ShareBy the end of the 1960s, African American families had every reason to hope that future generations would enjoy the prosperity and access to homeownership of White families. After a series of civil rights laws earlier on — outlawing employment discrimination, promoting voting rights and more — Congress capped the decade with the 1968 Fair Housing Act, barring discrimination in the sale and finance of housing. In principle, there were no more legal impediments to Black ownership and wealth accumulation.
The gap between White and Black homeownership rates is as wide today as in 1968.
Yet since that time, the wealth gap between White and Black households has persisted, and the gap between White and Black homeownership rates — at more than 30 percentage points — is as wide today as in 1968. African Americans remain far more likely to live in neighborhoods marred by the depressed property values, pollution and safety concerns associated with proximity to freeways, noxious industries, and waste dumps. Those facts raise a couple of key questions: Why do these disparities persist in a prosperous America? And what can we do about it?
How We Got Here
To explore how the prosperity gap persists to such a degree a century-and-half after slavery ended, we return again to the middle of the 20th century. Beginning on the eve of WWII, a series of federal policies — implemented at the state and local levels — served to exclude Black families from homeownership, devalue what they did own and even erase their homes and businesses from the map.
The National Housing Act of 1934 was a New Deal effort to promote homeownership, in part by, creating more accessible and longer-term mortgages, backed by the federal government. But not everyone would benefit. Looking to create a system for helping lenders assess the relative risk of mortgages, the federal Home Owners’ Loan Corporation (HOLC) worked with local real estate professionals to create “Residential Security” maps in every city over 50,000 in population. Neighborhoods were color-coded with green for “Best,” blue for “Still Desirable,” yellow for “Definitely Declining,” and red for “Hazardous.” This practice of using red to label neighborhoods as “hazardous” gave rise to the term “redlining”. (All available HOLC maps have been compiled on the website Mapping Inequality by the University of Richmond.)
“Those ‘hazardous’ areas were defined by the out-of-favor population de jure,” said Joe Minicozzi, principal of Urban3, a consulting firm that analyzes the link between land-use policies and property values. “A neighborhood with too many Black families would be hazardous, but so would those with other recent immigrants.” In Denver, for example, mappers noted a percentage of foreign-born families and ranked neighborhoods accordingly.
Black families feel the brunt of the lack of affordable options in cities where they may have lived for generations.
For Blacks, however, the question was “yes or no”: If yes, the zone was colored red for unfavorable. “Jews and Italians changed their names to assimilate, but Black people couldn’t change their skin,” Minicozzi said.
Because of federal policy under HOLC and later the FHA, the “hazardous” label meant buyers couldn’t secure mortgages for Black-owned homes nor could Black families buy in the inner-city neighborhoods where they lived. But moving to outlying areas, as millions of Whites did post World War II, also was off the table thanks to racially restrictive covenants — as required by the FHA as a condition of Post-WWII suburban, single-family home construction financing — on many developments that barred sales to Black families, said Bruce C. Mitchell, senior research analyst for the National Community Reinvestment Coalition (NCRC). “Redlining and racially restrictive covenants, along with steering by real estate agents, kept Black families from participating in the post-war housing boom and confined them to areas with depressed property values,” he said.
With the passage of the federal Interstate Highway Act in 1956 and urban renewal programs to eliminate “blighted” areas in the 1960s, “The neighborhoods where Black families were allowed to live became targets for major infrastructure projects,” said Brennon Thompson, fair housing policy and programs analyst for the NATIONAL ASSOCIATION OF REALTORS®. Looking for land to build urban renewal projects such as civic centers and stadiums, city leaders removed countless homes and businesses from African American neighborhoods. But highway construction was particularly destructive, cutting vast swaths through neighborhoods for their construction and leaving a legacy of pollution and dangerous streets in their operation. At the same time, Thompson noted, the highways opened vast areas for suburban development that often excluded Black families and resulted in the exodus of White residents from the cities further depressing city property values.
The first two decades of this century have created new twists on the story. An urban revival in the last decade-plus has seen an influx of more-affluent residents competing for housing, pushing up prices on city homes and land, while also making affordable, rental properties a target for redevelopment to meet the demand. Meanwhile, many jurisdictions restrict or limit more affordable small-lot or multifamily housing types by limiting large areas to one house per lot, Thompson said.
“Racially exclusive covenants evolved into exclusionary zoning,” he said, noting that the wealth gap means Black families feel the brunt of the lack of affordable options in the cities where they may have lived for generations. “Unable to afford the city, less-affluent Black residents have been pushed to older suburbs that are further from amenities.”
Black buyers today continue to face hurdles in obtaining mortgages and business loans.
Steps Toward Reversing the Legacy
“There are three things we have to do to redress historic inequities and their current manifestation,” said Andre M. Perry, a senior fellow at the Brookings Institution specializing in structural inequality. “Invest in people first. Second, invest in place … And third, divest from practices rooted in racism.”
Investing in people, in Perry’s formulation, begins by making it possible for more African Americans to achieve an ownership stake in homes and businesses. “You have to focus on restoring the value extracted by racism by making sure people have [ownership] equity,” he said. “Without that, anything else we might try is likely to fail.”
