Sanctuary policies and the mortgage market behavior in the U.S.

Article  -  Monday, 17 February 2025

Zuchowski, David (2025): "Sanctuary policies and the mortgage market behavior: Reducing uncertainty to promote financial inclusion", Journal of Economic Behavior & Organization

This paper examines the impact of sanctuary policies on the financial inclusion of Hispanics in the U.S. mortgage market. By reducing local cooperation with federal immigration authorities, sanctuary policies reduce the risk of deportation and signal local acceptance of irregular immigrants and their families. This reduction in uncertainty for Hispanic borrowers and profit-maximizing lenders influences decision-making in financial markets.

To identify the effect, I take advantage of the staggered implementation of county-level sanctuary policies between 2010 and 2021. Using an event study approach, I find evidence of a significant improvement in financial inclusion in counties that adopted local sanctuary policies. The results are consistent with the literature pointing to a trust spiral created by sanctuary policies and provide novel evidence that such local policies can serve as a tool for improving financial inclusion.

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