It's time to get down to the of the matter.
housing
Research conducted by two professors from Princeton University discovered that "median homeownership rates are similar in most urban areas and, with a few exceptions, hover around 70%. But in majority-Black neighborhoods, homeownership rates are frequently well below 50 percent. In Albany, New York and Atlantic City, New Jersey, the gap between White and Black neighborhoods reaches a staggering 40 and 50 percentage points, respectively." The Wall Street Journal reports that "the Black homeownership rate has fallen 8.6 percentage points since its peak in 2004."
A joint study from Brookings, a nonprofit public policy organization, and Gallup, a global analytics and advice firm, found that "in the average U.S. metropolitan area, homes in neighborhoods where the share of the population is 50 percent Black are valued at roughly half the price as homes in neighborhoods with no Black residents." Read the entire report here.
There is a strong and powerful statistical relationship between the share of the population that is Black and the market value of owner-occupied homes. Location in a Black neighborhood predicts a large financial penalty for 117 out of the 119 metropolitan areas with majority Black neighborhoods, though the valuation gap varies widely between them.
Differences in home and neighborhood quality do not fully explain the devaluation of homes in Black neighborhoods. Homes of similar quality in neighborhoods with similar amenities are worth 23 percent less in majority Black neighborhoods, compared to those with very few or no Black residents. Majority Black neighborhoods do exhibit features associated with lower property values, including higher crime rates, longer commute times, and less access to high-scoring schools and well-rated restaurants. Yet, these factors only explain roughly half of the undervaluation of homes in black neighborhoods. Across all majority Black neighborhoods, owner-occupied homes are undervalued by $48,000 per home on average, amounting to $156 billion in cumulative losses.
Metropolitan areas with greater devaluation of Black neighborhoods are more segregated and produce less upward mobility for the Black children who grow up in those communities. Using combined tax and census data from the Equality of Opportunity Project, this analysis finds a positive and statistically significant correlation between the devaluation of homes in Black neighborhoods and upward mobility of Black children in metropolitan areas with majority Black neighborhoods. Segregation is negatively correlated with black home valuations.
Beginning in the 1930s, as part of President Franklin D. Roosevelt's New Deal, the Federal Housing Administration (FHA) created loan programs that lowered down payment requirements and extended the term of home loans from 5 to 30 years — all in an effort to make home ownership accessible to more Americans. To help banks determine who should get home loans, the government-run Home Owners’ Loan Corporation established a system for appraising neighborhoods, now commonly referred to as "redlining." Essentially, the United States government created color-coded maps, assigning green for "good" neighborhoods and red for "bad" neighborhoods (literally drawing red lines around what they considered "bad" neighborhoods, hence the name).
Unsurprisingly, Black neighborhoods (pretty much across the board) were given both the color red and the worst grade (D), which classified them as "hazardous" places to underwrite mortgages because “colored infiltration is a definite adverse influence on neighborhood desirability.” Read more here. Naturally, without the ability to obtain conventional financing, these neighborhoods significantly declined as businesses left, segregation and discrimination deepened, and predatory lending and slumlords thrived.
Redlining was devastating for Black Americans. Between 1934 and 1962, the federal government backed $120 billion of home loans. MORE THAN 98% OF THE LOANS WENT TO WHITE PEOPLE.
A report by Reveal from The Center for Investigative Reporting, which analyzed 31 million Home Mortgage Disclosure Act records, revealed that "modern-day redlining persisted in 61 metro areas even when controlling for applicants’ income, loan amount and neighborhood." Their reporting "showed Black applicants were turned away at significantly higher rates than Whites in 48 cities, Latinos in 25, Asians in nine and Native Americans in three. In Washington, D.C., Reveal found all four groups were significantly more likely to be denied a home loan than Whites." They found that "lending patterns in Philadelphia today resemble redlining maps drawn across the country by government officials in the 1930s, when lending discrimination was legal."
