Module 8 Housing Inequality

wealth inequality in the usa

  • 1% of country owns half the wealth

  • top 20% owns 80% of wealth

  • more entrenched and severe than income inequality

  • racial disparities in wealth

    • wealth inequality between white and black people result of historically embedded inequalities from slavery, jim corw and housing policies

    • exasberated by inequality in homeownership, college attendance, inheritance, and unemployment rates

Land ownership after slavery

  • slaves were unable to own any property

  • 1865— land reforms that granted black people land to settle after slavery ended by johnson

  • southern homestead act gave black people unproductive land

  • 1874—freedmans bank failed bc speculative loans were distributed to white companies, black people lost a lot of savings

  • only 1/4th of southern black people owned land in 1900

  • residential segregation up north made it hard for black people to build wealth in the city

Residential Segregation

  • urban residential segregation created in 20th century and contributed to consequences in wealth portfolio

  • creation of residential segregation

    • collective racial violence by white people

      • cross burning, race riots

    • practices created and reinforced by real estate industry

      • racially restrictive covenants—contratctual agreements that prevent sale or lease of property within an area to non whites

      • fair housing act made covenants illegal

      • “steering” where real estate agents would only show white neighborhoods to white buyers

    • federal housing programs made available only for white people

      • federal housing administration

      • encouraged building new homes for people in crowded tenements with mourtageg system

        • “neighborhood stability is from proprties being occupied by same race and class”

Discrimintaory and predatory lending practices

  • black borrowers 2.7 times more likely than white to be denied mortages

  • black homeworners pay 0.54 higher interest rate than white

  • when credit scores are same with black and white borrowers, black ones are still 60% more likely to be turned down

  • predatory lenders— pawnshops, payday lenders check cashing services that charge high fees and interest rates

  • subprime loans—high interets loans to people with high risk of defualt

  • black and latino homewoners more likely than white to recieve these loans

Neighborhood Segregation Today

  • how is neighborhood segregation quantified?

    • dissimilarity index, describes extent to which two groups (black and white residents) are found in equal proportions in all neighborhoods

      • percentage of individuals in either group who would have to move to achieve perfect integration

    • isolation index neighborhood demographic v citywide demographic

Wealth Inequalities

  • wealth disparties worse because of the housing crisis

  • wealth: individual accumulated assets (savings, home equity, stocks, business ownership) wealth is financial stability and guaruntees stability for future geenration

    • home ownership apart of wealth

  • negative wealth if total of debt > total value of assets

road to zero wealth paper

key findings:

  • middle class income does not gurantee middle class economic security

    • white households own 8x as much wealth as middle income

    • middle class was defined by wealth rather than income, black and latino familis in middle income need 2-3x as much in earnings to be middle class

    • 70% of black and latino households fall below threshhold needed for middle class status if its wealth > income

    • acceslerating decline in wealth has left black and latino families unable to reach middle class

  • racial wealth divide is across all educational attainment

  • great recession disproprotionatly impacted communities of color

  • black households expected to hit zero wealth in 2073

  • current policies that preserve divide

    • punishment of those trying to get ahead (cutting off people after certain savings for snap)

does home equity explain the black wealth gap

  • black people have lower rares of homeownership, lower amounts of home equity and experience lower housing appreciation than whites

  • racial differences in returns to homeownership using survey of middle aged homeowners

  • home equity appreciation higher for black sbetween 1994 and 2004 but black ppl with high incomes do not experience same home equity gap

  • however if you account for differences in home equity growth, there are still racial differences

  • reduced preference for housing in areas that black people lives, limits ability to attain wealth during periods of home equity appreciation

  • however, black ppl with higher incomes can avoid this bc they can move wherever

  1. How do these readings challenge common assumptions about why the racial wealth gap exists?

  2. What role does housing play in creating or limiting wealth across generations?

  3. How do the articles help explain why racial economic inequality persists even among middle-class families?