It’s been more than a century since the U.S. government abolished slavery and decades since landmark bills such as the Civil Rights Act of 1964 outlawed discriminatory Jim Crow practices. After the federal government prohibited these explicit biases, however, has come a lull in new legislation, but as a country built on generations of racism, more subconscious and equally malicious implicit biases are woven in the fabric of life in America.
Housing has been the most egregious instance of this discrimination, with a 32.5% gap in homeownership between black and white Americans. This in turn drives a massive racial wealth gap because of the economic importance of owning a home in which black wealth is about 7% that of whites, according to thebalance.com, a personal finance website. Failing to act to equalize this imbalance would allow the massive disparity of wealth to fester; between 1983 and 2013, white household wealth increased by 14%, but during the same period, black household wealth plummeted by 75%. Therefore, housing reparations are needed to increase black homeownership and counteract existing biases.
Redlining and its racist origin
In the early 1900s, racist sentiments fueled a banking practice known as redlining, making socioeconomic advancement for African-Americans nearly impossible. Banks and insurers would designate minority communities as “high risk,” or unlikely to repay a loan. This belief meant lenders withheld investments from segregated sectors of cities, not granting the residents money merely because of their skin color. On maps, areas with high proportions of immigrant and African-American inhabitants were outlined in red and deemed too hazardous to give mortgages to merely because of their minority status, preventing those communities from receiving mortgages and building equity by becoming homeowners
Lenders were not the only proponents of redlining during the first half of the 20th century. For example, Franklin Delano Roosevelt’s administration pushed for the policy during the New Deal in the 1930s, with economic programs providing suburban housing to white middle and lower-middle class Americans and systematically segregating African-Americans into poorly funded urban housing projects regardless of their financial standing. Banks used the theory that minorities shouldn’t be allowed to buy houses in white neighborhoods because surrounding home prices in the neighborhood would decline to justify redlining. Inspired by the U.S. federal government itself, economic interests were put ahead of protecting civil liberties.
During the Civil Rights Movement, public opposition to redlining resulted in The Fair Housing Act of 1968. This bill aimed to outlaw the practice, making it “unlawful for any lender to discriminate in its housing-related lending activities against any person because of race, color, religion, national origin, sex, handicap, or familial status,” according to the Federal Reserve.
Historic redlining map of St. Louis
Continuing biases and modern-day redlining cause housing segregation, wealth gap
While explicit redlining has disappeared, implicit biases in the housing system have given rise to a phenomenon known as appraisal redlining, in which homes in low-income and minority neighborhoods receive a lower valuation compared to their white counterparts.
Dorothy Brown, a tax law professor at Emory University, reports for Forbes that a 2001 Brookings study found “wealthy minority neighborhoods had less home value per dollar of income than wealthy white neighborhoods,” and “poor white neighborhoods had more home value per income than poor minority neighborhoods.” Brown continues that homes in majority black neighborhoods appreciate less than homes in white neighborhoods, widening an existing wealth gap.
“Put simply, the market penalizes integration,” Brown writes. “The higher the percentage of blacks in the neighborhood, the less the home is worth, even when researchers control for age, social class, household structure, and geography.” Although the government attempted to outlaw redlining, the racist mindset which served as the core motivation permeates the modern-day housing market.
The similarities between our current housing market and redlining from the Jim Crow era become even more apparent when examining mortgage rates. In St. Louis, banks are 2 1/2 times more likely to deny prospective African-American homebuyers a conventional mortgage loan than non-Hispanic whites — “even when controlling for income, loan amount and neighborhood,” according to the newspaper STLToday.com.
Banks and realtors devaluing of homes in predominantly black neighborhoods has brought about astronomical economic disadvantages for minority homeowners. A 2018 study from Brookings found homes in black neighborhoods with a similar quality as non-black neighborhoods are worth 23% less. On average this equates to $48,000 per home, amounting to $156 billion of cumulative lost wealth. The study additionally found a positive correlation between the “devaluation of homes in black neighborhoods and upward mobility of black children in metropolitan areas” at a level that was statistically significant: as the rate at which realtors and buyers undervalued black homes increased, the ability of the homeowner’s children to improve their socioeconomic standing decreased.
The notion that minority neighborhoods are undesirable not only permeates the thinking of lenders, but also those looking to purchase homes. This bias, in which white Americans avoid buying houses in black communities, results in more pronounced segregation that reinforces the devaluation of black homes. Douglas Massey, a professor of sociology and public policy at Princeton University, contends that segregation is the “structural linchpin” of racial inequities in the U.S.
