando Ferreira, and Stephen Rossin; The National Bureau of Economic Research

Racial inequities in the mortgage system abound and these differences can have tremendous downstream effects on the lives of minorities. This paper adds to the growing chorus documenting those differences – but goes a step farther, identifying what might be causing them.

First, the authors document that African-American and Hispanic home buyers are much more likely to get high-cost mortgages when purchasing a home – even when controlling for factors like income and credit scores. Then, to explain why minority borrowers are ending up with higher-cost loans in the first place, the authors distinguish between two different mechanisms. Lenders might be putting minority applicants into high-cost loans more often, or minority borrowers might be more likely to go to lenders that put all borrowers in high-cost loans.

The authors find that while both are happening, the second is a much bigger problem. A lack of access to high-quality lenders – and not discrimination by lenders themselves – seems to be the biggest factor in high mortgage costs for minorities.

Making Mortgages Work in Detroit

Heesun Wee; CNBC

Detroit could be the poster-city for the shortcomings of the mortgage industry. Shockingly, in the entire city, only 500 mortgages were issued last year. This is a symptom of a deeper problem – the current mortgage system was simply not built to provide financing in areas, like Detroit, where so many homes require extensive rehabilitation and renovation. With banks wary of writing a mortgage for more than a home is worth in its current condition, buyers can’t finance needed repairs with a loan, causing potential sales to fall through. And without sales, appraisers are hard-pressed to find comparable homes that recently sold on which to base their appraisals, making it harder still for banks to extend financing. Some sort of intervention is needed to break this vicious cycle. The Detroit Home Mortgage Initiative has stepped into the breach, providing funding for banks to then lend to prospective homeowners seeking a loan for more than the current value of the home they’re looking to buy in order to pay for renovation. Home buyers are required to hire a project manager to ensure work is done properly and on schedule.

Beware Seller Financing

Matthew Goldstein and Alexandra Stevenson; The New York Times

In the past, a contract for deed, or land contract, has been one alternative to the traditional mortgage market – but it has proven problematic for many lower-income buyers. In fact, several decades ago these kinds of contract loans were a big part of issues around redlining in many communities. In primarily minority areas, where the FHA or other traditional mortgage lenders wouldn’t issue loans these sort of seller-financed (and usually predatory) arrangements were the only game in town. These tactics were often combined with strategies like blockbusting, in which real estate agents and building developers convinced white property owners to sell their home at low prices out of fear that racial minorities would soon be moving into the neighborhood.

These kinds of sales have made a comeback of late, which makes some sense in the face of tighter credit conditions that emerged during and after last decade’s housing. The current iteration doesn’t seem to involve the same level of racial discrimination. Still, sellers seem to have clearly snapped up many properties at bargain basement prices, then turned around the sold them for a profit to low-income buyers. It is the buyers who then take on much of the responsibility for repairs, in an agreement that is considerably less favorable to them than a standard mortgage.

Evicted

Matthew Desmond

This is a book we haven’t actually read, but have been eagerly anticipating. It is easy to get caught up in the statistics of the housing market, and end up missing the forest for the trees. With rent burdens at record highs, evictions are sure to follow. By following eight families on the margins of the housing market, this book lays out the potentially devastating human cost of those evictions.

Desmond argues that in many ways, eviction is not just a result of poverty, but also a cause of poverty, often passed down from generation-to-generation. When it comes to discussions of housing, poverty and society, it is easy to get trapped in a tangled web of polices and players and feel a sense of hopelessness around these problems. Is any one group really to blame for the eviction issue in the country? Or is it all parts of society and law that share a bit of the blame?

From what we’ve read from the book and about it, Desmond cuts through that morass and takes a firm stance – calling out landlords for exploiting the poor and getting rich off of their backs. But this line of argument strikes us as misguided. Housing market abuses clearly exist, but eviscerating the very people trying to provide rentals for low-income families seems counter-productive. Nevertheless, this work is a clear call to action and a sober reminder of the real human impact of housing.

Do Strict Land Use Regulations Make Metropolitan Areas More Segregated by Income?

Michael C. Lens and Paavo Monkkonen; Journal of the American Planning Association

It feels increasingly like the rich keep getting richer and the poor keep getting poorer, and income inequality is increasingly becoming a touchstone social issue. An important aspect of this growing divide is the increasing segregation of the rich and the poor, even as racial segregation declines. Motivated by a desire to inform city planners on how to reduce income segregation and provide greater social mobility to lower-income households, Lens and Monkkonen investigate strict land-use regulation as a major driver of income segregation.

By using the Wharton Residential Land Use Regulation Index (WRLURI), an important measure built from a massive survey of more than 2,000 municipalities nationwide, the effect of regulation on income segregation can be broken down into specific restrictions or nuances of the building approval process. Contrary to the assumptions of many, land-use regulation (broadly captured by the omnibus WRLURI measure) does not significantly impact income segregation. Rather, it’s the form and implementation of land-use regulation that matters.

Things like open space requirements, exaction fees, approval delays, state court involvement and overall caps on units have no significant impact. But density restrictions including minimum lot sizes, greater involvement of local actors in the development process and more local groups asked to approve zoning changes all significantly increase income segregation. In contrast, areas where state authorities or other large jurisdictions are more involved are less segregated. So, if you’re looking to ameliorate income segregation, it may be time to get regional and state governments involved.