How White Racism Destroys Black Wealth

There are a lot of reasons that home prices tend to be lower in black neighborhoods than in white ones. Decades of racist policies put in place by governments and private companies — segregation, redlining, deed restrictions, exclusionary zoning, the deliberate hollowing out of urban cores — have had the net effect of eroding the quality of life in many majority-black neighborhoods nationwide.

As the authors of a new Brookings Institution-Gallup study note, Zillow data shows that the median listing price of a home in a majority-black neighborhood in a major metro area is around $184,000, while the median listing in a neighborhood where blacks make up less than 1 percent of the population stands at over $341,000.

But the authors — Andre M. Perry and David Harshbarger of Brookings and Jonathan Rothwell of Gallup {snip} wanted to isolate the effects of racism alone — to peel off all the other explanatory variables until they could “detect how much racism depletes wealth from black homeowners,” as they put it. In the end, they were left with one number: $48,000.

That’s the amount the average home in a majority-black neighborhood is undervalued, relative to an identical home in an identical all-white neighborhood once you properly adjust for all the other structural and neighborhood characteristics that could plausibly affect that number. That’s the “cost of racial bias,” as the authors put it, “amounting to $156 billion in cumulative losses” accruing to black homeowners.

{snip} Home equity accounts for 54 percent of all the wealth owned by black households in the United States. That makes devaluation of black-owned homes particularly devastating for black families and contributes to the huge disparities between black and white wealth: In 2016, the median American white family had a net worth of $140,000, while the median black family had a net worth of $3,400.

{snip} “By controlling for commonly held causes of price differences including education, lower home quality, and crime, this paper suggests that bias is likely to be a large part of the unexplained devaluation of black neighborhoods.”

{snip} “If properties in black neighborhoods were priced equally as those in white neighborhoods, black children coming of age in the 1990s and 2000s would have had much more wealth to draw upon to pay for things like private schooling, tutoring, travel, and educational experiences, as well as higher education and greater access to higher scoring schools in the suburbs,” the authors write.

{snip}

“If we can detect how much racism depletes wealth from black homeowners, we can begin to address bigotry principally by giving black homeowners and policymakers a target price for redress,” the authors write. “Laws have changed, but the value of assets — buildings, schools, leadership, and land itself — are inextricably linked to the perceptions of black people. And those negative perceptions persist.”

[Editor’s Note: The study “The Devaluation of Assets in Black Neighborhoods,” is available here.]