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Disentangling the effect of tolerance on housing values: how levels of human capital and race alter this link within the metropolitan area

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Abstract

Previous studies argue that homosexuals can affect house prices through two mechanisms: an esthetic–amenity premium and a tolerance (or open culture) premium. We find that this relationship varies with respect to areas with different compositions of educational attainment and race. While we find evidence of a premium in areas with higher share of college-educated individuals, we find no premium in low-educated areas. Based on the mechanisms above, these results suggest either that low-educated individuals and homosexuals diverge in their preferences for types of amenities, or that the open culture preference from buyers could be biased toward highly educated areas. Interestingly, the magnitude of the premium (or discount for areas with low shares of educated residents) is lower when the number of black residents increases. This suggests that the presence of blacks may help the ‘openness’ perception for areas with low levels of educational attainment, but also highlights differences in preferences for amenities between African-Americans and homosexuals.

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Notes

  1. See Richard and Gary (2001), Florida (2002a, b, 2005), Florida et al. (2008), and Florida and Mellander (2010).

  2. Wozniak (2010) finds evidence that lower-educated households are more credit constrained and consequently less mobile.

  3. Mellander et al. (2014) compile international studies of the creative class which clarify some of the issues surrounding culture and the benefits of tolerance in the UK, the Netherlands, Germany, Australia, China, Japan, and Canada.

  4. Additionally, home ownership rates tend to be higher for whites than blacks, although this differential is lower within groups (married, same-sex couples, and different-sexed unmarried couples).

  5. Our individual house data for the Ohio area contains 2007 clusters at the census tract level.

  6. It is equally possible to interpret the influence of black households on house prices within areas with varying concentrations of homosexual coupled households. However, the objective is to test the sensitivity of the claim that homosexual couples have a positive influence on the overall demand for houses. Additionally, given the relatively low number of homosexual couples, compared to black and white households, we can expect to observe smaller variation in the proportion of same-sex couples between low- and highly educated areas, obfuscating the joint influence these two variables may have on the relationship between percent black and house prices.

  7. See IDRE (2013) for a complete description of the difference in slope approach using Stata or SAS.

  8. Since 2000, attitudes toward same-sex couples have improved within most populations (Baunach 2012). This would limit our ability to generalize our findings if attitudes changed more for educated groups or blacks (relative to less educated populations and whites). However, Baunach (2012) finds that the differences in attitudes between individuals with higher and lower levels of eduction did not change, while blacks approval of same-sex couples increased less than whites. This suggests that our findings potentially underestimate rather than overestimate current trends.

  9. Only partnered households are used since single homosexuals are not identified in the Census.

  10. See Black et al. (2000) and Carpenter (2004) for an in depth discussion on identifying gay and lesbian households using the Census.

  11. We use 5% IPUMS to identify potentially incorrectly identified homosexual couples because this is the smallest geographic unit available for this data (Ruggles et al. (2015)).

  12. School quality now reports a negative, rather than positive, influence on house prices. This is likely because houses in downtown locales typically have high house prices and low school quality.

  13. The correlation becomes negative for areas with very high proportions of blacks.

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  1. Department of Economics, Western Kentucky University, Bowling Green, KY, USA

    J. Sebastian Leguizamon & Susane Leguizamon

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  1. J. Sebastian Leguizamon
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Correspondence to Susane Leguizamon.

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Leguizamon, J.S., Leguizamon, S. Disentangling the effect of tolerance on housing values: how levels of human capital and race alter this link within the metropolitan area. Ann Reg Sci 59, 371–392 (2017). https://doi.org/10.1007/s00168-017-0835-4

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