Housing discrimination persists leaving people of color “no room at the inn”

This Prayer-Study-Action was researched and written by the Pax Christi Anti-Racism Team.

PRAYER

Jesus, when you and your Holy Family most needed a safe, warm, and secure home, no dwelling was available to shelter you.

There was no room at the inn.

Today, too, there continues to be no room at the inn for our sisters and brothers of color.

Give us the clarity to recognize and acknowledge the many ways in which whites and their families continue to enjoy unearned and unfair advantages in access to housing, and to the host of attendant financial benefits that home ownership brings, down through the generations.

Help us to identify and eliminate the many legal and social obstacles – some overt, many disguised – that our society erects to prevent people of color from having the same opportunities as their white neighbors to enjoy housing stability.

Give us the courage to work and speak publicly to redress these grave injustices.

And give us the grace to embrace all as our neighbor – as we wait, and work, for the day when all neighborhoods reflect the composition of the world itself.

STUDY

STILL NO ROOM AT THE INN FOR PEOPLE OF COLOR 

The Ability to Purchase a Home – a Key Factor in the Affluence and Generational Well-Being of Generations of White Americans – Continues to Be Denied to People of Color                                                      

Home ownership has long been the key to upward mobility for white families. It has permitted white families to live in neighborhoods with good schools and services, and enabled white families to transfer significant wealth – on a tax-advantaged basis – to succeeding generations.

People of color, however, continue to be denied the opportunity to participate equally in the wealth and stability-producing rewards of home ownership.

The Impact of Income Inequality on the Ability to Purchase and Pay the Costs of Home Ownership

A major factor contributing to the differences in home purchasing power is income disparity by race. Income inequality across the races is becoming more extreme. Data suggests that the modern economy leaves behind large swaths of the country. Nationwide, about 25% of households earn six-figure incomes, while approximately 22% of households earn less than $25,000 annually.  Income disparity has both racial and geographic characteristics. Many of America’s elite zip codes are in city centers, especially on the east coast and the west coast, where large number of households make over $100,000 – in sharp contrast to many southern counties, where over a quarter of households earn less than $25,000.

Income in this country is unequally distributed by race – and particularly between white and black households. African-American families have a fraction of the income of white families, leaving them more economically insecure and with far fewer opportunities for home ownership.  The median household income for white, non-hispanics is about $61,000; for blacks,  $39,000, and for hispanics, $46,900.

The median household income of black families in 16 major metropolitan US housing markets (Atlanta, Boston, Chicago, Dallas, Detroit, Houston, Los Angeles, Miami, New Orleans, New York, Philadelphia, Phoenix, San Francisco, Seattle, St. Louis, and Washington DC)[1] is below the income required to pay principal, interest, taxes, and insurance on the average home in these markets.  (A recent report documented, for example, that there were no homes listed for sale under $500,000 in Washington DC. )  The median hispanic household income only exceeds the required income in St. Louis.  By contrast, the median family income of white, non-hispanics exceeds what is necessary to pay monthly home ownership costs in 10 of these 16 metropolitan areas listed.

Even when minorities can afford to purchase home, they are often not able to afford to live in more “desirable” neighborhoods, where crime is lower, schools have more resources, and property values are more stable. Detroit’s large income disparity exists between the Black-inhabited downtown and outlying suburbs which are mostly white.  Similarly, in LA, economic opportunity is spread unevenly across the city’s geography:  wealthy households are concentrated in coastal areas, like Hollywood and Santa Monica, and the hills overlooking the city, while the low-income parts of LA are downtown, to its south, and in the area east of the city. In the New York metropolitan area, Manhattan neighborhoods are mostly wealthy, except for parts of the Lower East Side and the northern part of the island. While west and North Philly grapple with extreme poverty, the Ardmore area along the Philadelphia Main Line is much more affluent. Similarly, Houston has an outer ring of affluent suburbs and pockets of rich neighborhoods downtown.

Home Ownership and Inheritance is Highly Favored –and Publicly Subsidized – Under U.S. Tax Law                 

Our nation’s tax system has long placed home ownership on a favored basis – extending numerous tax and social benefits, as well as social standing, to homeowners.  Purchasing a home can provide a buyer with significant tax savings. A portion of one’s home-mortgage payment and property taxes – unlike a rental payment – is tax-deductible. And unlike rental payments, mortgage payments – to the extent the home increases in value – become part of the homeowners’ nest egg, for the future:  a significant benefit for retirees and others living on a fixed income, helping stabilize their later years, and those of their families.

Homeowners can also tap into the value of their homes to qualify for home-equity loans or lines of credit, paying significantly less interest on those loans than would be required to repay exorbitant credit-card loans.

