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The homeownership gap is larger today than it was 60 years ago
Redlining — a discriminatory practice from the New Deal era — is partly to blame. So the Justice Department introduced a new initiative to level the playing field.
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The Justice Department announced last Friday the Combatting Redlining Initiative to root out housing discrimination against Black and brown people. If successful, the initiative would make mortgage credit and homeownership accessible for Black and brown people no matter their race, national origin or the neighborhood where they live. “Lending discrimination runs counter to the fundamental promises of our economic system,” Attorney General Merrick Garland said during a press conference to introduce the initiative. “When people are denied credit simply because of their race or national origin, their ability to share in our nation’s prosperity is all but eliminated.”
Redlining is an illegal practice in which lenders avoid providing services to individuals living in communities of color because of the race or national origin of the people who live in those communities. The roots of this gross discrimination dates back to the 1930s during the New Deal era. Middle- and lower-middle-class white families were prioritized in the economic measures introduced by President Franklin Roosevelt, while pushing Black Americans and other people of color into urban housing projects. This was accomplished in part by a requirement from the Federal Housing Administration that the builders who were mass-producing new suburban communities sell none of the homes to Black people. Private lenders have continued to practice through today even though there’s legislation on the books that prohibits redlining.
The Fair Housing Act banned discrimination in the sale and rental of housing and in mortgage lending. It also made it illegal to harass members of the legislation’s protected class. Prior to the Act’s passage, Congress regularly considered the bill but failed to attract enough support to make it the law. This changed when Rev. Dr. Martin Luther King, Jr. was assassinated: President Lyndon Johnson connected the open housing marches in Dr. King’s name with the fair housing legislation to pull it across the finished line. The Vietnam war was another catalyst for the Fair Housing Act: Young, poor Black and Hispanic infantrymen represented the highest casualties, but their families couldn’t purchase or rent homes in certain neighborhoods due to the race or national origin.
Then there’s the Equal Credit Opportunity Act, which attempts to give all individuals an equal opportunity to obtain loans and other types of credit from financial institutions and other lenders. In other words, applicants can only be evaluated using factors that are directly related to their creditworthiness. The ECOA applies to any organization that extends credit, including banks, small loan and finance companies, retail and department stores, credit card companies, and credit unions or anyone involved in the decision to grant credit or set its terms — for example, real estate brokers who arrange financing.
As the Justice Department notes, homeownership remains the principal means of building wealth for American families. Our zip code determines our health outcomes too, as Kyndra Frazier, a New York City-based licensed master social worker and the founder of KYND Consulting, Inc. told me in June 2020. “Research within [the Zip Code Health Paradigm] shows us that zip codes densely populated by communities of color have higher rates of cardiovascular diseases and mental-health vulnerabilities,” Frazier said. These particular zip codes, Frazier explained, comprise persons who have Adverse Childhood Experiences (ACEs), which may look like exposure to domestic violence and various abuses, exposure to community violence, having an incarcerated loved one or chronic poverty. “The Paradigm, coupled with ACEs, and undergirded by the trauma of white supremacy and racial injustice systemically causes Black people to experience depression and anxiety at higher rates than their white counterparts.”
It should come as no surprise then that the underinvestment in these communities have contributed to families of color persistently lagging behind in homeownership rates and net worth compared to white families. (The median family wealth of a black family is $24,100 compared to $188,200 for a white family; that is about seven and a half times less, per the Department.) In fact, the gap in homeownership rates between white and Black families is larger today than it was in 1960, before the Fair Housing Act of 1968 passed, according to the Justice Department.
Assistant Attorney General Kristen Clarke for the Justice Department’s Civil Rights Division, which will lead the initiative, said that enforcement of the nation’s fair lending laws is critical to ensuring borrowers of color have equal access to lending opportunities. “We know well that redlining is not a problem from a bygone era but a practice that remains pervasive in the lending industry today,” Clarke said. “Our new initiative should send a strong message to banks and lenders that we will hold them accountable as we work to combat discriminatory race and national origin-based lending practices.”
The initiative represents its most aggressive and coordinated enforcement to address redlining. It will empower US Attorneys’ offices to showcase their local expertise on housing markets and the credit needs of local communities of color. States Attorneys General will also be called upon to coordinate on potential fair lending violations. Additionally, since non-depository lenders engage in mortgage lending and now make the majority of mortgages in this country — but are not traditional banks and do not provide typical banking services — the initiative will also apply greater scrutiny to non-depository institutions in analyses of potential redlining. And the Justice Department will also partner with regulatory agencies to ensure it fair lending violations don’t fall through the cracks.
“We have a duty to act now. Persisting racial inequality and widening wealth gaps makes clear that simply staying the course is not enough,” AAG Clarke said. “We must take bold, new action if we are ever going to eradicate redlining and achieve the goal of equal opportunity in our country.”
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