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Relative status of different groups within the U.S. population.
Income differentials when matched by education. Comparing groups by wealth shows the real extent of inequalities that exist Wealth tells the real story because 1) it reveals the structural inequalities and 2) we can see the outcome of practices which have continued over time.
INCOME
WEALTH (net worth)
Net Worth: The straightforward value of all assets less any debts. Why does this exist? The most important source of wealth for most people is their home, so it is necessary to focus on housing to understand the wealth differentials.
HOUSING We have to recognize that segregated housing markets continue to exist. Detroit is rated the second most segregated city in the country To desegregate housing entirely, 78% of blacks in Northern cities and 67% of blacks in Southern cities would have to move to new neighborhoods. By 1993, 86% of suburban whites still live in places in which Blacks represent less than 1% of householders (Massey and Denton) Continuing segregation is not a choice blacks freely make; rather, it is a social condition that results from racial steering, redlining, hostile white attitudes, and lender discrimination (Faegin and Sikes)
MORTGAGE LOAN REJECTION RATES Federal Reserve Bank studies show that black and Hispanic applicants were denied mortgage loans two to three times more often than Whites. Banks turned down high-income minorities in some cities more often than low-income whites. Even after controlling for financial, employment, and neighborhood characteristics, "black and Hispanic mortgage applicants are roughly 60 percent more likely to be turned down than whites" (Oliver and Shapiro, 1997) Why? Loan officers are far more likely to overlook flaws in the Credit records of white applicants or to arrange creative financing for them than they were in the case of black applicants. "whites seem to enjoy a general presumption of creditworthiness that black and Hispanic applicants do not, and that lenders seem to be more willing to overlook flaws for white applicants than for minority applicants."
INTEREST RATE DIFFERENTIALS Overall, Blacks pay a .54% higher rate on home mortgages than Whites. A half-point difference on the median Black home mortgage of $35,000 adds up to a $3,951 over the course of a twenty-five year loan. Every Black homeowner thus is deprived of nearly $4000, money that potentially could have been invested in financial instruments earning interest and accruing further capital. On home loans made without VA or FHA participation Blacks pay nearly a full percentage point more. Intergenerational Wealth Transfer: Preliminary findings from recent data suggest that White home buyers are twice as likely to receive family assistance in purchasing a home as blacks (Los Angeles Survey of Unrban Inequality)
HOUSING VALUES Homes owned by Black couples are valued substantially lower than those of similar white couples in 1980. Using national data for married couples, Black-owned houses were $11,352 less valuable than White owned houses after making adjustments for racial differences. In general, homes of similar design, size, and appearance cost more in White communities than in Black or integrated communities. Their value also rises more quickly and steeply in White communities. The mean value of the average White home increse $53,000 in comparison to $31,100 for Black homes from 1967 through 1988. What are the effects of this? Depressed home values adversely affect the ability of Blacks to obtain home equity loans or loans for business start-ups or education. Racial isolation restricts individuals to information about and access to jobs and better quality schools.
The Cost of Being Black in the Housing Market: 10.5 billion paid to banks in extra interest 58 billion in lost home equity If mortgage approval was the same for whites, 14,200 more blacks per year would own homes. That's 355,000 over a period of 25 years - 13.5 billion. Current generation of Blacks about $82 billion. If this continues unabated, it will cost the next generation of black homeowners $93 billion.
The FHA was established in 1939 to bolster the economy and increase employment in the construction industry. People could buy homes with a small down payment at reasonable interest rates There was over a 100% increase in housing purchases within the first 10 years. It was limited however, to suburban housing. Why: 1) bias towards single family detached homes (cities were congested so new housing went to the peripheries), 2) bias towards new purchases rather than fixer-uppers and 3) continued use of the "unbiased professional estimate"
The Unbiased Professional Estimate Government introduced standardized appraisals in which they considered the racial composition of a neighborhood to be a variable in determining the "productive life of the housing". Communities that were changing racially or were already Black were deemed undesirable and placed in the lowest category. The cateories, assigned various colors on a map ranging from green for the most desirable (all new, all-White housing) to red (all-Black areas). These designations were then used by the FHA loan officers who made loans on the basis of these designations.
The FHA Underwriting Manual stated openly that"if a neighborhood is to retain stability, it is necessary that properties shall continue to be ocupied by the same social and racial classes". It recommended that "subdivision regulations and suitable restrictive covenants" are the bst way to ensure neighborhood stability.
Effects: Blacks were systematically locked out of the greatest mass-based opportunity for wealth accumulation in American History. |