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Report: Racial Bias Continues to Limit Black Homeowners’ Wealth, Upward Economic Mobility

In this Oct 2, 2018, photo a for sale sign stands outside a home on the market in a suburb north of Denver.

In this Oct 2, 2018, photo a for sale sign stands outside a home on the market in a suburb north of Denver. AP Photo

 

Connecting state and local government leaders

Homes in majority-black neighborhoods are worth $48,000 less on average than similar ones in neighborhoods with no black residents, research from the Brookings Institution and Gallup says.

WASHINGTON — Racial bias is to blame for a startling disparity between the worth of houses in majority-black neighborhoods and those with no black residents, a new report asserts.

When comparing owner-occupied homes of similar quality in neighborhoods with similar amenities, those in majority-black neighborhoods are worth 23 percent less. Across all neighborhoods where at least 50 percent of residents are black, homes are undervalued by an average of $48,000, according to report authors Andre Perry and David Harshberger of the Brookings Institution and Jonathan Rothwell of Gallup.

The Devaluation of Assets in Black Neighborhoods” found that in average U.S. metro areas homes in majority black neighborhoods are being valued at nearly half the price of those in neighborhoods with no black residents.  

A net loss of $156 billion lowers wealth accumulation in black communities and limits upward economic mobility among the children who live in those places, the authors say.

Historically—with Jim Crow-era deed restrictions, redlining and zoning—and presently, racial bias continues to affect real estate markets, according to the report:

“During the 20th century, both explicit government institutions and decentralized political actions created and sustained racially segregated housing conditions in the United States. This has created what has been dubbed a ‘segregation tax,’ resulting in lower property valuations for blacks compared to whites per dollar of income.”

Today, black neighborhoods have fewer quality schools and less access to finance, and real estate agents direct black and white home buyers differently based on racial stereotypes, the authors write.

Rochester, New York, led all U.S. metropolitan areas in terms of most devaluation of homes in black neighborhoods from 2012-2016 with values 65 percent less than in neighborhoods with no black residents, according to the report.

Jacksonville, Florida; Omaha, Nebraska; and Tulsa, Oklahoma saw the next most devaluation and low economic mobility in black neighborhoods.

On the flip side, Boston saw the least devaluation of homes in black neighborhoods, although segregation remained high.

Overlooked assets in black communities include walkability and access to public transit, and the resulting undervaluation makes it harder for black residents to invest in business enterprises or afford college tuition for their children, according to the report.

At a Brookings event on Wednesday discussing the report, speakers addressed federal housing policies that can effect potential homebuyers. 

Under former President Obama, the Department of Housing and Urban Development enacted the "disparate impact" rule as a way to combat housing discrimination. The rule can be used to hold lenders, landlords and other housing providers liable for discriminatory practices, even if they weren’t intentional.

In June, the Trump administration moved to weaken the rule with an advanced notice of proposed rulemaking aimed at providing insurance companies with exemptions from such liability.

“The proposition that we can have a ‘safe harbor’ for discrimination is, I think, preposterous,” said Jorge Andres Soto, director of public policy at the National Fair Housing Alliance.

HUD already had delayed the Obama administration’s Affirmatively Furthering Fair Housing rule requiring cities and towns that receive federal funding to develop plans addressing measurable racial bias in local housing patterns.

Detroit had the seventh-most devaluation of homes in black neighborhoods, which cost 36.9 percent less than average. There’s also been a drop in black homeownership in the wake of the recession.

“Banks weren’t coming back to Detroit,” said Tahirih Ziegler, executive director of the Detroit Local Initiatives Support Corporation. “We saw a lot of cash deals if you wanted to be a homeowner.”

LISC partnered with Detroit and Bank of America on the 0% Interest Home Repair Loan Program, which provided $8 million for eligible homeowners to address structural or safety issues like leaky roofs and poor plumbing, starting in 2015. About 4,000 homeowners applied, but only 1,500 have been helped—most residents averaging only $50,000 in income but with credit scores of 717.

Many black homeowners are struggling to retain ownership for when economic development returns to Detroit, Ziegler said.

“People are in a holding pattern, as much as they can be, to see what comes next,” she said.

Dave Nyczepir is a News Editor at Government Executive’s Route Fifty and is based in Washington, D.C.

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