Which Neighborhood Attributes Matter? The Influence of Ethnicity, School Quality and Property Crime on Property Values in Pima County

Abstract

A negative price premium exists for neighborhoods with higher racial/ethnic minority representation in Pima County. Interesting questions arise as to the motivations for this price differential, with two major hypotheses being presented. The first is that Racial/Ethnic Preferences drive the negative premium. Alternatively, the Racial Proxy Aversion hypothesis posits that the strong negative correlation between economic achievement and racial/ethnic minorities leads to negative premiums. That is, race/ethnicity proxies for low economic status, and aversion to the characteristics embodied by poor neighborhoods drives the negative price premium. This study finds that after controlling for multiple non-racial indicators of neighborhood quality, racial/ethnic composition maintains a negative relationship with home sales prices. Additional interesting results are found regarding the neighborhood unit of analysis, role of school quality and role of crime in housing prices.