“Research shows that whites substantially overestimate crime rates in communities that contain blacks, and that even controlling for crime rates, school quality, and home values, whites grow progressively less likely to purchase a home in a neighborhood as the percentage of blacks rises,” Massey writes in a 2019 email toTheNew York Times. “These sentiments both cause, and are caused by, segregation as both conscious and unconscious racism structures the social cognition of Americans.”
Gentrification uproots black neighborhoods, families
Middle and upper class homebuyers being wary of minority neighborhoods, perceiving them as high-crime and run-down regardless of actual evidence, has given rise to a practice known as gentrification. Gentrification is when investors decide to overhaul a neighborhood’s homes and businesses to attempt to attract new, predominantly white and middle class residents at the expense of the current residents. Rick Jacobus, a national expert in inclusionary housing and affordable homeownership, describes the process of discriminatory investment, where developers cut minority neighborhoods out of the economy and allow them to deteriorate until they are “rediscovered” and gentrified, as the “most important driver” of segregation.
“This cycle of disinvestment and displacement is economically inefficient in many ways, but worse, it imposes a very high human cost on poor and working-class people who suffer blight, crime, and decay only to later be priced out or evicted when the cycle finally brings new investment into their neighborhoods,” Jacobus writes.
The notion that minority neighborhoods are undesirable not only permeates the thinking of lenders, but also those looking to purchase homes. This bias, in which white Americans avoid buying houses in black communities, results in more pronounced segregation that reinforces the devaluation of black homes.”
A study using U.S. Census Bureau and economic data from 2000-2013 from the National Community Reinvestment Coalition discovered gentrification is primarily concentrated in major cities, with rising rents, property values and taxes forcing more than 135,000 residents to move. Washington D.C. was the most egregious example of this, with 40% of neighborhoods becoming gentrified. Each of the 33 gentrified housing tracts gained an average of 525 white residents and lost 617 black residents from 2000-2010, with 20,000 black residents displaced in total.
In a supplement to the study, anthropologist and former American University professor Dr. Sabiyha Prince writes the Barry Farm housing complex is emblematic of the issues brought about by gentrification in Washington D.C. The federal government built the community in the 1940s for lower income families, including nearby construction displaces. Over time the complex became home to a “broad spectrum of people, including employed and unemployed persons, the disabled, recipients of college degrees, large families, returning citizens and elder retirees.” The location near the metro with easy access to downtown became attractive to developers, however, and the D.C. Housing Authority began plans to demolish Barry Farm, displacing “hundreds of families that have no other place to go with only a vague promise that they will have a spot in one of the few affordable units that will remain after redevelopment.”
The outlawing of redlining only happened nominally. Appraisal redlining and gentrification, powered by the vastly incorrect and biased notion that homes in a predominantly minority area are “undesirable,” make it nearly impossible for African-Americans to overcome the long-lasting economic theft of slavery.
Segregated neighborhoods cause unequal schooling
The impacts of de-facto segregation are not limited just to the economy, however. Where people live affects access to transportation, education, employment opportunities and quality of healthcare. In particular, because property taxes primarily fund schools, a systematic devaluing of minority homes takes away resources from schools, carrying lifelong ramifications. A 2019 study from EdBuild, a nonprofit that advocates for a more equitable distribution of school funds, found predominantly non-white school districts (less than 75% white) get $23 billion less that predominately white districts (greater than 75% white), despite serving the same number of students. This disparity exists even when controlling for potentially confounding factors; for instance, poor-white school districts receive roughly $150 less per student than the national average, certainly a problem that deserves addressing in and of itself. These students, however, still receive nearly $1,500 more than poor-nonwhite school districts.
“The racial and economic segregation created by gerrymandered school district boundaries continues to divide our communities and rob our nation’s children of fundamental freedoms and opportunity,” the report states. “Families with money or status can retain both by drawing and upholding invisible lines. Many families do just that. This, in conjunction with housing segregation, ensures that — rather than a partial remedy — district geographies serve to further entrench society’s deep divisions of opportunity.”
Even within school districts, a vast racial wealth gap between white and black Americans manifests itself in a lower quality of education for minority students, contributing to a vast achievement gap between the two races. Richard Rothstein, a Distinguished Fellow for the Economic Policy Institute, a nonprofit think tank, explains segregationist policies have created segregated neighborhoods, which in turn creates segregated schools. Rothstein credits the achievement gap to this concentration of economic and social disadvantages.
