Tenure Choice with Location Selection: The Case of Hispanic Neighborhoods in Chicago

1. INTRODUCTION The tendency for immigrant groups to locate where other coethnic groups have already settled (in ethnic enclaves) is a common process resulting from the need (or preference) to reunite with family members and other coethnic members and from initial unfamiliarity with the country's labor and housing markets (Bartel, 1989). Immigrants may also settle where they have the best opportunities for employment or where they can best use their skills, which may or may not be in an ethnic enclave. Evidence suggests that an immigrant's location choice (whether in or outside an enclave, within the destination country) depends on his or her human capital characteristics. Specifically, immigrants who choose to live in enclaves tend to have less education, shorter periods of residency in the United States, less general experience in the destination country, and lower English proficiency (Funkhouser and Ramos, 1993). The implications of spatial concentration for immigrant groups on various aspects of their economic adjustments have spurred much interest among researchers. The impact of spatial concentration has been analyzed for the labor market earnings of immigrant groups, their propensity to be self-employed (Light et al., 1993), their investment in postmigration human capital (Chiswick and Miller, 2002), and their participation in the political process (Portes and Mozo, 1985). Although less studied, homeownership is another important aspect of immigrant financial assimilation and the social/economic adjustment process that deserves attention (Alba and Logan, 1992). Ethnic enclaves may influence homeownership attainment of immigrant groups in several ways. Rising housing prices in increasingly dense neighborhoods can encourage home-ownership as an investment (Borjas, 2002). Ethnic enclaves may also foster homeownership to the extent that ethnic networks within enclaves can more effectively channel information flows about homeownership opportunities (Krivo, 1995). Conversely, if an immigrant group is concentrated in an ethnic neighborhood where the supply of housing is more limited and possibly where housing stock is of poor quality, this will likely result in lower home-ownership gains for the group (Krivo, 1995). Or, if an immigrant group is concentrated in an central city where housing prices are relatively higher, these residents may be less likely to own a home due to affordability constraints (Coulson, 1999). In particular, the more recently an immigrant group has migrated and the poorer the immigrants are who reside in enclaves, the greater are the affordability constraints and difficulties faced in meeting down payment requirements (McArdle and Masnick, 1995). The impact of ethnic spatial concentration on homeownership is unclear, and previous empirical research has shown somewhat conflicting evidence. Comparing various ethnic/racial groups, Alba and Logan (1992) find that as the proportion of Mexicans and Cubans in a metropolitan area becomes larger, the likelihood of homeownership increases; for other groups, such as Puerto Ricans and Vietnamese, the likelihood of homeownership decreases. Similarly, Krivo (1995) maintains that the "immigrant context" decreases the likelihood of homeownership among Hispanics--although the negative effect is more subdued for Mexicans than non-Mexicans. In contrast, Borjas (2002) finds that in several major American cities ethnic clustering increases the probability that immigrant households own their homes. These studies suggest that the ethnic enclave context will have a direct impact on the determination of tenure choice. At the same time, it is reasonable to assume that the decision to reside in an ethnic enclave is not a random process. A number of factors are likely to influence an immigrant's decision to choose an "enclave" rather than a location with only a sparse number of residents from his or her coethnic group. Enclaves offer an alternative means of cushioning the relatively higher cost of integration that some immigrants may face (Chiswick and Miller, 2002). …