New York real estate agents favor wealthy, white and Asian neighborhoods

Real estate agents in New York tend to work in white and Asian neighborhoods, in addition to neighborhoods with higher home values, according to new research from a Rice University sociologist.

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“Investigating the Relationship Between Real Estate Agents, Segregation and House Prices: Steering and Upselling in New York State” used data from the 2014 American Community Survey and from the New York State Department of State to investigate the ways real estate agents produce housing inequality. The study also included interviews with 45 real estate agents from across New York State.

Max Besbris, an assistant professor of sociology in Rice’s School of Social Sciences, and Jacob William Faber, an assistant professor of public service at New York University’s Robert F. Wagner Graduate School of Public Service, found that on average nearly 20 real estate agents in New York work in majority-Asian neighborhoods and approximately 12 real estate agents work in majority-white neighborhoods. However, majority-black and majority-Hispanic neighborhoods, on average, had just three real estate agents per neighborhood. Average home values for majority-white neighborhoods were $541,930 per home, for majority-Asian neighborhoods were $389,183 per home, for majority-Latino neighborhoods were $377,266 per home and for majority-black neighborhoods were $321,876 per home.

They also grouped home values in New York into five groups and conducted analyses to determine the number of real estate agents per neighborhood in low, moderate and high-home-value neighborhoods. The first groups (with average home values of $133,890), representing neighborhoods with the lowest-valued homes in the state, also had the fewest number of real estate agents — approximately three per neighborhood. The number of real estate agents increased with each group, and the fifth groups (with average home values of $527,158), representing the highest-valued homes in the state, had the highest number of real estate agents — approximately 19 per neighborhood.

“Our research revealed that indeed, real estate agents tend to concentrate in places with high housing prices and high levels of segregation,” Besbris said.

The study also found that agents readily make assumptions about their clients’ neighborhood racial preferences because they believe it facilitates the sales process. “Racial steering (the practice in which real estate brokers guide prospective home buyers towards or away from certain neighborhoods based on their race) is still very prevalent in the housing market,” Besbris said. “But it’s likely due to the fact that agents want to get deals done at high prices and done quickly. They think showing white clients houses in nonwhite neighborhoods is not an effective sales strategy — unless the nonwhite neighborhood is gentrifying.”

Besbris also said that upselling by real estate agents may also be responsible for segregation and higher home prices in New York. Upselling is a sales technique where a buyer is encouraged to purchase a more expensive house than originally intended.

“Upselling may lead some buyers to spend more on a home,” Besbris said. “This leads to the perception that homes in more expensive neighborhoods are in higher demand and drives prices up. It may contribute to some households being priced out of more expensive neighborhoods, which also contributes to segregation.

“While multiple factors play a role in determining segregation and the geographic distribution of prices, the practices of real estate agents are undoubtedly part of the process,” he added.

Besbris said the research raises important questions of how real estate agents operate across the country and world. He hopes the work will encourage the implementation of additional anti-discrimination training for real estate agents, as well as future research on the topic.

“So long as neighborhoods, demographics and real estate prices remain closely linked, real estate agents may continue to face market incentives to steer people to certain neighborhoods,” he said.

The study is online at http://onlinelibrary.wiley.com/doi/10.1111/socf.12378/abstract.