The Damages and Distortions from Discrimination in the Rental Housing Market.

This article investigates the welfare costs of racial and ethnic discrimination in the U.S. rental housing market by combining a large-scale correspondence experiment with a structural residential sorting model across five metropolitan statistical areas (Atlanta, Houston, Philadelphia, Cleveland, and San Jose). The study finds that African American and Hispanic/Latinx renters face significant discriminatory constraints that reduce their access to rental units, particularly in neighborhoods with higher amenities such as better schools and lower pollution, resulting in welfare losses equivalent to 4.4% and 3.5% of annual income, respectively. These damages increase with income for African American renters, reflecting stronger discrimination in high-amenity, high-rent neighborhoods and higher marginal utility from such amenities. Additionally, renters of color must expend 10%–30% more search effort than comparable white renters to achieve similar utility levels, and ignoring discrimination in models biases estimates of willingness to pay for neighborhood amenities, potentially distorting public policy decisions. The study is limited to initial contact discrimination on a specific online platform and a narrow rental market segment but provides a utility-theoretic framework to quantify the economic impact of housing discrimination on minority renters.