Growth of the Suburbs - and the Racial Wealth Gap
Developed by David M. Seiter
ACTIVITY 5: Deepening Understandings of Race
Wealth Accumulation: Six Jigsaw Readings
How did government housing policies help create the racial
john a. powell: First of all, in the 1930s, in order to
buy a home, you had to put 30%, sometimes 50% down to buy a home,
and you had to pay off the loan in five years, not thirty. In
the 1930s, this was the middle of the Depression, and consumers
were losing more homes than they were buying. The federal government
stepped in, and created the first serious national program around
housing. So it started making money available, and then later
it insured private investments.
Melvin Oliver: And to do that, they created the Federal
Housing Administration, whose job it was to provide loans, or
the backing for loans, to average Americans so they could purchase
The tables were turned completely around. The new terms of purchasing
a home was that you put 10% or 20% down, and the bank financed
80% of it - not over five years, but over thirty years - at relatively
low rates. This opened up the opportunities for Americans to own
homes like never before. The average person could own a home.
Furthermore, the FHA allowed no or low down payments for certain
kinds of homes.
So you had this great opportunity. But it was a color-coded opportunity.
How? In order for homes to receive financing, they would have
to be certified by home appraisers. The appraisers were given
written criteria that assigned colors to different types of homes.
Green was the highest value - green homes were homes that were
in all-white neighborhoods, usually suburban, and far away from
communities that were either integrated or all Black. Red was
the lowest value - red neighborhoods were in all-minority or mixed
communities and were usually in inner cities. These homes rarely
got mortgages. The vast majority of mortgages were reserved for
homes in all-white suburban areas. This appraisal method came
to be known as redlining.
This color-coded criteria was central in determining who got
loans and who didn't. They didn't say Blacks couldn't get loans.
But they did say communities in which there were few Blacks could
get loans. As a consequence, most of the mortgages went to suburbanizing
America, and it suburbanized it racially. Today metropolitan America
is made up of white suburbs and African American inner cities.
john a. powell: Up until then suburbs had been largely
the homes of the well-to-do. All of a sudden, it became cheaper
to buy a home in the suburbs than to rent a place in the city.
But this venture for acquiring a home was only available to whites.
So it redefined the racial geographic space in the United States
in a fundamental way, so suburbs became associated with whiteness
and cities became associated with people of color.
The national purse was put behind this game at the very time
that Blacks were making demands for inclusion and to end the Jim
Very little government funding was given to people of color.
In fact, there are a number of cases where whites who wanted to
get FHA loans were told by the federal government, the only way
they could do it was if they put racially restricted covenants
in their deeds.
Were people of color completely left out of the housing market?
john a. powell: Blacks weren't completely left out of
the housing market, but the housing market they were exposed to
was largely public housing. Public housing, first of all, was
built almost exclusively - with a few exceptions - in the central
city. And after World War II, we started building larger and larger
public housing projects, which are called "vertical ghettos."
All of a sudden you're concentrating large numbers of poor people
of color in one place, and then in the '50s and '60s, there's
also this idea of clearing out places where Blacks had lived before.
Some people called it urban renewal, other people called it urban
removal - we removed whole neighborhoods and sometimes these neighborhoods
were very vibrant. We'd run a freeway through the middle of it,
and they would build these giant erections in the central city.
This is a time when, also, the country was going through the
beginning of "de-industrialization," where jobs were moving out
of the central cities. So we're isolating people away from the
tax base, from good schools, and from jobs, and really building
ghettos for Black people.
Now, this was a federal program, but it was administered through
local control, so each community had complete control over whether
or not to build public housing, and how to build public housing.
And it's not surprising that many of the suburbs - in fact, most
- said no, we do not want any public housing. We do not want those
people out here.
And the federal government said fine. Even though we're the federal
government, even though we have the right to exercise control
over the federal purse, we will do it in a completely fragmented
way that will give each community a veto over who can live there.
And that's still the way we operate the federal housing program.
How does geography today do the work of Jim Crow laws?
john a. powell: In the 1940s and 1950s the whole country
was living in central cities or in rural areas. Suburbs as we
know them hadn't really come into existence. There was a tremendous
demand for housing at the end of World War II, and the federal
government stepped into the breach, and stepped into the role
of addressing the demand for housing, as it also stepped into
the role of addressing the demand for civil rights and inclusion
In creating the suburbs it was explicit that the suburbs were
for whites only. You had a couple of things happening at the same
time: You had the end of the war. You had Blacks coming to the
North and to urban areas in record numbers. You had demands for
civil rights, and you had the federal government essentially paying
white people to leave the central city and to live in this new
space - a white space - called the suburbs.
The structure of that is still what we're living with today.
So much of the work of Jim Crow laws was maintaining social distance
between Blacks and whites - it was not necessarily physical distance
before the turn of the century, especially in the South. But that
social distance became reinscribed as spatial distance between
Blacks and whites as a result of the housing policies after World
War II. Now whites lived in the suburbs, and Blacks and racialized
others lived in the city. Social differences became redefined
through these fragmented, racialized, metropolitan areas.
Melvin Oliver: Essentially, this resulted in the social
construction of racialized space - a space in which whites lived
in the suburbs, Blacks lived in the inner city. Furthermore they
created these differences, these vast differences in wealth. If
you look at the 1994 survey of income and program participation,
you can see that a homeowner that purchased a Levittown type home
in 1950 for about $5,000 now has about $300,000 in home equity.
That's an investment that has grown tremendously over time. According
to the same survey, an African American family that did not have
an opportunity to buy that home, or who had to purchase a home
in the inner city, has substantially less wealth. So that's how
you start to see how this huge gap between white and Black wealth
was created. These were FHA-financed homes.
Questions for READING C:
- How did government money and policies affect racial housing
and segregation patterns after WWII?
- How did the construction of segregated white suburbs affect
the fortunes of whites and African Americans?
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