Black buyers today continue to face hurdles in obtaining mortgages and business loans. “The lack of inter-generational wealth transfers” leaves many without the ability to muster a down payment, Perry said. “A lot of people can’t get the credit they need because they’re saddled with debt,” another legacy of the gap in wealth and earnings. Countering the discrimination of the past means taking active measures to “discriminate in the other direction,” he added.
There are things we have to do to redress historic inequities.
Lenders have the opportunity to create products with the explicit purpose of helping communities that have historically been harmed and excluded,” Thompson agreed. He noted that the federal Equal Credit Opportunity Act and associated regulations allow creditors to set up “special purpose credit programs” to meet the credit needs of previously excluded groups. In 2022, a consortium of federal regulatory agencies issued a statement encouraging financial institutions to act on that ability.
Then last August, the Bank of America (BOA) announced just such a special credit program, dubbed the Community Affordable Loan Solution, to be offered in “certain Black/African American and/or Hispanic-Latino neighborhoods in Charlotte, N.C., Dallas, Detroit, Los Angeles and Miami,” according to a statement. For homebuyers who meet the criteria and complete a certification course provided by the bank and HUD-approved financial counselors, the program eschews conventional credit scores in favor of factors such as timely payment of rent, utilities, phone, and auto insurance. It also helps to lower payments by waiving the need for mortgage insurance. The bank had previously committed to make $15 billion in down payment loans and non-repayable grants to similar borrowers.
“If it’s successful,” Perry said, “it will open the doors for a lot of ‘invisible’ prime borrowers, people who are doing everything right but don’t have the generational wealth.”
The BOA program is just one example of the actions that banks should be taking, said Dedrick Asante-Muhammad, chief of organizing, policy and equity at NCRC. His organization has put a focus on getting banks to make specific commitments to lend to historically excluded, low- and moderate-income communities whenever they acquire or merge with other banks. NCRC has helped negotiate the creation of such “community benefit agreements” with 22 bank groups to make $639 billion worth of mortgage, small business, and other loans in such traditionally under-resourced areas.
Investing in Place: Healing the Highway Scar
Healing the places Black families have traditionally called home in America inevitably means removing, or at least mitigating the effects from, highway segments that deliberately eviscerated African American neighborhoods in the 1950s and 60s, Perry said. As examples: In New Orleans, La., an oak-lined boulevard through a largely African American neighborhood gave way to the Claiborne Expressway, an elevated freeway offshoot of I-10. In Atlanta, construction of multiple, intersecting interstates cut a gash through the prosperous African American downtown of Sweet Auburn and took out hundreds of homes and businesses in the Mechanicsville and Summerville neighborhoods. In Minneapolis/St. Paul, I-94 was routed through areas containing nearly all of the cities’ Black population, displacing 30,000 people in all.
In 2021, the federal government for the first time created a program with the intention of helping cities, their residents and business communities repair some of the damage from divisive infrastructure. Included in the 2021 Infrastructure Investment and Jobs Act, the Reconnecting Communities program provides $1 billion over five years for communities to explore whether and how to remove or restructure underused, outdated or decaying highway segments and thereby allow for surrounding neighborhoods to revive and redevelop. Grants under the program can go to local governments and community or business-led organizations for planning and design work, or to transportation agencies for capital improvements. Plans that become ripe for action down the road could be eligible for construction funding from several other pots of federal transportation dollars.
The program takes its inspiration from cities such as Rochester, N.Y., which for several years has been on an ongoing program of removing its 60s-era Inner Loop beltway, filling the trench it occupied and reconnecting the neighborhoods and streets it bisected. “The Inner Loop cut off neighborhoods and strangled downtown,” said Thompson, who is also a former community liaison for the Greater Rochester Association of REALTORS®. After many years of debate and planning, Rochester in the 2010s finally received the approval and funding to remove .6 mile of the eastern quadrant and open six acres of land for redevelopment and addition to the tax base. That project was deemed so successful that the city sought and has earned state and federal support to remove another 1.5 miles on the north side of the loop, freeing up 24 acres for redevelopment.
“The north piece was largely African American at the time of the highway construction and remains so, and so it needs to be carefully knitted back into the fabric of the city,” said Thompson. While in Rochester, he served on a Racial Equity Subcommittee the city created to engage with the community and ensure that the redevelopment “didn’t recreate the mistakes of the past.” The subcommittee put forward guidance toward a planning process with plenty of community engagement, as well as metrics to which the redevelopment should be held accountable.
Rochester, N.Y., has been on an ongoing program of removing its 60s-era Inner Loop beltway and reconnecting the neighborhoods it bisected.
According to Jim Yockel, CEO of the Greater Rochester Association of REALTORS®, local REALTORS® are committed to the planning process and promoting housing in the region. “Our association members understand and are active in the north Loop area and are uniquely qualified to support equitable opportunities in housing and homeownership for residents who have been marginalized in the past,” Yockel said. “We are actively working with community leaders, industry partners and elected officials to ensure that this is a key aspect as we develop the next generation of housing.”