Researchers have found that "The increasing intensity, duration, and frequency of heat waves due to human-caused climate change puts historically underserved populations in a heightened state of precarity, as studies observe that vulnerable communities — especially those within urban areas in the United States — are disproportionately exposed to extreme heat...The results of the study reveal that "94% of studied areas display consistent city-scale patterns of elevated land surface temperatures in formerly redlined areas relative to their non-redlined neighbors by as much as 7 °C." The researchers conclude that: "Historical housing policies may, in fact, be directly responsible for disproportionate exposure to current heat events." Read the entire report here.
According to the U.S. Department of Justice itself, "One of the central objectives of the Fair Housing Act, when Congress enacted it in 1968, was to prohibit race discrimination in sales and rentals of housing. Nevertheless, more than 30 years later, race discrimination in housing continues to be a problem. The majority of the Justice Department's pattern or practice cases involve claims of race discrimination. Sometimes, housing providers try to disguise their discrimination by giving false information about availability of housing, either saying that nothing was available or steering home-seekers to certain areas based on race. Individuals who receive such false information or misdirection may have no knowledge that they have been victims of discrimination. The Department of Justice has brought many cases alleging this kind of discrimination based on race or color. In addition, the Department's Fair Housing Testing Program seeks to uncover this kind of hidden discrimination and hold those responsible accountable. Most of the mortgage lending cases brought by the Department under the Fair Housing Act and Equal Credit Opportunity Act have alleged discrimination based on race or color. Some of the Department's cases have also alleged that municipalities and other local government entities violated the Fair Housing Act when they denied permits or zoning changes for housing developments, or relegated them to predominantly minority neighborhoods, because the prospective residents were expected to be predominantly African Americans."
The Consumer Financial Protection Bureau (CFPB) released a Data Point that found "one in ten adults in the U.S., or about 26 million people, are 'credit invisible.' This means that 26 million consumers do not have a credit history with one of the nationwide credit reporting companies. An additional 19 million consumers have 'unscorable' credit files, which means that their file is thin and has an insufficient credit history (9.9 million) or they have stale files and lack any recent credit history (9.6 million). In sum, there are 45 million consumers who may be denied access to credit because they do not have credit records that can be scored. Together, the unscorable and credit invisible consumers make up almost 20 percent of the entire U.S. adult population. Consumers who are credit invisible or unscorable generally do not have access to quality credit and may face a range of issues, from trying to obtain credit to leasing an apartment." Read reports here and here.
The latest Department of Housing and Urban Development (HUD) discrimination study says this: "For much of the twentieth century, discrimination by private real estate agents and rental property owners helped establish and sustain stark patterns of housing and neighborhood inequality...Minority renters are told about and shown fewer homes and apartments than equally qualified Whites. Black renters who contact agents about recently advertised housing units learn about 11.4 percent fewer available units than equally qualified whites and are shown 4.2 percent fewer units; Hispanic renters learn about 12.5 percent fewer available units than equally qualified whites and are shown 7.5 percent fewer units; and Asian renters learn about 9.8 percent fewer available units than equally qualified whites and are shown 6.6 percent fewer units." HUD also says "results reported probably understate the total level of discrimination that occurs in the marketplace." Read the full report here.
A study from the National Fair Housing Alliance — a consortium of more than 200 private, non-profit fair housing organizations, state and local civil rights agencies, and individuals from throughout the United States — found that: "Our current credit-scoring systems have a disparate impact on people and communities of color. These systems are rooted in our long history of housing discrimination and the dual credit market that resulted from it. Moreover, many credit-scoring mechanisms include factors that do not just assess the risk characteristics of the borrower; they also reflect the riskiness of the environment in which a consumer is utilizing credit, as well as the riskiness of the types of products a consumer uses."
