Does systematic racism drain, deny and diminish black homeowners' wealth?

"Differences in home and neighborhood quality do not fully explain the devaluation of homes in black neighborhoods."
Image: A home stands in Compton, California
A home in Compton, south of Los Angeles.Patrick T. Fallon / Bloomberg via Getty Images file

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By Janell Ross

Americans don’t just live in their homes, they rely upon them.

About 32 percent of the average white family’s total wealth — that’s assets minus debt — is tied up in their home. For black and Latino families, the average figure is between 37 and 39 percent. The revenue generated by taxing the value of homes helps to fund hospitals, parks, schools, to keep streets clean and to underwrite critical services like ambulances and policing.

But when a trio of researchers looked at home values in neighborhoods where black residents make up 50 percent or more of the population, they found that even after accounting for differences between neighborhoods, including crime, homes in majority black communities are valued about 23 percent less than comparable homes in neighborhoods with few or no black residents.

The report was published last month by Andre Perry, who studies education at the Brookings Institution; Jonathan Rothwell, an economist at Gallup; and David Harshbarger, a mathematician at Brookings. They found that at almost every stage in the home buying and living process, perceptions of black people reduce home values in majority-black communities.

This is a form of racism, ongoing and active. This is not simply a function of historic policy. It is rooted in negative perceptions of black people that cost American communities and black homeowners billions. The money could be used to fund city parks, libraries and schools as well as individual educations, retirements and businesses.

In the average U.S. metropolitan area, homes in neighborhoods where the share of the population is 50 percent black are valued at roughly half the price as homes in neighborhoods with no black residents, says researcher Andre Perry from the Brookings Institute.Brookings Institute

Majority black neighborhoods make up just 10 percent of all the places where Americans live, but are home to about 37 percent of the nation’s black population. And collectively, racist perceptions are costing these people as well as their 5 million non-black neighbors a collective $156 billion in home value. That’s an average of about $48,000 per home.

NBC BLK talked with Perry about the details of his findings and what they mean for the country in the Q&A that follows. Perry’s responses have been edited for clarity and length.

Q: What is the essence of what your study uncovered?

A: We found that majority-black neighborhoods hold $609 billion in owner-occupied housing assets and are home to approximately 10,000 public schools and over 3 million businesses. Though most residents are black (14.4 million non-Hispanic black) by definition, approximately 5 million non-black Americans from every other racial and ethnic background live in majority black neighborhoods. There is strength in the ’hood.

In the average U.S. metropolitan area, homes in neighborhoods where the share of the population is 50 percent black are valued at roughly half the price as homes in neighborhoods with no black residents.

Differences in home and neighborhood quality do not fully explain the devaluation of homes in black neighborhoods. Homes of similar quality in neighborhoods with similar amenities are worth 23 percent less in majority black neighborhoods, compared to those with very few or no black residents. Majority black neighborhoods do exhibit features associated with lower property values, including higher crime rates, longer commute times, and less access to high-scoring schools and well-rated restaurants.

Yet, these factors only explain roughly half of the undervaluation of homes in black neighborhoods. Across all majority black neighborhoods, owner-occupied homes are undervalued by $48,000 per home on average, amounting to $156 billion in cumulative [wealth] losses.

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Q: One of the things that really struck me about your report is you begin with a compelling and very modern story about a white man in Mississippi, a Facebook post and the sentiments it seemed to represent. Will you tell readers a little about that post? Why is this important?

A: On Sept. 19, 2018, University of Mississippi alumnus, former faculty member and administrator Ed Meek posted on Facebook two separate pictures of African American women along with the caption, “Enough, Oxford and Ole Miss leaders, get on top of this before it is too late.”

For Meek, namesake of the Meek School of Journalism and New Media, the women’s presence apparently signaled the decline of the town of Oxford, home of the University of Mississippi. “A 3 percent decline in enrollment is nothing compared to what we will see if this continues… and real estate values will plummet as will tax revenue,” Meek wrote.

