Community Investments

Summer 2014
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Community Investments Vol 26, Issue 2
Research Briefs

Regional Disparities Across U.S. in “Good” and “Bad” Debt Accumulations

Five years after the recent recession, total American household debt levels remain well above pre-recession figures. A new Urban Institute analysis of 2013 TransUnion credit data provides new insight into how that debt is distributed, finding that different types of debt are concentrated in different regions of the country. 

The authors note that overall household debt levels are highest in certain areas along the Pacific Coast and between Washington, DC and Boston on the East Coast, where the majority of debt is held in the form of mortgage loans. Nationally, mortgage debt makes up an average of 70 percent of total household debt, but this proportion is higher in states such as California, Hawaii, and Massachusetts that include higher-cost housing markets. With an average mortgage debt of over $97,000, San Jose tops the MSA list on this measure, with Seattle and Honolulu not far behind. The lowest levels were found in Texas and across the Midwest. The authors suggest that significant mortgage debts in affluent coastal areas may be indicative of households generally building credit and wealth, as the homeowners in these areas are more likely to itemize their taxes and take advantage of the mortgage interest deduction. Average non-mortgage debt levels, which include credit card, student loan, and vehicle loan debts, are much smaller amounts overall, but are highest in New England and lowest in the Southeast. By contrast, the authors note that aside from some student loan debts, higher concentrations of non-mortgage debt may signal regions where excessive spending has damaged household credit and community stability. 

Looking at debt relative to income, the authors observe a notable difference between mortgage debt and non-mortgage debt. While Western states such as Hawaii, Washington and Idaho have the highest rates of mortgage debt relative to income, states across the South such as Mississippi and Texas have lower ratios. At the same time, relative non-mortgage debt-to-income levels are highest in the South, with the lowest levels found in California.

The analysis also considers delinquent debts, including payments over 30 days past due and debt in collections. Just over five percent of Americans with a credit file show debt past due on credit card accounts and other non-mortgage loans, with little geographic variation but slightly higher rates in the South. A wider range of debts can end up in collections, however, such as medical bills and parking tickets, and the rates of these debts are much higher; nationally, 35 percent of those with credit files, or 77 million Americans, have debt in collections. While the proportion of those with debt in collections is generally higher in Southern states, Nevada had the highest rate at 47 percent. New England showed the lowest regional level on this measure, with 25 percent of residents with credit files showing debt in collections. 

The authors identify some limitations within the data; most notably that it does not speak to the debt holdings of 22 million Americans without credit files, who are more likely to be low-income. The data does not include information about the debts of those who borrow from friends and family or those who use alternative financial services such as payday loans. Future research, the authors note, should also examine the causes of the geographic disparities in debt amounts and types of debt observed in this paper.


Ratcliffe, Caroline, Brett Theodos, Signe-Mary McKernan, and Emma Kalish, “Debt in America,” Urban Institute, July 2014; Ratcliffe, Caroline, Signe-Mary McKernan, Brett Theodos, and Emma Kalish, “Delinquent Debt in America,” Urban Institute, July 2014.


Study Shows Impact of Racial Bias in Gentrifying Chicago Neighborhoods

While there are conflicting views of how to identify and measure the extent of gentrification in urban neighborhoods, one common assumption is that the process of gentrification results in the displacement of lower-income minority residents as an increasing number of wealthier white residents move in. A recent study by Harvard University researchers Jackelyn Hwang and Robert Sampson, however, reveals a different pattern of gentrification in Chicago, where incoming higher-income white residents appear to bypass those neighborhoods with higher concentrations of minority residents in favor of those with higher concentrations of existing white residents. The authors suggest that their findings provide evidence of a racial bias at work in the gentrification process in these areas.

To identify markers of gentrification, Hwang and Sampson compared Google Street View images taken from 2007 to 2009 of 1,905 block faces (each constituting a single side of the street for a given block) with photographs that researchers took of the same block faces in previous studies. The researchers identified gentrifying blocks using a number of indicators, including evidence of new or rehabilitated buildings and street improvements, a lack of structural decay, and the presence of green roofs and Starbucks coffee shop locations. They then supplemented these visual markers with demographic data from the Census and Chicago crime and health data to assess the commonalities between the blocks that are gentrifying. 

Not surprisingly, the researchers found that blocks that showed visual signs of gentrification generally were occupied by high income residents, and showed higher home values and rents. More significant is that Hwang and Sampson’s study uncovered a clear racial component to gentrification, showing that the process was much more prevalent in Chicago neighborhoods that were at least 35 percent white, and much less prevalent in neighborhoods that were at least 40 percent African American. Visual markers of gentrification were also inversely correlated to a neighborhood’s percentage of Hispanic residents. 

The authors acknowledge that the racial differences in gentrifying neighborhoods may be starker in Chicago than they would be in other cities with a less pronounced history of racial segregation, and that neighborhood disinvestment in certain areas may reflect the effects of the recent economic downturn, given that the Google Street View images were taken between 2007 and 2009. They also admit an “undeniable level of subjectivity” inherent in the physical indicators of gentrification they chose to measure. 

Despite these issues, however, the authors assert that their findings indicate that higher-income white “gentrifiers” show an “observed limit” in the desired concentration of minority residents in the neighborhoods to which they move, adding an important caveat to the broader claims of previous studies that suggest those moving into gentrifying areas prefer integrated neighborhoods. Neighborhoods with higher percentages of African American or Hispanic residents do not show the same degree of gentrification and accompanying physical improvement investments, according to the researchers’ findings, as those where whites make up more than one-third of the population. 


Hwang, Jackelyn and Robert J. Sampson, “Divergent Pathways of Gentrification: Racial Inequality and the Social Order of Renewal in Chicago Neighborhoods,” American Sociological Review, August 2014, Volume 79, Number 4, pp. 726-751.


The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or the Federal Reserve System. Material herein may be reprinted or abstracted provided Community Investments is credited. Please provide our Community Development Department with a copy of any publication in which material is reprinted.