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10/31/01

Black Homeowners are Hurt Most by Neighborhood Segregation

WASHINGTON D.C. - - The Brookings Institution Center on Urban and Metropolitan Policy today released, "The 'Segregation Tax': What Racial Segregation Costs Black Homeowners," a report which examines homeownership as a wealth creation tool for different ethnic and racial groups in the nation's 100 largest metropolitan areas.

The report, written by David Rusk, former mayor of Albuquerque and author of several books on regionalism, finds that after equalizing for income, black homeowners had substantially less value in their homes than white homeowners. Home value and equity are the typical American family's most important financial asset, and often the only vehicle for passing wealth to children and grandchildren. In recent years, federal policies have focused on increasing the percentage of Americans who own homes - particularly minorities, since their homeownership rates have lagged behind those of whites. While homeownership has increased for all racial groups, it is not clear whether homeownership has increased the assets of all minorities equally. The report's key findings are:
  • Home values for black homeowners were 18 percent less than values for white homeowners. For every dollar of income, white homeowners owned $2.64 worth of house. By contrast, black homeowners owned only $2.16 worth of house.
  • This gap in home values, or "segregation tax," results primarily from a high degree of racial segregation in neighborhoods. The higher the segregation, the wider the home value gap; conversely, the lower the segregation, the narrower the gap.
  • Black homeowners in metropolitan areas in the Midwest were subject to a higher "segregation tax" than their counterparts in other parts of the U.S. Racial segregation was found to be the highest in metropolitan areas in the Midwest.
  • Both black and white homeowners were hurt by high levels of racial segregation. For example, a closer examination of Philadelphia census tracts reveals large drops in the ratio of home value-to-income for all homeowners as the percentage of minority residents increased.
According to Rusk, as more and more white homebuyers shunned increasingly black neighborhoods, demand for housing and price competition were reduced in those neighborhoods, home values were depressed, and the "segregation tax" grew. Rusk further contends that eliminating the "segregation tax" requires stable, integrated neighborhoods. The report offers the following policy recommendations: (1) amend zoning ordinances to include more low and moderate income homes; (2) rethink school enrollment policies to achieve economically balanced student bodies; and (3) vigorously enforce fair housing and fair lending laws.

"In addressing these disparities," said Bruce Katz, Director of the Brookings Urban Center, "state and local governments need to recognize the pervasive role of race in shaping metropolitan growth patterns and undertake sustained efforts to give African-Americans and other minorities greater access to educational and economic opportunities that create long-term wealth."