A 4-part dissection of how more than 50 years after redlining was outlawed, America’s communities continue the practice in clever and blatant ways
21st Century America and “Shadow” Redlining
In 1968, the U.S. Government outlawed redlining, a form of housing discrimination that, up until that point, had not only been perfectly legal, but was also done by and with the blessing of the federal government. Banks and government agencies created maps of cities and towns, largely based on the racial makeup of the areas, and approved or refused home loans according to the maps and their conclusions. After a series of lawsuits, the Supreme Court ruled that, based on the 14th Amendment, housing fell under the constitutional guarantee of equality for all. So, redlining was abolished.
At the time the Supreme Court made the ruling, and with the establishment of the 1968 Fair Housing Act, systemic racism in lending and home sales had resulted in the percentage of Black homeowners being 41%—this despite the rapidly growing (at the time) Black middle class who could finally afford and wanted to buy homes. Shockingly, over five decades after the passage of the Fair Housing Act, the percentage of Black homeowners has barely budged less than 2%. As of this writing, homeownership rates for Black Americans is at 42%}. For Latinos, it is a slightly higher 44%. For White Americans, it has stayed relatively steady at 75%.
To those of us who are fair housing advocates, the writing on the wall is quite clear: in spite of the abolishment by the U.S. Supreme court of the literal practice of redlining, there are many forms of “shadow” redlining that still exist to this day. Truly equal housing has yet to come to fruition, and the rights and benefits that come with homeownership are still inaccessible to massive swaths of poor and minority Americans. It is a tragedy for a country as large and wealthy as ours that nearly 100 years after the creation of a government plan specifically designed to grow America’s homeownership class and generate wealth and financial stability for all, so many of us are still locked out.
Before outlining these modern-day shadow redlining tactics that are making homeownership inequality persist even now, it is helpful to discuss a bit of the history of homeownership inequality in the United States, why it matters, what common “shadow” redlining tactics are in our present-day America, and what can be done to combat it.
First, it is also important that we take a moment to briefly consider a commonplace phrase, “generational wealth,” that is frequently used in conjunction with the discussion of homeownership equality. Because it is this concept of generational wealth, inextricably bound to homeownership for most “normal” Americans, that illustrates why homeownership is—at its very core—a social justice cause.
Generational Wealth and Why Homeownership Is a Game-Changer
While it might seem common sense to most people how it is that being a homeowner can create and sustain wealth and financial stability for future generations, it is worth noting the ways in which this actually occurs. The most obvious of these is that owning one’s own home means that with every payment you make, you have more and more equity in the home, and over time (in most cases) the value of your home will increase. So, the simple math is that a home is an investment that grows both as you pay your mortgage down, and as the home’s monetary value rises with inflation. It becomes a financial asset that sustains itself (once paid off) and even grows over time.
However, a second, perhaps less apparent, way that homeownership generates wealth is that it means when the home is paid off, you no longer are putting such a large portion of your income toward the actual cost of paying for the home, and that money can be freed up to be saved or invested elsewhere. The federal government and creditors both suggest that a person’s monthly housing cost (whether rent or mortgage payment) not exceed 30% of their income. Even if you are one of the lucky few for whom that number is actually true (most people spend far more than 30% of their income on housing), that is a sizable portion of your income that would then be freed up once your home is paid off. The ability to move this 30% of your income from debt to savings or investment would undeniably have a significant impact on your financial future. Even if you did not invest the money, you would still have 30% more money on hand to spend how you choose.
And if this 30% (or, likely, much higher) increase in true money on-hand after paying off your mortgage holds true, then imagine how much better off your children’s financial future would be if you could leave a home to them that is paid off (freeing up that 30%} of their future income to be invested from the get-go) and increasing in value by the day. Now imagine how much better off their children will be if their parents had been saving 30%} of their income their entire lives, then passed whatever wealth they had accumulated, plus the house that has been growing in value all that time, and it becomes abundantly clear how generational wealth with the simple purchase of a home becomes exponential. The impact is both immediate and long lasting. And this doesn’t even include the countless other financial benefits that accompany homeownership, such as lower interest rates on loans and lines of credit.
In addition to the financial stability that homeownership provides, there are the emotional, psychological, and physical benefits of homeownership for yourself and future generations that make owning a home a life-changing event.
Having grown up in a household where for years we moved repeatedly from rental to rental, and even halfway across the country, I can attest to the importance of feeling that a place is home. Not just the house itself, but the community where it is located. Studies have shown that a person’s connection with his neighbors, investment in his property (both financially and physically), and fundamental involvement with his community are all significantly higher when a person owns the home he lives in. All of this gives a person not just a sense of civic pride, but also an identity tied directly to the place where they live. Having a sense of belonging, as well as a sense of security related to housing, is essential to a person’s overall mental health.
Additionally, for children, having a consistent and comfortable housing environment (and the friends, schooling, and neighborhood that accompany it) is linked to positive mental health and future success in many ways: from school performance to physical health to a sense of confidence and potential for a good life by nearly every metric. Entire books have been written on this very topic by child psychologists for decades. For this reason, it is not an aspect of parenting to take lightly. Providing a safe, clean, and nurturing home is among the highest priorities for most any parent. Because of this, stripping the option of homeownership from so many American parents because of their race or income is not only unconstitutional, but also cruel and unusual punishment toward them and their future generations of offspring.
Knowing that your home will always be there, that you won’t be evicted or have someone rent the place out from under you (as well as befriending neighbors and colleagues and schoolmates) provides a sense of identity and community that is hard to place a value on. But story after story shows the opposite when it comes to not owning a home. The life expectancy of poor and minority Americans from their wealthier counterparts in the same towns and cities sometimes varies by decades.
In Chicago alone, White Chicagoans in certain zip codes outlive their Black counterparts by almost 30 years. The infrastructures of poorer communities tend to be less maintained. Services like food and medical care are often sparse or even completely absent. Transportation and safety are depressingly lower than in wealthier neighborhoods. Policing tactics and job opportunities are so vastly different that a different zip code in the same city can seem like a different country altogether.
This is why one of the most important social justice issues of our time is homeownership equality. It directly affects and impacts a person’s financial, physical, and even mental health. And their children. And their children’s children.
All of these historical wrongdoings that have resulted in two different Americas for the homeowner and the renter is the direct result of decades of purposeful discriminatory zoning, banking, and legal practices that were designed to keep homeownership out of the hands of America’s poor and minority communities.
Sadly, as the numbers show, the decades of purposeful work have been wildly successful.
So the battle ahead is a long one. But it is one that must be fought.
Are you ready to make your move into the world of homeownership? Visit AHP75.com to learn about our homebuyer programs designed specifically to help low-income and minority Americans join the ranks of homeowners and get onto the path of financial stability and wealth generation.
Aaron Morales is the Social Justice Writer for AHP 75, based out of Chicago, IL.