The report concludes, "By 2042, the majority of people in this country will be people of color. Credit-scoring mechanisms are negatively affecting the largest growing segments of our country and economy. America cannot be successful if increasing numbers of our residents are isolated from the financial mainstream and are subjected to abusive and harmful lending practices. Credit scores have an increasing impact on our daily activities and determine everything from whether we can get a job, to whether we will be able to successfully own a home. The current credit-scoring systems work against the goal of moving qualified consumers into the financial mainstream because they are too much a reflection of our broken dual credit market. This paradigm must change." Read the entire report here.
According to the Pew Charitable Trust, "Nearly 43 million U.S. households rented their homes in 2016 (the latest data available) including about 9 million households that were formed over the preceding decade, according to the Harvard Joint Center for Housing Studies. Demand for rental properties has increased across age and socio-economic groups since 2008. Recent research indicates that although some of those increases can be explained by population shifts, a significant portion is the result of declines in homeownership since the Great Recession." Read the full report here. This imbalance is contributing to high rates of 'rent burden,' which we define here as spending 30 percent or more of pretax income on rent. Rent-burdened households have higher eviction rates, increased financial fragility, and wider use of social safety net programs, compared with other renters and homeowners. And as housing costs consume a growing share of household income, families must cut back in other areas."
In 2015, 38 percent of all “renter households” were rent burdened, an increase of about 19 percent from 2001.
The share of renter households that were severely rent burdened — spending 50 percent or more of monthly income on rent — increased by 42 percent between 2001 and 2015, to 17 percent. Increasing rent burdens were driven in part by year-over-year growth in gross rent — contract price plus utilities — that far exceeded changes in pretax income, which means that after paying rent, many Americans have less money available for other needs than they did 20 years ago.
In 2015, 46 percent of African American-led renter households were rent burdened, compared with 34 percent of white households. Between 2001 and 2015, the gap between the share of white and African American households experiencing severe rent burden grew by 66 percent.
Senior-headed renter households are more likely than those headed by people in other age groups to be rent burdened. In 2015, about 50 percent of renter families headed by someone 65 or older were rent burdened, and more than a fifth were severely rent burdened.
Rent-burdened families are also financially insecure in many other ways:
1. Nearly two-thirds (64 percent) had less than $400 cash in the bank; most (84 percent) of such households are
African American-headed.
2. Half had less than $10 in savings across various liquid accounts, while half of homeowners had more than $7,000.
Fewer rent-burdened households transitioned from renting to owning in 2015 than in 2001. Households that were rent burdened for at least a year were less likely to buy a home than those that never experienced a rent burden.
On top of everything else, in an exhaustive study analyzing 118 million homes, researchers from Indiana University and the University of California, Berkeley found "widespread racial inequalities in the U.S. property tax burden." The study found a "nationwide assessment gap which leads local governments to place a disproportionate fiscal burden on racial and ethnic minorities." The researchers discovered "that holding jurisdictions and property tax rates fixed, Black and Hispanic residents nonetheless face a 10-13% higher tax burden for the same bundle of public services."
"This assessment gap arises through two channels. First, property assessments are less sensitive to neighborhood attributes than market prices are. This generates racially correlated spatial variation in tax burden within jurisdiction. Second, appeals behavior and appeals outcomes differ by race." Read the full report here.
Does all this even really matter? Yes. ALOT.
Harvard University and the National Bureau of Economic Research did a joint study: "The Moving to Opportunity (MTO) experiment offered randomly selected families living in high-poverty housing projects housing vouchers to move to lower-poverty neighborhoods. We find that moving to a lower-poverty neighborhood significantly improves college attendance rates and earnings for children who were young (below age 13) when their families moved. These children also live in better neighborhoods themselves as adults and are less likely to become single parents. The treatment effects are substantial: children whose families take up an experimental voucher to move to a lower-poverty area when they are less than 13 years old have an annual income that is $3,477 (31%) higher on average relative to a mean of $11,270 in the control group in their mid-twenties." Read the entire report here.
Even still, according to a study by the Center on Budget and Policy Priorities, "315,000 children in families using vouchers lived in extremely poor neighborhoods in 2017." Read the entire report here.