UNCLE SAM LENDS A HAND
Did the Government Racialize Housing and Wealth?
The federal government policies and programs that helped white
families achieve the American Dream made it difficult for minorities
to buy homes and amass wealth.
1935: Social Security created
When Congress created social security in 1935, it provided
a safety net for millions of workers, guaranteeing them an income
after retirement. However, the act's provisions excluded agricultural
workers and domestic servants, who were predominantly African
American, Mexican, and Asian. As low-income workers, minorities
had the least opportunity to save, were least likely to have pensions,
and were most vulnerable to economic recession, yet they were
systematically excluded from the protection and benefits granted
to most Americans.
1935: Wagner Act legalizes collective bargaining and labor
Like Social Security, the Wagner Act helped establish an important
new right - to unionize. The act's original version prohibited
racial discrimination, but the American Federation of Labor fought
against it and the final version permitted unions to exclude nonwhites.
As a result, nonwhites were not only locked out of higher-paying
jobs, they were also denied union protection and benefits: medical
care, full employment, and job security. Moreover, they were legally
barred from challenging their exclusion. Although the laws changed
in the late 1950s, many craft unions remained all white well into
1930s-1940s: Federal housing programs spur suburb growth
Beginning in the 1930s and 1940s, the federal government created
programs that subsidized low-cost loans, opening up home ownership
to millions of average Americans for the first time. At the same
time, government underwriters introduced a national appraisal
system, tying property value and loan eligibility to race. Consequently,
all-white communities received the highest ratings and benefited
from low-cost, government-backed loans, while minority and mixed
neighborhoods received the lowest ratings and were denied these
loans. Of the $120 billion worth of new housing subsidized by
the government between 1934 and 1962, less than 2 percent went
to nonwhite families. Nonwhites were locked out of home ownership
just as most white Americans were finally getting in.
1948: Restrictive covenants outlawed in Shelley v. Kraemer
Restrictive covenants, which barred homeowners from selling
or leasing their homes to nonwhites, were common in many neighborhoods
across the U.S. Although they were outlawed by this Supreme Court
decision, exclusion continued. Private developers could still
refuse to sell homes to nonwhites, and real estate agents steered
nonwhite prospective homebuyers away from white neighborhoods.
Following government guidelines, lenders continued to base property
appraisals on race, denying loans to communities with nonwhites
or insisting on higher fees and interest rates to cover their
"risk." By systematically devaluing nonwhite neighborhoods and
homebuyers, federal intervention helped disguise racial discrimination
and enabled many to claim that the resulting segregation was "market
1949: National Housing Act authorizes urban redevelopment
The housing market available to most nonwhites was rental
and later, public housing in segregated urban centers. Government-sponsored
urban redevelopment programs destroyed more housing than they
built. Ninety percent of all housing destroyed by urban renewal
was not replaced; two-thirds of those displaced were Black or
Latino. As urban renewal projects destroyed taxable properties,
the burden for maintaining social services was shifted onto fewer
and fewer residents - encouraging white flight and making the
1950s-1960s: Economy and housing boom
During the 1950s and 1960s, more and more white homeowners
moved to the suburbs. Federal and state tax dollars subsidized
the construction and development of municipal services for suburbs,
in turn fueling commercial investment. Freeways in major cities
connected white suburbs to central business districts, but they
were often built through core areas of Black settlement. Many
urban Black areas lost their neighborhood shopping districts and
successful small businesses as a result. By the 1960s, many businesses
began moving jobs from cities to suburbs, further concentrating
wealth and needed tax dollars away from urban areas.
1960s: Fair housing laws passed
In the 1960s, the government made several efforts to end housing
discrimination, most notably Kennedy's 1962 Executive Order and
the 1968 Fair Housing Act. Although these were important, they
had little practical impact. Appraisers continued to factor race
into their assessments and some practices, such as racial steering
and predatory lending, continue to this day. It was not until
1988 that fair housing laws were amended to expand their scope
and include important enforcement provisions. In the 1970s, '80s
and '90s, housing prices rose dramatically, and white homeowners
who benefited from discriminatory federal policies were able to
sell their homes at great profit. Meanwhile, minority groups who
had been denied federal assistance had homes worth far less or
faced an even higher cost of entry into the housing market.
Residential segregation didn't happen by accident. The U.S. federal
government took many steps to channel resources and opportunities
to whites and away from nonwhites, resulting in an enormous wealth
gap that persists today.
In 1993, 86% of suburban whites still lived in places with a Black
population of less than 1%. The 2000 Census showed that whites
are still more likely to be segregated than any other group. Today,
71% of whites own their own home, compared to 44% of African Americans.
Black and Latino mortgage applicants are 60% more likely than
whites to be turned down for loans.
As housing gets more expensive and wealth gets passed down from
generation to generation, the legacy of past discrimination persists,
giving whites and nonwhites vastly different life chances.