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Segregated Housing and the Racial Wealth Gap

In the United States, buying a home is the key to achieving the American Dream. Forty-two percent of the net worth of all households consists of equity in their homes - that means for most Americans, their homes are their single largest asset. Homeownership provides families with the means to invest in education, business opportunities, retirement and resources for the next generation.

When the federal government stepped in to make it possible for most Americans to finance the purchase of their own home, they essentially paved the way for millions of average white Americans to begin their own wealth-building. But the policies they endorsed made it very difficult for minorities to attain the same resources and opportunities, resulting in deeply segregated communities and an enormous wealth gap between whites and nonwhites that persists to this day. In 1995, the median white family had over 8 times the net worth of the median Black family. The gap is even greater for Latinos - the median white household has over 12 times the wealth of the median Latino family.

Race, wealth and life opportunities are intertwined in the United States. Today, white and nonwhite communities are still "separate and unequal" and the gap continues to grow, long after the Civil Rights era. Wealth, and the opportunities it affords, is passed down through successive generations. Along with it, Americans have also inherited a legacy of inequality that continues to shape the future. Segregation and the wealth gap between whites and nonwhites did not arise on their own. And because they are so deeply entrenched in the institutions that structure our society, they will not fade away by simply outlawing discriminatory policies.

What is the state of segregation in the nation's metropolitan areas today? 

The U.S. population is more racially and ethnically diverse than ever before. Yet for the most part, America's neighborhoods remain highly segregated. The only areas that have become more integrated since 1970 are cities with small minority populations.

On the whole, segregation is highest in the major metropolitan areas of the Midwest and Northeast and lower in the West and South.

The 2000 census shows that overall the nation's largest cities have lost large numbers of white residents to suburban and outlying areas. The urban populace is becoming increasingly Latino and Asian, with a slight increase in Black residents.

According to the Lewis Mumford Center at the University of Albany, segregation has increased in almost every large suburban area from 1990 to 2000.

Across the nation, four out of five whites live outside of the cities and 86 percent of whites live in neighborhoods where minorities make up less than 1 percent of the population. In contrast, 70 percent of Blacks and Latinos live in the cities or inner-ring suburbs.

According to the Census Bureau's 1999 American Housing Survey, 74 percent of suburban residents owned their own homes, while only about half of urban residents are homeowners. The proportion is similar when you compare homeowners by race - in 1999, 74 percent of whites were homeowners, while only 45 percent of Latinos, 46 percent of Blacks and 51 percent of Asians owned their homes.

Whites are still the most segregated of all racial groups, have the largest suburban presence and are most likely to own their homes. African Americans continue to be highly segregated and as Latinos and Asians gain a larger share of the population, they are becoming increasingly segregated from whites as well. 

When whites relocated to the suburbs, their strong tax base and businesses followed. The result: a huge discrepancy in the quality and quantity of resources, jobs and public services in central cities and inner-ring suburbs inhabited by mostly minority populations. As white communities continue the trend of isolating themselves and their resources, the pattern of flight and divestment repeats, and the wealth gap grows larger. 

Communities cannot be expected to accomplish integrated, stable neighborhoods on their own. In a 2002 study by the Harvard Civil Rights Project, analysts found evidence of an overwhelming trend toward school district resegregation. Court-ordered busing once made Southern schools the most integrated in the country. However, when many of these programs expired in the 1990s, the proportion of Black students in majority-white schools decreased by 13 percent. Until the problem of residential seclusion is addressed, schools will continue to resegregate by default.

But aren't some communities segregated by choice? What about the Chinatowns, Little Ethiopias and other ethnic enclaves?

People sometimes assume that certain ethnic or racial groups segregate themselves "voluntarily," but there are many factors involved. These groups often face discrimination when they try to enter established, primarily white communities. Limited job and economic opportunities, language barriers, and shared culture can also influence many groups to cluster. Ethnic enclaves, however, are very different from impoverished urban ghettos. Apart from "first-settlement" immigrant neighborhoods, rarely do ethnic groups ever become as highly concentrated as many Black communities. Ethnic groups can tap into various types of resources unavailable to areas of concentrated poverty: networks of friends and relatives, "niche" occupations and businesses, etc. Furthermore, ethnic enclaves are more transitory in nature - as stepping stones to entering more privileged, resource-rich communities. Still, many groups (such as Latinos and Asians) will face more barriers based on racial discrimination as they look to move out. 

Confronted with racially discriminatory policies, minorities could not take advantage of the programs that made it possible for millions of people to buy homes in the suburbs. People of color remained in the cities while they witnessed their white counterparts leave in droves. Today, mostly minority inner cities are characterized by the unique phenomenon of concentrated poverty. Inner-city residents face intense spatial isolation and inadequate public resources, education and economic opportunities. As more and more people leave, costs for basic services rise and the poor become even poorer. The average inner city consists of abandoned buildings, total business disinvestment, and resource-depleted schools leaving it vulnerable to violent crime, prostitution, and drugs. By the time anti-discriminatory laws were passed, suburban whites were enjoying soaring property values and minorities now faced the economic barriers that replaced those initially created by race. 

Moreover, after decades of segregation, a culture of poverty has become associated with people of color - particularly African Americans. Inner-city residents are not only surrounded by crime, drugs, homelessness and poverty, they are blamed for it. As john powell says, "Not only have we racialized our space, but it is through space that we do our 'racing' in the 20th century." 

How does discrimination, both past and present, continue to affect the life opportunities of nonwhites?

In 1992, The Federal Reserve Bank of Boston released a study showing that Black and Latino mortgage applicants are 60 percent more likely to be turned down for loans than whites, even when they share similar employment and financial backgrounds. 

According to a 1998 report by the Association of Community Organizations for Reform Now (ACORN), African-American mortgage applicants were rejected 217 percent as often as whites - up from 206 percent in 1995. Latino applicants were denied 183 percent as often as whites - up from 169 percent in 1995.

According to a Department of Housing and Urban Development study, high-cost loans are offered five times more often in Black neighborhoods than in white neighborhoods. Furthermore, homeowners in upper-income Black neighborhoods were twice as likely to receive these sort of loans than homeowners in low-income white neighborhoods. In 1998, 9 percent of home loans in white neighborhoods were high cost compared to 51 percent of loans in Black neighborhoods.

In 2003, we celebrate the 35th anniversary of the 1968 Fair Housing Act. Nonetheless, housing discrimination persists in subtler forms. Minorities still experience discrimination on an individual level as well as through a variety of systematic practices. Realtors who practice racial steering will direct nonwhites to segregated areas or direct whites away from integrated areas. Minority mortgage applicants who are regularly denied loans more often than their white socioeconomic equals will by necessity turn to predatory lenders who charge them higher-cost loans than their credit histories warrant.

As long as minorities are still barred from desirable communities and lose out on opportunities to accumulate wealth through rising property values, socioeconomic inequalities between racial groups will continue to be reinforced. Even if individual incidences of discrimination are no longer, the current housing market makes it almost impossible for a family with little or no assets to enter it. As home prices in resource-rich communities continue to rise, low to middle-income families must choose between renting or buying in at-risk, often segregated suburban communities. 

Ironically, defenders of the racial bias in the home lending system will point to the low net worth of minority applicants, even those with high incomes. As George Lipsitz points out, "net worth is almost totally determined by past opportunities for asset accumulation, and therefore is the one figure most likely to reflect the history of discrimination."

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