The U.S. government partnered with the private sector for decades to prevent Black Americans and immigrants from owning homes, and while explicit rules regulating where people of color live were outlawed in 1968, the legacy of racial segregation in undervalued neighborhoods still reverberates throughout the country.
Why it matters: Owning a home is an integral piece of the American dream, and the single most important driver of wealth generation and financial security — especially for Black households.
The catch: Federal and state governments created policies to maintain and intensify segregation. The business community supported that discrimination by using racial criteria to make decisions about lending, property valuation and rental rates.
How it worked:
- Racial covenants: Starting in the 1920s, realtors and developers wrote language into deeds to prevent anyone who wasn't white from buying property.
- Redlining: The federal Home Owners’ Loan Corp. created "residential security maps" in the 1930s based on evaluations from lenders, developers and appraisers.
- The lowest-rated, "hazardous" areas were outlined in red. The maps reinforced racial and income segregation, deterred investment in non-white communities and depressed home values — a dynamic that still exists in a majority of redlined areas today.
- Realtors: The profession required racial discrimination.
- The National Association of Realtors recently issued a public apology for its past.
The big picture: Redlined maps are gone but the inequality they helped create has endured. Limiting the ability to build wealth through the value of a home touches future generations since houses can be passed on as inheritance and also tapped for anything from college funds to seed money to start a business.
“Redlining is still hardcoded in our cities, and that manifests itself in what home values are doing now,” says Cheryl Young, senior economist at Zillow.
Asian American homes are often located in pricey geographies like California, where 30% of all Asians live, making their home values higher than those of Black and Hispanic homeowners, Young says.
- Non-white Americans have a harder time finding homes — thanks to unequal treatment — and financing them at affordable rates using traditional mortgages.
- Being blocked from homeownership means more people of color rent and pay much more for the privilege. Higher rents equate to lower savings cushions and more exposure to eviction.
By the numbers:
- Housing equity makes up nearly 60% of total net worth for Black homeowners, compared with 43% for white homeowners, according to a recent report from the Urban Institute.
- Even so, Census Bureau data shows the rate of homeownership for Black (42%), Hispanic (48%), American Indian or Alaskan Native (51%), Asian or Native Hawaiian/Pacific Islander (58%) Americans is much lower compared with 72% for white Americans.
The intrigue: If you think federal policies have changed to improve life for people of color, the reality is very different for Native Americans. Thunder Valley Community Development Corp. executive director Tatewin Means says few Native Americans feel the federal government will solve the housing crisis soon. "We keep expecting a broken system to work," Means tells Axios’ Russell Contreras.
The bottom line: “Because housing was such a driver of intergenerational wealth in the 20th century, it is hard to say that anything else measures up to driving and worsening wealth disparity between people of color and white families in the last century," says Robert Nelson, a historian focused on housing and urban history at the University of Richmond.
- "It is one of the main expressions of white privilege and systemic racism.”