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Systemic Racism in Real Estate
- Nick & Wolf
- Apr 27, 2023
- 3 min read
The racist policies of the past have had a lasting impression on the economic inequality in neighborhoods of color. How did we get here? What went so wrong? Was this a product of circumstance or design? We are here to analyze these questions and more.
Through the implementation of the "New Deal" and subsequent creation of the Federal Housing Authority (FHA) in 1934, systematic segregation continued to take hold with the creation of new suburban housing opportunities specifically excluding people of color. A process now known as "redlining" was substantiated by the Federal Housing
Administration in an attempt to keep people of color from purchasing real property (real estate) in white neighborhoods.
"Redlining" is the refusal to insure federally backed mortgages in and near neighborhoods of color. Simultaneously, the FHA was subsidizing home builders developing subdivisions with deed restrictions against the sale or occupancy of people of color. "In one development, the FHA would not go ahead, during World War II, with this development unless the developer built a 6-foot-high, cement wall, separating his development from a nearby African-American neighborhood to make sure that no African-Americans could even walk into that neighborhood." according to Richard Rothstein, Author of The Color Of Law.
Redlining led to long felt income and wealth inequality in the African-American population
When comparing the income and wealth of African-Americans to their white counterparts, African-American income is on average approximately 60 percent to that of whites. Whereas, the wealth held by whites is 95 percent greater than that of African-Americans. This can be tied directly to the racist policies of the FHA during the 1940's, 50's, and even into the 60's. During this 30 year span, white homeowners were gaining equity thus building wealth. During the same period, African-Americans were being denied access to federally backed mortgages, which prevented them from purchasing homes in desirable neighborhoods. As a result, they were forced to purchase homes in neighborhoods with lower home values, poor schools, and fewer job opportunities. This not only led to the stagnation of wealth accumulation for African-American families but also the depreciation of their assets.
The impact of redlining has also led to the widening of the gap in homeownership rates between African-Americans and whites. According to the U.S. Census Bureau, the homeownership rate for whites in the United States is approximately 73 percent, while the homeownership rate for African-Americans is only about 44 percent. The inability to own a home in a desirable neighborhood has also perpetuated cycles of poverty that have lasted for generations.
The effects of redlining are still felt today, as neighborhoods of color continue to be underfunded and underserved. These communities lack access to quality education, affordable healthcare, and job opportunities. The lack of investment in these neighborhoods has led to a perpetuation of the cycle of poverty, which continues to impact African-American communities to this day.
The policies that led to redlining were not the result of circumstance, but rather, they were designed to promote segregation and uphold racial discrimination. The discriminatory policies of the past have contributed significantly to the economic inequality that exists today. To address these issues, it is important to acknowledge the role that systemic racism has played in creating and perpetuating economic inequality in neighborhoods of color. Policies must be put in place to ensure that these communities have access to the resources they need to thrive and break free from cycles of poverty. By acknowledging the past, we can work towards creating a more equitable future for all.
1. Rothstein, R. (2017). The Color of Law: A Forgotten History of How Our Government Segregated America. Liveright Publishing.
2. National Community Reinvestment Coalition. (2018). Redlining and Disinvestment. Retrieved from https://ncrc.org/redlining-and-disinvestment/
3. The Urban Institute. (2020). The Legacy of Redlining in the United States. Retrieved from https://www.urban.org/urban-wire/legacy-redlining-united-states
4. United States Census Bureau. (2020). Homeownership Rates by Race and Ethnicity of Householder: 1994 to 2020. Retrieved from https://www.census.gov/housing/hvs/data/charts/fig05.pdf
5. National Low Income Housing Coalition. (2020). The Impact of Segregation and Discrimination on Housing Policy. Retrieved from https://nlihc.org/resource/impact-segregation-and-discrimination-housing-policy