The Growth of the Suburbs - and the Racial Wealth Gap
Developed by David M. Seiter

ACTIVITY 5: Deepening Understandings of Race and Family
Wealth Accumulation: Six Jigsaw Readings


How did government housing policies help create the racial wealth gap?

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 a home.

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 Crow laws.

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 by Blacks.

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:

  1. How did government money and policies affect racial housing and segregation patterns after WWII?
  2. How did the construction of segregated white suburbs affect the fortunes of whites and African Americans?



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