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 organizing
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 the 1970s.

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 driven."

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 poor poorer.

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.

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