The Titanic Wealth Gap Between Blacks and Whites

The gap between black and white wealth is nothing new. Researchers have studied it for decades, people have lived it for longer, and comedians—from Chris Rock to Dave Chappelle—have used it to craft biting humor. What's novel is the extent to which its has exploded over the last 25 years.

According to a recent study from the Institute on Assets and Social Policy at Brandeis University, in which researchers followed 1,700 working-age households from 1984 to 2009, "the total wealth gap between white and African-American families" has nearly tripled, "increasing from $85,000 in 1984 to $236,500 in 2009." And more than 25 percent of the gap is attributable to homeownership and other policies associated with housing. Indeed, the disproportionate influence of housing on black wealth is reflected in this staggering statistic: "Overall, half the collective wealth of African-American families was stripped away during the Great Recession."

It's fitting Brandeis released this report during a week where the Supreme Court will debate a challenge to the Voting Rights Act. The nut of the argument—aimed at a provision requiring federal scrutiny for districts with histories of racial discrimination in voting—is that we're past the problems of overt racism. Which is true! Casual racial prejudice is taboo, blacks exercise a fair amount of political power, and just last year, the country re-elected its first African American president—a milestone that might be more significant than his initial victory.

These are impressive gains. But they aren't the whole ballgame. Much of the actual structure of racism remains, and that's a much larger obstacle to equality of opportunity. Unfortunately, few Americans understand the extent to which anti-black racism was an organizing principle for public policy through much of 19th and 20th centuries. To borrow from The Atlantic's Ta-Nehisi Coates, "It is not enough to merely understand segregation as a means to keep the 'races' separate. Segregation [was] about rendering black people a permanent underclass."

The truth of that is plain in the history of American housing policy. For decades, policymakers at all levels of government worked to keep African Americans out of good housing and good neighborhoods, confining them to low-income areas with poor services and worse opportunities. The explicit goal was to limit black mobility—and it worked. The policies were a huge success. Here, again, is Brandeis University:

The number of years families owned their homes was the largest predictor of the gap in wealth growth by race. Residential segregation by government design has a long legacy in this country and underpins many of the challenges African-American families face in buying homes and increasing equity.

The chain of causality is straightforward: Because forced residential segregation "artificially lowered demand," it placed a "ceiling on home equity for African Americans who own[ed] homes in non-white neighborhoods." By contrast, public policy encouraged white home ownership and upward mobility. With more value in their homes, whites were "far more able to give inheritances or family assistance." As the report notes, "white families buy homes and start acquiring equity an average eight years earlier than black families."

It goes further: "Because whites are far more able to give family financial assistance, larger up-front payments by white homeowners lower interest rates and lending costs." And of course, due to historic differences in access to credit, past discrimination that confined blacks to low wage, low mobility jobs, and said segregation, "the homeownership rate for white families is 28.4 percent higher than the homeownership rate for black families."

None of this is particularly hard to imagine. Let's say your (white) grandfather fought in the Second World War. He came home, got a college education under the G.I. Bill, and took advantage of a low interest mortgage from the Federal Housing Administration to purchase a home in the newly-formed suburbs of Philadelphia. As more and more people move to the area, the home climbs in value. In the meantime, your grandfather got married—further increasing household wealth—went to law school—again, relying on low interest loans from the government—took a job in the city, and built his nest egg. When your mother finished high school, she went to college—financed, in part, by your grandfather's savings—and when she got married, her parents (and her husband's parents) helped make the downpayment on her first home, giving her room to accumulate her own savings and make her own investments with her husband. And in turn, all of these advantages are passed on to her children.

The path for a similarly-able black G.I. wouldn't have been so easy. If he managed to get funding for an education, post-war, there were only so many schools he could attend in the country. Let's say he graduates, gets married, and tries to buy a home in the suburbs of Atlanta (he went to Morehouse)—restrictive covenants make that impossible, and even if it were, the federal government wouldn't make the loan at a low interest rate, if at all. He moves into a lower income neighborhood—closer to the city—with more crime, fewer businesses, and worse schools for his kids, and thus begins the accumulation of disadvantages, accelerated by the ongoing flight of whites from the area.

The key thing to note about all of this is that the original position of advantage for whites—and forced disadvantage for blacks—was the only one requiring outside intervention. Past that, advantages and disadvantages built upon themselves on a predetermined path. Jim Crow could have ended in 1950, and we still would have a large disparity between black and white wealth. As it stands, public policy worked to immiserate blacks for another 15 years, making the problem even worse.

I'm tempted to say reasonable people can disagree about the extent to which ameliorating this requires government intervention. But that's not true. For most of our history, keeping blacks poor was a key objective of American public policy. The current situation with black wealth—and mass incarceration, among other things—is a testament to its success. And while my inclination is to say that we should focus on generating growth and mobility for all Americans, I'm not sure if that's enough—even the boom of the 1990s left African Americans at a disadvantage relative to everyone else.

In other words, I'm increasingly convinced that weighting the scale on the other side—and making the upward mobility of low-income blacks a priority—is the only way to repair the damage. Given our politics—and the overall mood of the country—this would never happen. But making the point is still important.

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