In Blog Eric Frazier

A recent Brookings/Gallup study reveals residential property in predominantly-black neighborhoods is constantly undervalued

For black American homeowners, owning a home rarely happens without the added hurdles; a fact they’ve long learned to live with. But there’s even more; having their investments in residential property undervalued time and again according to a new joint study from Brookings Institution and Gallup, is another fact they have to grow accustomed to.

“The devaluation of assets in black neighborhood: The case of residential property,” reports that homes occupied by owners are undervalued by the real estate market throughout predominantly black communities, and are also frequently sold or valued at lower prices, at an average of $48,000 per home. This amounts to $156 billion in aggregate losses, what the report refers to as “segregation tax”.

Additionally, in predominantly-black neighborhoods, homes of similar values and features were undervalued 23% less than those with a small population of black residents or no blacks at all. According to the researchers, although some majority black neighborhoods in their study showed classic features associated with lower property values, including higher crime rates, lengthier commute time, lesser access to better-scoring schools and highly-rated restaurants, their analysis reveals that the above factors only partially explain the undervaluation.

Even when it is taken into cognizance that housing stock in predominantly black communities are often older and with less space or fewer bedrooms than similar homes in the same market, it still does not account for the margin in housing values.

“We believe anti-black bias is the reason this undervaluation happens, and we hope to better understand the precise beliefs and behaviors that drive this process in future research,” states the study.

Using the 2016 American Community Survey and Zillow, researchers Andre Perry, Jonathan Rothwell, and David Harshbarger determined and valued neighborhood demographics and property for the 119 metropolitan areas with predominantly black neighborhoods.

Expectedly, the systemic devaluation leaves black families considerably disadvantaged at wealth accumulation, leading to challenges with paying for education, starting businesses or even retirement.

The report also discovered that communities with greater devaluation are segregated more and less upward mobility was provided for black children. On the other hand, black children born to low earning families had better incomes if they were raised in an area where black homeowners had theirs valued as every other and in line with the set market value.

Communities also pay the price. Predominantly black neighborhoods consist of $609 billion in owner-occupied properties, 10,000 public schools, and over 3 million businesses across the nation. Communities are further penalized by the devaluation of these assets, as these businesses often make up the tax base for funding and sustaining local education and infrastructure.

Findings from this study highlights the effects of positioning U.S housing policies to favor homeownership and advocate the single-family home as a tool for creating wealth and strong families. Combined  with a history of racist and exclusionary policies, redlining and housing covenants included, this policy choice has resulted in a significant disparity in homeownership between white and black Americans, and a wealth gap and shutting out black families from achieving a substantial long-term source of wealth creation.

Today, fifty years after the historic 1968 Fair Housing Act, from which the systemic civil and economic injustice was supposed to have been corrected, Fair Housing Act has failed.   The gap has grown even wider, with only 42.3 percent of black Americans able to own homes and the wealth gap is so large that it appears that economic and wealth equality may never be full realized or achieved by African Americans.  The American dream of homeownership is not the African American dream.

 

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