To be clear, the sheer presence of black women doesn’t devalue homes. However, signaling they do can negatively impact housing markets. Meek served as the university’s assistant vice chancellor for public relations and marketing for 37 years. Meek’s Facebook post suggests in word and deed that the values we place on people are strongly associated with [nearby] assets. Black people, according to Meek, lower real estate values.

[Editor’s Note: Meek declined to comment about his post when contacted by NBC News. The University of Mississippi confirmed that Meek, a major donor and once the School of Journalism's namesake, requested that the university remove his name from the school in September, four days after the Facebook post. Meek later issued a public apology to those he offended.])

Q: Where does the devaluation problem really begin? And what else is driving or contributing to the devaluation of homes in communities where half or more of residents are black?

A: Let’s not let racism off the hook.

If homes in black neighborhoods were placed in a similar white neighborhood, they would be worth 23 percent more. There are many points at which racism is inserted; appraisers, mortgage brokers and real estate agents all play a significant role in the valuation of property, but it’s their collective negative view of black people that lowers the value on top of the real effects of segregation, racist housing covenants that kept blacks from buying in white neighborhoods, and redlining that deemed black neighborhoods too great a risk for investment.

Q: What is the devaluation of homes in majority black neighborhoods doing to black families?

A: There is a terrible narrative that black people are the cause for community decline. The marital behaviors of black women, pant sagging, etc. We constantly blame black people. Our communities are constantly damaged by this deficit frame that we are the problem. Devaluation robs black people of the resources needed to uplift themselves.

Q: I think the elephant in any room where the devaluation of homes in black communities may somehow be discussed — the kind of thing that will show up in my email inbox after this Q&A is published — is the idea that in the aggregate, predominantly black neighborhoods are lower quality than others. So, what do the people formulating those comments right now need to know?

A: Low education, crime and deferred maintenance definitely reduce the prices of homes, but white people do those things too and don’t pay as much of a penalty.

We have to stop believing in that we are the source of the problem. Again, there’s nothing wrong with black people that ending racism can’t solve.

Q: What does it mean for our country that the upward mobility that a home can provide — access to quality schools, an asset to back what can be wise forms of borrowing such as a college education or a business — remains severely restricted for 41 percent of African Americans?

A: It means that we must demand our proper price. We must deal with racism if we are going to really see equity.

Q: Is the answer to the devaluation problem that African Americans who can afford to do so need to buy in majority white neighborhoods and those who can’t should rent in them?

A: No. Moving doesn’t properly address it. D.L. Hughley told me, “When one black person moves in a white neighborhood, it’s said, ‘there goes the neighborhood.’ When a white person comes in, the property values go up.”

We must address the source of the problem.

Q: But that does leave us with the question of what should people do? What should neighborhoods, cities, counties and states suffering the consequences those perceptions do?

A: The housing crisis spurred regulations in the past to combat predatory lending, and there are rules and regulations on the books to curtail bad appraisals and real estate agent behaviors. However, those policies are rather generic, they do not account for past racial housing policy created by our federal government and facilitated by the private sector, particularly in the case of redlining.

We need to deliberately address the structural racism — the biases in our systems — as well as individual racism among housing actors if we are to correct these disparities. But in general, home buyers and sellers must question the valuation process at every step. We simply cannot take prices at face value when talking about property in black neighborhoods.

Very few people have real estate backgrounds so it’s incumbent on buyers and sellers to seek advisement. In addition, individual home owners and residents in majority-black communities must do everything to animate worth in their communities because their homes are indeed more valuable than they are priced. Make home improvements, start a small business in the community, encourage friends and family to buy in the neighborhood. Residents must do everything they can to act on their true value, not at the price society gives them.

CORRECTION (Dec. 11, 2018 11:36 a.m. ET): An earlier version of this article incorrectly described the researchers behind the report on black homeowners. Two of the researchers work for the Brookings Institution and one works for Gallup; they do not all work for Brookings.