The achievement gap becomes evident in data from Columbia Public Schools (CPS). Consistently, a higher percentage of black students scored below the basic level on the 2019 Missouri Assessment Program (MAP) standardized tests when compared to white students. Conversely, a higher percentage of white students score proficient on the MAP tests when compared to black students.
The disparity in scores between black and white CPS students on MAP Tests
As socioeconomic standing influences education throughout one’s life, the difference in performance begins as early as one enters CPS schools. A 2017 report from Cradle to Career Alliance, a Boone County educational nonprofit, found “persistent achievement gaps for underrepresented students in our community beginning before children enter kindergarten and persisting through high school.”
Reparations needed to overcome massive wealth gap
While opponents of reparations counter that current generations should not have to pay to fix past generations racism, white Americans are clearly still benefiting from the legacy of slavery and Jim Crow in wealth accumulation. When it comes to housing specifically, these biases are not just from the direct discrimination of past generation; rather, they are the direct result of current implicit biases that deem predominantly black neighborhoods “undersirable” and “less-valuable.”
Banks and white buyers have shunned black homeowners, costing them billions from the devaluation of their homes, an injustice that must not continue. By targeting housing specifically, the U.S. would drastically reduce the wealth gap. Jonathan Eggleston and Donald Hays of the U.S. Census Bureau, based on data from the bureau’s 2015 Survey of Income and Program Participation, concluded that homeownership is the most important determinant of wealth.
Demos.org, a left-leaning think tank, supports the effectiveness of housing reparations in 2016, explaining if policy effectively eliminated the racial disparities in homeownership rates, median black wealth would grow $32,113 and the wealth gap between black and white households would shrink 31%. If the racial disparity in return on housing prices disappeared, median black wealth would grow an additional $17,113. While housing reparations are not the only policy necessary to eliminate the disparity in wealth and its negative ramifications for quality of life, it’s a sorely needed start after decades of relative inaction.
Additionally, targeted reparations in the form of a housing credit to low-income and minority Americans would be much more politically practical, and thus more resilient to cuts than reparations in the form of a blank check. Programs such as Social Security have been able to withstand many government budget cuts because they almost all Americans see benefits from them, whether it be in the payments eventually or the increased economic output. Encouraging more homeownership not only benefits the targeted groups but also other Americans because it fuels economic output and job creation. For every two sales of a home, one job is created for the economy, according to the National Association of Realtors.
How a housing credit would work
The government already gives housing grants to low-income families to aid in purchasing a house, buying rental property or renovating existing property. Housing reparations would be similar, with cost burdened minority Americans receiving grants to purchase or afford a home. According to the Department of Housing and Urban Development, families are cost burdened if they spend more than 30% of their monthly income on housing expenses.
The U.S. would also need to couple a housing credit with audits of racial disparities in loans and home evaluations at a federal and local level. Biases manifested in the form of appraisal redlining are not something that a housing credit alone would prevent. Only by including a substantial financial for those who further the long history of redlining, similar to those the federal government imposes on companies that violate employment civil rights protections under the Civil Rights Act of 1964, can the necessary mindset shift against our current system of de-facto segregation and redlining occur.
The housing market within the U.S., past and present, is filled with discrimination. In large part, this is from inaction by both federal and state governments. Politicians have allowed a substantial wealth gap to not just persist, but widen, making it their utmost moral priority to begin a program of housing reparations.
The blame cannot lie only on policymakers, however.
Politicians, banks and realtors rely on their popularity and public support; therefore, it is we, the everyday Americans, who should bear the blame by largely turning a blind eye to discrimination in housing. Additionally, implicit biases, such as white homeowners avoiding minority neighborhoods, have exacerbated the issue even further.
Housing credits are just a start; only sweeping policy action can truly provide equal opportunity to all Americans, regardless of race, but discrimination in America is death by a thousand cuts. We must all critically analyze our own actions and biases and advocate for long-overdue legislation because death by a thousand cuts can be healed by a thousand bandages.
How do you think the U.S. should address the racial wealth gap? Let us know in the comments below.
Senior Will Cover is the Commentary and Editorial Editor for The Rock and Bearing News. He is also a captain of the RBHS Speech and Debate team and a member of the Youth Advisory Council. In his free time, he enjoys listening to podcasts and getting as much sleep as possible.