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 does the housing market continue to perpetuate racial
Dalton Conley: The housing market is a place where culture
meets economics - where values about what people want and where
they want to live actually influence prices. Whites control the
market by virtue of pure numbers, being the largest group. So
when whites want to live somewhere, prices go up, and when whites
don't want to live somewhere, prices go down.
If you compare housing in Black and white neighborhoods that's
otherwise exactly equal - the quality of the housing is the same,
the income level of the residents is the same, education system
is the same, almost everything is the same - you'll find that
the white housing will be worth more precisely because it's white.
Because whites are the biggest group in the marketplace, their
preferences count the most in terms of supply and demand. So wherever
whites want to live, housing values will be high.
The flip side is that if whites don't want to live somewhere,
the value of houses in that neighborhood will be less. Think about
it: if you have a group that makes up 12-14% of the population
like African Americans do - or even 25% of the population if you
take the entire non-white population of the United States - they
can't compare with the demand created by the other 75-80% of the
population, so houses in neighborhoods where whites don't want
to live will be depressed by virtue of supply and demand.
The evidence shows that even if a house is in exactly the same
condition - it's been kept up at the same rate, the neighborhood
is almost exactly the same, but it's Black racially - it's going
to be worth less money than a similar situated white neighborhood.
At one time we had explicit legal racial covenants and/or redlining
policies on the part of banks. Today we don't need those anymore,
because once we've segregated the market, it becomes in whites'
interest to perpetuate the divisions. Whites get a boost in their
property values by maintaining a segregation of the marketplace,
maintaining their position as the dominant group in the housing
market. So once you sort of have the initial push of racial covenants
or redlining or any other policy that segregated the housing market,
it becomes a self-fulfilling prophecy after that.
And in fact, there's a vicious cycle here. Because when a neighborhood,
a previously white neighborhood starts to integrate, even if individual
whites don't have personal or psychological animosity or racial
hatred, they still have an economic incentive to leave. Because
they recognize that others might make the same calculation and
And therefore, if there's a rash of selling by whites, which
are the biggest group in the marketplace, prices will go down,
by virtue of the laws of supply and demand. So you get a vicious
circle where whites calculate that other whites are going to sell
when the neighborhood integrates. Therefore, they want to sell
first to avoid losses, and they actually make it happen - they
make white flight happen and drive down property values when the
neighborhood becomes more integrated.
It's obviously disadvantageous to African Americans who want
to accumulate equity in integrated or in predominantly Black neighborhoods.
But people don't talk about how it's advantageous to whites.
What is the difference between income and assets?
Melvin Oliver: We all want the things that can provide
us with better life chances. We want to have an opportunity for
education. We want to have good housing. We want to have good
medical care. We want to make sure that the next generation is
going to be better off than the previous generation.
Those kinds of life chances depend on a certain combination of
income and wealth. Many people think of income as being the basic
thing for all of those life chances. But in reality, income usually
goes into your pocket and out of your pocket. It provides for
your basic standard of living.
But wealth - your savings, investments or inheritances from the
previous generation - those are the resources that you use to
really establish your opportunities in life. Getting an education
for your kids, purchasing a home, handling catastrophic illness,
and leaving a legacy for future generations. Wealth is really
what provides for the life chances that you want your children
to have. Income alone doesn't do it.
Look at the example of purchasing a home. The average home in
America costs about $150,000. Twenty percent down payment is $30,000.
You don't get that $30,000 from income. You usually get it from
wealth - your savings, your investment. And a lot of the research
we've done points out that many first-time home buyers get that
down payments from their parents. Parents typically use their
wealth to help their children generate wealth in their lifetime.
One of the theories about assets says, income feeds your stomachs,
but assets change your head. That is, you really do act differently
when you have a cushion of assets so that you can strategize around
important opportunities in life. When you are living from paycheck
to paycheck you just think about how you're making the next day
or the next week or the next month happen. But when you have a
set of resources that allow you to think about your future in
a positive way, you can strategize about the future, create and
take advantage of opportunity. Otherwise you stay in the present.
And I think the key to a fast-paced economy is taking advantage
of new opportunities as they come along. And that doesn't happen
when you just depend on income. You have to have a wealth or an
asset base that allows you to take advantage of that future.
The average American has most of their wealth in the equity in
their home. That's why I think homeownership is so important in
this society. I think of homeownership as the first step to wealth
accumulation, because with homeownership and equity you have so
many options afterwards. Leaving your home to your next generation
is a huge legacy you can leave. Using the equity in your home
to help your children achieve an education is a big advantage.
You can use it to take advantage of important opportunities.
Questions for READING D:
- How does race influence the market value of homes? Think about
your idea of a "good" versus a "bad" neighborhood. How does
the housing market perpetuate a racial wealth gap?
- How do whites control the housing market? What happens to
a community when whites leave?
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