Home Ownership Has Made Possible the Significant Transmission of Wealth to Succeeding Generations of White Families                       

There are many financial advantages to inheriting a home. The value of a home bequeathed to another is not taxed until the home is ultimately sold; at that point, moreover, the tax basis is determined on “stepped-up” basis – i.e., the value of the home not at the time of its original purchase, but instead at the time of the death of the purchaser. So to the extent the home has increased in value, its transfer results in a financial windfall to the inheritor.

Inheriting appreciated real property gives the recipient not only a secure home in which to live, as well as a cushion against personal financial challenges, but also frees up other resources that the inheritor might otherwise have had to spend on housing, enabling the inheritor to pay, for example, for a pricey, debt-free education for his or her own children, thereby significantly expanding and enhancing those children’s futures, as well (and on down the line, through generations).

Access to, and the Benefits of, Home Ownership Continue to Be Deliberately and Systemically Denied People of Color       

Numerous federal policies have had the purpose and effect of denying black families the same rights and opportunities to purchase housing extended to Whites.

The United States Supreme Court, in Corrigan v. Buckley (271 U.S. 323 (1926)), upheld the use of racially-restricted covenants in real-estate contracts, preventing particular groups of people – primarily African-Americans – from purchasing homes in particular neighborhoods or communities.  While, decades later, the Supreme Court later ruled enforcement of such contractual covenants unconstitutional (Shelley v. Kraemer, 334 U.S. 1 (1948)), such exclusion still occurs, in practice.

GI Bill Opportunities for Vets Proved More Illusory for Blacks Than for White Veterans                                  

Pursuant to the 1944 GI bill – which extended significant mortgage guarantees to lenders giving housing loans to returning vets – millions of white veterans were able to secure mortgages to purchase new homes. Black veterans, however, were effectively denied, or received reduced access to, this significant benefit, because they were still foreclosed by local restrictive covenants, and by discriminatory local policies, from being able to obtain mortgages from racist local lenders to purchase homes in desirable neighborhoods.

“Redlining”

Beginning in the 1930’s, federal agencies – including the Home Owners Loan Corporation and the Federal Housing Administration – prepared and distributed color-coded maps of residential areas, delineating neighborhoods in which financial institutions should be wary of investing.   These maps depicted black neighborhoods in red (hence, “redlining”). Local banks and mortgage brokers, relying on these maps in making loan decisions, frequently denied 30-year mortgages to purchasers of redlined properties, thereby preventing black would-be-purchasers from acquiring homes. Redlining also depressed the values of homes lying within its confines, reinforcing racial segregation.

Significant Racial Discrimination in Home Ownership-Opportunity Persists Today   

While the formal practice of “redlining” was outlawed by the 1968 Fair Housing Act, the practice of excluding people of color from certain neighborhoods and communities continues – albeit in new guises – today. Banks are still more likely to extend housing loans to whites – even in lower-income neighborhoods – than they are to people of color.

An article in “The New York Times,” March 8, 2018, at p. A26, reported on a troubling study by the Center for Investigative Reporting, appearing on the Center’s online publication “Reveal” (https://www.revealnews.org/blog/state-attorneys-general-probe-lending-disparities/) , that had uncovered a stark pattern among several major metropolitan areas of people of color being far more likely than were whites to be denied housing loans, even when the applicant’s income, loan amount, and other factors were taken into account.  Upper-income black applicants were even more likely to be denied loans, vis-à-vis their white financial counterparts, than were lower-income black applicants vis-à-vis lower income whites: a finding giving lie to the myth that becoming wealthier will help people of color avoid racial discrimination. An additional significant finding was that more affordable mortgages issued in historically black neighborhoods were being given to new white arrivals in those neighborhoods, than to longtime black residents of those neighborhoods.

Conclusion

In the area of home ownership, as in so many other areas of daily life, Jim Crow persists, in new guises.  The “American Dream” of family home-ownership continues to be a dream denied to People of Color.

APPENDIX:

Source of Appendix data: https://statisticalatlas.com/United-States/Overview
http://www.businessinsider.com/monthly-cost-home-us-metro-areas-2017-8
and US Census data

ACTION

1. Take time to review the study by the Center of Investigative Reporting described here. Do you do your own banking with any of the banks whose practices are discussed in that study?  If so, contact the bank to make clear that you expect it to exercise its lending decisions in a non-discriminatory manner – and that your continued relationship with that bank will hinge on its acting fairly to all.
2. Contact your local State Attorney-General and Member of Congress to express your support for an investigation of racial disparities in mortgage lending.
3. Read more about the history of housing discrimination in our country.
4. Share your knowledge with others.
5. Write a letter to the editor of your local paper, expressing your concern about racial discrimination in home-mortgage lending.

[1]  See detailed Chart attached as an Appendix.