Your Home’s Value Is Based on Racism

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Black Americans are often unable to build wealth from homeownership in the same way their white peers are, in large part because home prices are generally set by the people who make up the majority of buyers: white Americans. White families typically prefer to live in predominantly white neighborhoods with very few or no Black neighbors. Homes in these neighborhoods tend to have the highest market values because most prospective purchasers — who happen to be white — find them most desirable.

Black Americans, on the other hand, tend to prefer to live in racially diverse or all-Black neighborhoods. Research has shown that once more than 10 percent of your neighbors are Black, the value of your home declines. As the percentage of Black neighbors increases, the property’s value plummets even further.

A study published in The American Journal of Sociology in 2009 found that “race, per se, shapes how whites and, to a lesser extent, Blacks view residential space.” The researchers showed videos of neighborhoods with different racial makeups to Black and white participants and found that even after they controlled for social class, whites found the all-white neighborhoods significantly more desirable than either the racially diverse or all-Black neighborhoods. The mere presence of Blacks in a neighborhood made it less appealing to whites.

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So if a Black person like John buys a home in the diverse neighborhood he prefers, his home is likely to not appreciate in value as much as a home in a white neighborhood. But if he becomes a homeowner in a predominantly white neighborhood, making a good financial investment, social penalties can follow: Will a neighbor call the police as he enters his own home? Will he have to alert the police that his Black sons belong in the neighborhood and shouldn’t be treated as suspicious? Whatever they choose, Black people risk being penalized by white preferences.

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Enter tax policy to add insult to injury. The typical white family has eight times the wealth of the typical Black family, a racial wealth gap that’s fueled by tax subsidies for homeownership.

Between 1940 and 1950 a majority of white Americans became homeowners by riding a wave of anti-Black policies — public and private — that prevented Black families from buying in certain neighborhoods and from taking advantage of F.H.A.-insured loans. By the end of the 1950s, 98 percent of homes built with F.H.A. support after World War II were occupied by white Americans. Black taxpayer dollars were supporting a federal government that was denying them equal treatment.

At the same time that America was solidifying its status as a nation of white homeowners, the post-World War II defense industry was mobilizing and in need of workers. To enable those workers to sell their homes with tax-free gains and move to where the jobs were, the real estate lobby went to work. By 1951, a new tax provision allowed homeowners to avoid paying taxes on gains when they sold their homes, if they purchased a new home of equal or higher value.

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Black Americans are paying taxes into a system that benefits white homeowners. That is all the more true when you remember that most Black Americans are renters and can’t take advantage of any subsidies for homeownership. Only 44.1 percent of Black families, compared with 74.5 percent of white families, own homes.

The federal government should stop subsidizing a racist housing valuation system that’s made so by the preferences of white homeowners. It should repeal all federal tax subsidies for homeownership. Household rent is not deductible because it is considered a personal living expense. Why shouldn’t homeownership be treated the same way?

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