and local governments as well as private citizens, as explicated in the Detroit example, certainly had a role in degrading property. The practice of redlining didn’t formally end until 1977 with the passage of anti-housing discrimination policy, the Community Reinvestment Act. That loss of revenue kept individuals and municipalities from investing in neighborhoods, which negatively impacted the housing stock.
Most people will attribute the price difference to perceived flaws in people and communities. Many will say lower school quality, crime, poor housing stock, and other problems with either the home or the neighborhood are the reasons for the lower prices. We controlled statistically for many of those variables. Taking the common beliefs about what lowers home prices off the table, we found that differences in home and neighborhood quality do not fully explain the lower prices of homes in Black neighborhoods. Black-majority 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. And these factors do have a negative impact on price. Yet, these factors explain only roughly half of the undervaluation of homes in Black neighborhoods.
FIGURE 2-1. NEIGHBORHOOD MEDIAN HOME VALUE BY BLACK POPULATION SHARE, U.S. METROPOLITAN AREAS, 2012–2016.
SOURCE: Zillow and 2016 American Community Survey five-year estimates.
Given that homes in Black-majority neighborhoods are devalued by 23 percent as compared to White ones, with a cumulative loss of $156 billion nationally, we need to reframe the “it all starts at home” refrain. It does start at home, but what that means is bigotry and implicit bias impose a “Black tax” on residents of Black-majority neighborhoods that White neighborhoods simply don’t have to pay. To put it plainly, racial bias is taking away money from Black families that could be put toward college tuition or a small business. Notwithstanding the elimination of discrimination in employment, policing, education, and other areas, if homes in Black neighborhoods bought and sold at market rates, our neighborhoods would have significantly more resources. Home sellers don’t get their proper value, and certain buyers don’t necessarily get the return on investment they deserve. Devaluation also means municipalities with a significant percentage of African Americans lose tax revenue that could be put toward government services and infrastructure. This is a vicious cycle: Devaluation leads to divestment, which leads to people moving out of the community; social services decline and crime and unemployment rise. Given the large amount of money that is stripped from communities because of racism, it’s illogical to think Black folk should be faulted for community decay.
Put that $156 billion in cumulative, national losses into perspective. That $156 billion could have started 4.4 million Black-owned businesses, based on the average amount of $35,205 Blacks use to start a company.19 It could have paid for 8.1 million four-year degrees based on the average tuition of $19,189 at public universities in 2016.20 These are real wealth-building opportunities that could have catapulted the Black population to greater heights.
More perspective: The cost of replacing all the water pipes in Flint, Michigan, was estimated to be about $55 million, and the cost of the damage related to hurricane Katrina was $161 billion. That means the $156 billion could have replaced pipes in Flint nearly 3,000 times over and paid for the nearly all (97 percent) the damage caused by Hurricane Katrina.21 The nation’s yearly economic burden due to opioid abuse, dependence, and overdose is an estimated $70 billion (excluding criminal justice costs, which account for 10 percent of the total). The $156 billion is a sum large enough to more than double our efforts to combat the opioid crisis, according to a 2013 analysis of Centers for Disease Control data published in the academic journal Medical Care.22 All this is to say that 23 percent and $156 billion are big numbers.
Our study also looked at devaluation in the same neighborhoods studied by lead author Harvard economist Raj Chetty, which linked records from the Internal Revenue Service to the Census Bureau to understand intergenerational income mobility for people age thirty-one to thirty-seven who were born between 1978 and 1983.23 We found that Black children born into low-income families could achieve higher incomes as adults if they grew up in metro areas where homes were less devalued. If properties in Black neighborhoods were priced equally to those in White neighborhoods, Black children coming of age in the 1990s and 2000s would have had much more wealth to draw upon to pay for tutoring, travel, and educational experiences, as well as higher education and greater access to other neighborhoods. Greater property wealth also may have facilitated higher rates of entrepreneurship among Black parents, which may have positively affected children.
Contemporary work from social scientists has tried to sort out whether these lower valuations are caused by differences in socioeconomic status, neighborhood qualities, or plain discrimination.24 The findings are in agreement that discrimination is at play.25 In one study published in the academic journal Social Forces, Valerie Lewis, Michael Emerson, and Stephen Klineberg collected detailed survey data on neighborhood racial preferences in Houston, Texas.26 Researchers asked 1,000 participants from each racial group from a variety of neighborhood types to imagine that they were looking for a new house and to find one within their price range and close to their job. Respondents were then told about the neighborhood context using randomly generated combinations of characteristics about the public schools in the area, property values, the crime rate, and racial percentages. Consistent with previous research, they found that certain neighborhood features strongly predicted whether someone said they would buy the house. Racial composition strongly predicted the preferences of White buyers in neighborhoods that were otherwise identical, meaning White buyers refused to buy houses in Black neighborhoods but bought identical-seeming houses in White or mixed neighborhoods.
Researchers Jacob Fabera and Ingrid Gould Ellen, in the academic journal Housing Policy Debate, examined rising housing prices through the housing bubble from 2000 to 2007 and through the bust of 2008.27 They reported that Blacks and Hispanics gained less equity than Whites during that period and were more likely to owe more than their home was worth in 2008. In addition, their findings show that “Black-White gaps were driven in part by racial disparities in income and education and differences in types of homes purchased.” The researchers hypothesized that racial segregation and the resulting economic and education stratification between neighborhoods exacerbated equity disparities within neighborhoods that already had high concentrations of poverty. Consequently, the recession hit impoverished neighborhoods disproportionately harder, creating intense volatility in those markets. Declining incomes reduced people’s ability to purchase homes, thus further deflating prices in those neighborhoods. The findings around education and income may result from the disparities in wealth as it is “a powerful predictor of individual educational and economic outcomes, and despite their significantly lower homeownership … the long-run consequences of these gaps are substantively important and difficult to overcome.”28
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