The Inequitable Roots of Home Ownership: Systemic Racism & the Wealth Gap

In March, I was lucky enough to attend a two day Racial Equity Institute workshop. The workshop was dense – covering the creation of the concept of race, implicit bias, and systemic/ institutional racism and how it contributes to the inequitable outcomes we see today. In a future blog post, I will share some things I learned about systemic racism as it pertains to access to work, but today I’d like to focus on home ownership.

One statistic is particularly striking in revealing the scale of inequality impacting people of color today. According to the Census Bureau, in 2014 the median net worth of a white household was $102,800, versus only $9,590 for a black household. Equity in a home comprises the majority of the wealth; excluding equity in a home, the median net worth of a white household is only $33,570, and that a black household drops to $3,339. Hispanic families fare only marginally better, with a median net worth of $17,530, which drops to $6,253 absent home equity.

The history that the Racial Equity Institute covered illuminates how largely our government policies have led to that situation. This is important history to keep in mind as we work to develop new programs and policies to create economic opportunity, and as we try to explain to stakeholders why we have an obligation to redress the impacts of these policies. While the history is vast, here are three key points.

1. It all starts with land, and all of the major programs to initially settle our country were off-limits to people of color.

The 1785 Land Ordinance Act, which offered 640 acres at $1 per acre, was only available to white people. The nearly 100,000 white people who came to California after the end of the Mexican-American War were allowed to claim and own “free soil”, while slaves and free black people were banned from doing so. Additionally, the 1862 Homestead Act, which gave citizens 160 acres of land for free if they would farm it for five years, was not available for Blacks and Native Americans. According to Lui et al. in The Color of Wealth, an estimated 46 million Americans living today are descendants of Homestead Act beneficiaries.

2. The housing programs that fueled post-war wealth generation, were also largely inaccessible to people of color.

Of the approximately $120 billion in new housing financed by the VA and FHA by 1962, 98 percent of it went to white home owners. In part, this was because beginning in 1933 with redlining and continuing with racially restrictive covenants (outlawed in 1968, but still in some cases on the books), people of color were restricted to certain neighborhoods – neighborhoods in which banks would not lend. If you haven’t looked at the redlining map of your city to compare it to present-day conditions, check this out.

3. Systemic racism continues to influence access to homeownership and wealth.

The Recession disproportionately impacted people of color. In December 2011 the US Department of Justice announced a $335 million settlement with Bank of America/ Countrywide for its predatory practices that targeted black and Latino households. The settlement noted that between 2004 and 2008 roughly 200,000 African American and Latino borrowers were charged more for their mortgages than were similarly qualified white borrowers.

Of course, the picture is much more complex than this blog post can convey. If you want to learn more, PBS has compiled a list of resources on race.

And we are always interested in learning more, ourselves! So please reach out with thoughts, resources, or questions: engage@fourtheconomy.com.