Ethnic Discrimination in the Rental Housing Market in Germany

On June 30, 2016, AGI hosted a seminar with DAAD/AGI Research Fellow Prof. Dr. Thomas Hinz, who spoke about his research on ethnic discrimination in the German rental housing market. The event was moderated by AGI Senior Research Associate Parke Nicholson.

Now more than ever, Germany faces the major challenge of integrating new migrants and refugees into society. Along with other factors such as health, education and labor market opportunities, and social contacts, housing is a major variable affecting integration outcomes. Migrants often pay higher rent for the same or lower quality housing. To that end, Dr. Hinz’s research seeks to understand whether the disadvantages migrants face relative to German locals in the rental market are attributable to ethnic discrimination (which he generally defines as unequal treatment) or other factors. The focus on rental housing was due to the fact that in Germany, renting is more common than owning a home, particularly among lower income households.

Dr. Hinz went on to explain that his research builds on a long tradition of research on ethnic housing discrimination, particularly in the United States with regard to African Americans. In addition to describing existing literature and the pros and cons of various research methodologies, he gave an overview of the economic theories behind discrimination, discussing terms like taste-based discrimination, statistical discrimination, and segregation preferences.

The bulk of Dr. Hinz’s presentation covered the design, findings, and implications of four major studies he and his colleagues have conducted over the last decade. The first study, a correspondence test conducted in Munich, compared the response rates from landlords/housing agents to apartment inquiries sent by (fictional) applicants with names of either German or Turkish origin. The second study analyzed the prevalence of rental housing discrimination across six German cities with differing characteristics, such as population density, cost of living, former German Democratic Republic (GDR) vs. Federal Republic of Germany (FRG), proportion of migrants, etc. The third study consisted of a meta-analysis of 59 North American and EU research studies with 737 effect coefficients that sought to explain the variability in findings across various publications. In the fourth study, segregation preferences were examined through a factorial survey experiment in which respondents evaluated the attractiveness of neighborhood when provided information on seven different factors: cost, foreigners, noise, children, grocery stores, parks, and crime.

Overall, evidence of modest discrimination was found in all studies, but interestingly, the more information that was provided about the prospective renter’s ability to pay (e.g., status of job), the lower the rate of discrimination seemed to be in the field studies. Perhaps most puzzling was that in the Munich experiment, higher discrimination against migrants was found in neighborhoods with an already high population of Turkish migrants. One possible explanation for this discrimination is that these areas were going through gentrification; landlords were showing preference for renters with an ability to pay higher rent. Another interesting finding Dr. Hinz shared was that a minority group’s perception of being discriminated against was higher than the actual prevalence of discrimination. In addition, Hinz found that private landlords tend to discriminate more than larger housing companies—which has very important anti-discrimination policy implications given that the current anti-discrimination law in Germany applies only to agents with more than 50 units. On the subject of differences across housing markets in urban areas of Germany, despite different conditions, nearly identical rates of discrimination were found across the cities. However, in rural areas, higher rates of discrimination against migrants were found, perhaps attributable to lower job prospects and less contact with foreigners. Dr. Hinz also found that people have segregation preferences partly driven by underlying perceptions of social problems in neighborhoods with more foreigners.

Dr. Hinz concluded the talk relating his field experiments to the current debate on integration policy issues. With the newest wave of migrants and refugees, the rental housing market will be highly relevant for their social integration. In the short and medium-term, the rental housing market, especially in certain urban regions attracting the highest number of migrants, will experience a high excess in demand. On the other hand, the areas with more rental housing supply are in regions with fewer labor market opportunities and a less pronounced openness to newcomers. Dr. Hinz also recommended that social housing projects need to be re-established, which would be a significant policy shift. In addition, urban planning efforts should attempt to avoid increasing residential segregation (though ethnic segregation is already relatively low in Germany compared to that of its European neighbors or the United States) so that more contact between migrants and locals can help foster integration. Continued support of migrants’ social networks would do a great deal to help them make contacts to find housing through informal channels.

Read more on Thomas Hinz’ research on housing discrimination in his recent article “No Place to Stay.” Please contact Ms. Elizabeth Caruth (ecaruth@aicgs.org) with any questions.