Understanding the factors that drive individuals’ residential preferences is a critical issue in the study of racial segregation. An important debate within this field is whether individuals—especially whites—prefer to live in predominantly white neighborhoods because they wish to avoid the social problems that may be more likely to occur in predominantly black neighborhoods (i.e., the racial proxy hypothesis) or because of racial factors that go beyond these social class–related characteristics. Through a multilevel analysis of data from the 2004–2005 Chicago Area Study and several administrative sources, we assess the extent to which the racial proxy hypothesis describes neighborhood satisfaction among whites, African Americans, and Latinos living across a broad range of neighborhood contexts. The racial proxy perspective applies weakly to whites’ satisfaction: whites report less satisfaction in neighborhoods with more minority residents, and only some of their dissatisfaction can be attributed to local social characteristics. The racial proxy hypothesis applies more strongly to blacks’ and Latinos’ satisfaction. In some cases, especially for Latinos, higher levels of satisfaction in integrated neighborhoods can largely be attributed to the fact that these places have better socioeconomic conditions and fewer social problems than predominantly minority communities. At the same time, effects of racial/ethnic composition persist in unique and somewhat divergent ways for blacks and Latinos, supporting the assertion that racial composition matters, above and beyond its relation to social class. Taken together, these findings suggest that individuals balance both socioeconomic and race-related concerns in their residential preferences.

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