Removing Systemic Racial Bias
At the municipal level, a number of governance systems — from planning and zoning to property taxation — contain elements of systemic racial bias, Perry said. “Research shows that majority black communities are paying proportionally more in taxes. It’s a legacy of municipalities claiming that these disparities are because Black people use more resources,” he added. “But really it’s a way to balance the books on the backs of Black taxpayers while lowering the bills for those in wealthier areas.”
Minicozzi said he has confirmed this tendency to tax properties in largely Black areas at a higher effective rate in his own examinations of cities in every region of the country. In city after city, he noted, “We are overtaxing the lower-value properties and subsidizing the rich people’s taxes.”
In the wake of the George Floyd murder in 2020, Minicozzi’s home city of Asheville, N.C., won national attention by being one of a few cities to approve reparations for Black residents. While stopping short of providing direct payments, the measure said the city would provide funding to programs geared toward increasing homeownership and business and career opportunities for Black residents, who make up about 12 percent of the city’s 93,000 inhabitants.
While programs to boost ownership are critical, said Minicozzi, Asheville needs to fix a property tax system that extracts proportionally more from Black homeowners than from wealthy. Minicozzi and his firm, which specializes in evaluating tax yields based on land use, examined Asheville’s tax base, and learned that homeowners in traditionally black neighborhoods pay a significantly higher tax per square foot than those in wealthier areas. As an illustration, in Asheville over the last 20 years while most homes in the upscale Biltmore Forest neighborhood were assessed at stable or even lower values, the opposite was true for Shiloh, a Black neighborhood bisected by freeway construction in the 1960s. Shiloh homeowners have seen their tax bill grow more than $4 million, while Biltmore Forest dropped by more than $1 million, Minicozzi’s figures showed (see graphic above).
Mincozzi has a message for localities after years of subjecting Black residents and their neighborhoods to redlining, restrictive covenants, and displacement and environmental impacts from major infrastructure projects. Those actions significantly degraded property values and thereby the local tax base. “You paid to be racist,” Minicozzi said he tells local officials. “You took that taxable value and flushed it down the toilet.
“It’s a bitter irony, then, to see Black homeowners paying taxes at a higher effective rate. Everybody should be paying a uniform rate. We need to end the subsidy to the wealthy.”
Getting to “Inclusionary” Planning and Zoning
In seeking to combat the national crisis of housing affordability, advocates across the country have labeled “single-family” zoning — one house per lot — as exclusionary by artificially suppressing housing supply and allowing only the most expensive home types to be built. Some cities and states are starting to respond to that message. Seeking to fulfill its own Racial Justice Initiative, in 2022, Seattle eliminated the term “single family” as a zoning designation in preparation for a new plan that is considering allowing for more “missing middle” housing types in more areas of the city. The Washington Legislature in 2023 considered multiple bills to require localities to allow for more housing in city neighborhoods, particularly those close to rail transit.
“I’m not sold on zoning changes as being enough to create integrated communities, but it’s a start,” Asante-Muhammad said. He likened it to anti-discrimination laws and regulations — a necessary precondition but nowhere near enough to tilt the scales toward economic parity and intergenerational prosperity.
In examining what it takes to move from exclusionary to inclusionary planning and zoning practices, Asante-Muhammad pointed to the experience of Columbia, Md., the city where he grew up and is now raising his own family. Amid the civil rights tumult of the 1960s, Columbia was planned by social-minded developer James Rouse as a culturally diverse city, where anyone who worked there could afford to live there. It was conceived as a series of villages with a mix of stand-alone houses, townhouses, and rental apartments, each with schools, shopping, and recreation close at hand. The first half-dozen villages hewed to Rouse’s vision, and as a result were remarkably well-integrated, Asante-Muhammad and his colleagues discovered in an analysis of Columbia released in February 2023.
“On the positive side, the holistic community planning was so important to deal with deep structural inequality,” he said. “Columbia had single family, apartment and townhomes all in the same neighborhood, so whether or not you were someone who could obtain a mortgage, people would live together and interact in public spaces, in schools, playgrounds and on the walking paths. For its day, or any day, that was an unusual success.
“It also was important that the community was located in a high-income, high growth area like Maryland. On the less positive side, once Rouse had moved on, future developments drifted toward being exclusively expensive houses. Once you allow for that exclusive development you were allowing for a market-led segregation.”
Asante-Muhammad added an observation for communities looking to undo segregation by race and income: “Eliminating exclusive zoning won’t solve the issues, but if you ensure there are lower-cost housing types, as well as rentals, and consciously include affordable housing, it will make a difference.”
The real estate industry over many decades has implemented policies and practices that excluded Blacks, said Thompson, so REALTORS® have a special responsibility to advocate for inclusion. “It’s important for communities to have real discussions, to talk about the real impacts Black families have felt, how they continue today, how zoning codes affect accessibility to neighborhoods, and to think through how to create codes and practices that allow neighborhoods to be inclusive and accessible. The REALTOR® voice is critical in those conversations, because they have an ear to the ground, they know neighborhood trends, the housing market and the nuances of changes in the communities.”REALTORS® have a special responsibility to advocate for inclusion.